California Auto Exemption: Can I Keep My Car if I File for Bankruptcy in California?

Learn about California's motor vehicle exemption and whether you can protect your car in bankruptcy.

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The California motor vehicle exemption helps determine whether you can keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. Here you’ll find information about the California car exemption: how much it is, what types of vehicles it covers, how it works for married couples, how to find the applicable statute, and more.

(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Your State area.)

The Motor Vehicle Exemption and Your Car

California’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors.  If the equity in your car is less than California’s car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy? 

Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?

The Amount of California’s Motor Vehicle Exemption

California has two sets of exemptions that can be used in bankruptcy – called System 1 and System 2. You can choose whichever system works best for you. In California’s Exemption System 1, you can exempt up to $2,900 of the equity in your car or other vehicle. In California’s Exemption System 2, you can exempt up to $5,100 in car equity in one or more vehicles.

The Federal Motor Vehicle Exemption

Some states allow bankruptcy filers to use the Federal Bankruptcy Exemptions instead of state exemptions, but California is not one of these states.

Using California’s Wildcard Exemption to Protect Your Car

If you are using California’s System 2 and your car equity is more than $5,100, you may be able to cover the extra equity by using a wildcard exemption. California’s System 2 wildcard exemption allows you to exempt up to $1,350 of any property. You can also apply any unused portion of the homestead or burial plot exemption (which is $25,075) to any other property, including your car.

California’s System 1 does not have a wildcard exemption.

Can Married Couples Double California’s Motor Vehicle Exemption?

Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. California’s System 1 does not allow married couples to double the motor vehicle exemption. California’s System 2 does not allow married couples to double any exemption – which means you can’t double the motor vehicle or wildcard exemptions.

What Vehicles and Insurance Are Covered by the Motor Vehicle Exemption?

In California System 1, the motor vehicle exemption covers the aggregate value of equity in any number of motor vehicles.  It also covers insurance proceeds or other compensation you received for the loss, damage, or destruction of your car as long as you received the proceeds within 90 days of filing for bankruptcy.

In California System 2, you can apply the exemption to any number of motor vehicles.

Checking California’s Exemption Laws

You can find California’s System 1 motor vehicle exemption at California Code of Civil Procedure § 704.010.

You can find the applicable exemption laws in California’s System 2 as follows:

  • motor vehicle exemption: Cal. Code Civ. Proc. § 703.140(b)(2)
  • wildcard exemption: Cal. Code Civ. Proc. § 703.140(b)(5)
  • unused portion of homestead exemption: Cal. Code Civ. Proc. § 703.140(b)(5)

You can find the California statutes on the website of the State of California, Legislative Counsel http://www.leginfo.ca.gov. To learn how to find state statutes, see Nolo’s Laws and Legal Research area.

When the California Exemption Amounts Are Updated

The exemption laws in California change periodically. The amounts listed in System 1 are no longer updated by statute, but instead, are updated by the California Judicial Council every three years. The next update will be April 1, 2016. You can find the current exemption amounts at the California Judicial Council website at www.courts.ca.gov, type “exemptions” into the search box.

by: , J.D.

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