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.

April 6, 2017

The California motor vehicle exemption helps determine whether you can keep your car, truck, van, or some other type of vehicle if you file for bankruptcy. Here you’ll find information about protecting your motor vehicle in a California bankruptcy proceeding.

(For more information about exemptions, see Bankruptcy Exemptions.)

Protecting Your Car with California's Motor Vehicle Exemption

California’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee (the official tasked with overseeing your case) can take your vehicle to repay your unsecured creditors in a Chapter 7 bankruptcy. 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 if you fall behind on your payment or don't sign a reaffirmation agreement. To learn more, see Your Car in Chapter 7 Bankruptcy.

The motor vehicle will also help determine how much you'll pay creditors in a three- to five-year Chapter 13 repayment plan. Learn more in Exemptions in Chapter 13 Bankruptcy.

The Amount of California’s Motor Vehicle Exemption

California has two sets of exemptions that can be used in bankruptcy: called System 1 (CCP § 704) and System 2 (CCP § 703). You can choose whichever system works best for you, but you can't mix and match between the two.

In California’s Exemption System 1, you can exempt up to $3,050 of the equity in your car or some other type of vehicle. In California’s Exemption System 2, you can exempt up to $5,350 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 $5,350, 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 $1,425 of any property plus any unused portion of the homestead or burial plot exemption (which is $26,800) to any other property, including your car. (To learn more, see The California Wildcard Exemption in Bankruptcy.)

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

Can Married Couples Double California’s Motor Vehicle Exemption?

You can't double motor vehicle exemptions (or the wildcard exemption) in California.

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

In both California systems, you can use the motor vehicle exemption to cover the equity in more than one motor vehicle up to the maximum allowed exemption amount. For instance, under either system, you'd be allowed to protect two vehicles worth $1,000 each.

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 - (CCP § 703.140(b)(2).)
  • Wildcard exemption - (CCP § 703.140(b)(5).)
  • Unused portion of homestead exemption - (CCP § 703.140(b)(5).)

You can find the California statutes on the California Legislative Information website.

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, 2019.

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