California Bankruptcy Exemptions Revealed

One of the primary purposes of bankruptcy is to “relieve the honest debtor from the weight of oppressive indebtedness and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes.”

When you file for bankruptcy, all of your property becomes part of the “bankruptcy estate.” To protect some assets from the trustee, Congress created exemptions for debtors in bankruptcy. These exemptions allow a debtor to “exempt” some of their assets from being recovered by the trustee for the benefit of the creditors.

California Opt Out

The Bankruptcy Code contains the federal exemptions in section 522(d). Congress has also allowed the states to opt out of the federal set of exemptions and create their own state specific exemptions. California and 33 other states have done so.

Which Set of California Exemptions?

California has two sets of exemptions: one provides exemptions that apply to judgment debtors generally and the other applies only to debtors in bankruptcy proceedings.

California’s bankruptcy-only exemptions are more or less similar to the federal bankruptcy exemptions.

Section 703.140 provides debtors with eleven subsections detailing the specific exemptions and the maximum dollar amount available under each subsection. This section allows debtors to choose between these exemptions or use the other judgment debtor state law exemptions.

California Code of Civil Procedure Section 703.140 - The right to receive an award under a crime victim’s reparation law, some payments due to a wrongful death, life insurance, and some other types of lawsuits.

Section 704.730: The Amount of the Homestead Exemption

This set of exemptions applies to judgment debtors in California, but can be used by a bankruptcy debtor. The judgment debtor exemptions provide homestead exemptions of $50,000, $75,000 or $175,000 depending on the homeowner’s age, income and family status.

Generally, homeowners choose the judgment debtor exemptions so that they can take advantage of the more generous homestead exemption.

Renters find the exemptions based on federal exemptions or more advantageous.

How Do You Choose?

If you are considering bankruptcy, you may be thinking, “How do I know what to do?” Choosing can be complex: You can file a Chapter 13, or depending on your circumstance, you may be eligible to file Chapter 7.

California Homestead Law Amounts - Hidden Mortgage - Hidden Fees ...

Did you know California has a "homestead law" on the books - protecting you and your equity in the home you live in? The California homestead law amount of protection varies depending on the marital status of the homeowner as well the other real property he or she may also own.  The California homestead law entitles folks with a mortgage lien against their domicile to protect a certain amount of equity in the event of a forclosure by a bank or other lending institution.

An excellent introduction to California Homestead Law amounts follows:

California and other states have enacted laws to provide limited protection to homeowners against lien foreclosure. The Homestead Law, which varies from state to state, exempts from a judgment lien an amount set by statute. Article XX, Section 1.5 of the California Constitution provides for homestead rights. A homestead is defined as an owner-occupied dwelling, together with all appurtenant buildings and land. Additionally, a homestead may be a mobile home and land, a boat which is used as a dwelling, a condominium, or an interest in a cooperative. The bottom line is that any dwelling in which the occupant has an ownership interest and is the home or residence of that occupant is eligible for Homestead Law protection. Currently, in California, a person's equity in their home is exempt from judgment creditors as follows: