California Bankruptcy Exemptions

Like all states, California has a set of exemptions you can use to protect property when filing for bankruptcy, such as a home, car, and retirement account. In this article, you'll learn:

• how long you must live in California before using its exemptions
• whether California exemptions will protect all of your property, and
• what will happen to any property you can't exempt.

If you have more questions, read Filing for Bankruptcy in California. Not only will you find answers, but it includes helpful checklists and a link to an interactive bankruptcy quiz. Or, try the start-to-finish "Filing for Bankruptcy" guide.

Exemptions change periodically, and these figures could change before we update them again in June 2023. You can meet with a bankruptcy attorney for current amounts and learn how they apply to your situation.

How California Bankruptcy Exemptions Work

You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt property—things not covered by an exemption—differently.

• In Chapter 7 bankruptcy, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors.
• In Chapter 13 bankruptcy, you keep everything you own. However, you must pay the value of the nonexempt property equity in your repayment plan, or your disposable income, whichever is more.

The different approaches ensure that creditors receive the same amount regardless of the chapter filed.

When You Can Use California Bankruptcy Exemptions

You can file for bankruptcy in California after living there for more than 180 days. However, you must live in California much longer before using California exemptions—at least 730 days before filing, to be exact. Otherwise, you'd use the previous state's exemptions.

But suppose you weren't living in any particular state during the two years before filing for bankruptcy. In that case, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).)

Learn more about filing for bankruptcy after moving to a new state and who can and can't file for bankruptcy.

Common California Bankruptcy Exemptions

Some states let filers choose between state and federal bankruptcy exemption laws, but California isn't one of them. In California, you must use state exemptions to keep property in bankruptcy. However, you'll still be able to select the exemption set that works best for you. California is the only state with two state exemption systems.

Generally, debtors with substantial home equity prefer System 1 or "704" exemptions (after the corresponding civil procedure code section). System 2 or "703" exemptions tend to be better for debtors without much home equity because they can use the large wildcard exemption to protect other types of valuable property. You can also use any of the federal nonbankruptcy exemptions.

Some states allow you to double the exemption amount if you are a married couple filing jointly. In California, however, spouses can't double exemptions, with a few exceptions.

California Bankruptcy Exemption System 1 (704 Exemptions)

Below you'll find exemptions commonly used by California bankruptcy filers.

California 704 Homestead Exemption

The homestead exemption protects a certain amount of equity in your principal residence. In System 1 (also known as § 704 exemptions), you can exempt real or personal property you reside in at the time of filing for bankruptcy, including a mobile home, boat, stock cooperative, community apartment, planned development, or condominium, up to $600,000 - 704.730.

Learn more about the California homestead exemption and protecting your home in bankruptcy.

California 704 Motor Vehicle Exemption

The motor vehicle exemption protects equity in your car, truck, motorcycle, or another vehicle. The System 1 vehicle exemption is $3,625 - 704.010. Find out about protecting cars in bankruptcy and how the motor vehicle exemption works in a Chapter 7 case.

Personal Property

• Household items and personal effects - 704.020.
• Residential building materials to repair or improve home up to $3,825 - 704.030.
• Jewelry, heirlooms, and works of art up to $9,525 - 704.040.
• Health aids - 704.050.
• Bank deposits to $1,826 or the extent needed for support - 704.225. (This amount adjusts annually on July 1 and reflects the July 1, 2021 figure.)
• Bank deposits arising out of Social Security payments up to $3,825 for a single payee ($5,725 for spouse payees) and unlimited if funds are not commingled; bank deposits from other public benefit payments up to $1,900 ($2,825 for spouses as joint payees) - 704.080.
• Personal injury and wrongful death causes of action and recoveries necessary for support - 704.140 & 704.150.
• Cemetery and burial plot - 704.200.

Wages

• 75% of wages paid within 30 days before filing bankruptcy - 704.070.
• Public employee vacation credits (at least 75% if receiving installment payments) - 704.113.

Retirement & Pensions

• Tax-exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing, and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans) - 11 U.S.C. § 522.
• IRAS and Roth IRAs (limits apply) - 11 U.S.C. § 522(b)(3)(C)(n). (This amount is set by federal law. See The Federal Bankruptcy Exemptions for amount updates.)
• Public retirement benefits - 704.110.
• Private retirement plans and benefits, including IRA and Keogh - 704.115.
• Public employees - Cal. Gov't Code § 21255.
• County employees - Cal. Gov't Code § 31452.
• County peace officers - Cal. Gov't Code § 31913.
• County firefighters - Cal. Gov't Code § 32210.

Public Benefits

• Unemployment and disability benefits, and union benefits due to labor disputes - 704.120.
• Workers' compensation benefits - 704.160.
• Public assistance benefits - 704.170.
• Relocation benefits - 704.180.
• Student financial aid - 704.190.
• FEMA benefits - 704.240.

Tools of Trade

• Tools, implements, materials, books, uniforms, instruments, one commercial vehicle, equipment, and furnishings up to $9,700 total, or up to $19,050 if used by both spouses in the same occupation - 704.060.

Insurance

• Matured life insurance benefits needed for support of unlimited value, or unmatured life insurance policies up to $15,250 - 704.100.
• Disability or health insurance benefits - 704.130.
• Homeowners' insurance proceeds for six months after received, up to the amount of homestead exemption -704.720.
• Fidelity bonds - Cal. Labor Code § 404.
• Life insurance proceeds if policy prohibits use to pay creditors - Cal. Insurance Code § 10132, 10170, 10171.

Miscellaneous

• Business or professional licenses - 695.060.
• Trust funds of inmates up to $325 - 704.090.
• Property of business partnership - Cal. Corporations Code § 16501.

California Bankruptcy Exemption System 2 (703 Exemptions)

California's System 2 (also known as § 703.140(b) exemptions) only applies in bankruptcy (you can't use them to protect your property against creditors outside of bankruptcy).

Some courts might not allow you to use the System 2 exemptions (especially when filing for bankruptcy outside of California because of domicile rules). Consider talking to a knowledgeable bankruptcy attorney about exemptions permitted in your area.

California 703 Homestead Exemption

Under System 2, California's homestead exemption is $31,950 for real or personal property used as a residence - 703.140(b)(1).

California 703 Motor Vehicle Exemption

In System 2, you can exempt up to $6,375 of equity in motor vehicles.

Personal Property

• Burial plot up to $31,950 instead of the homestead exemption - 703.140(b)(1).
• Clothing, household goods, appliances, furnishings, animals, books, musical instruments, and crops up to $800 per item - 703.140(b)(3).
• Jewelry up to $1,900 - 703.140(b)(4).
• Health aids - 703.140(b)(9).
• Wrongful death recoveries needed for support - 703.140(b)(11).
• Personal injury recoveries up to $31,950 - 703.140(b)(11).

Retirement & Pensions

• Tax-exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing, and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans) - 11 U.S.C. § 522.
• IRAS and Roth IRAs (you'll find IRA bankruptcy limits here) - 11 U.S.C. § 522(b)(3)(C)(n).
• ERISA-qualified pension, annuities, and benefits necessary for support - 703.140(b)(10).

Public Benefits

• Unemployment compensation, Social Security, Veterans' benefits, and public assistance - 703.140(b)(10).
• Crime victims' reparation benefits - 703.140(b)(11).

Tools of Trade

• Tools, books, and implements of trade up to $9,525 - 703.140(b)(6).

Alimony & Child Support

• Alimony and child support necessary for support - 703.140(b)(10).

Insurance

• Unmatured life insurance policy, other than credit - 703.140(b)(7).
• Unmatured life insurance accrued interest, dividends, loan, cash, or surrender value up to $17,075 - 703.140(b)(8).
• Disability benefits - 703.140(b)(10).
• Loss of future earnings payments needed for support - 703.140(b)(11)(E).

Wildcard

• $1,700 plus any unused amount of burial or homestead exemption in any property (currently $31,950 in total if the filer doesn't use the homestead exemption) - 703.140(b)(5). Find out about the wildcard exemption in bankruptcy.

Unless otherwise noted, all law references are to the California Code of Civil Procedure. The California Judicial Council last adjusted the exemption amounts for inflation on April 1, 2022, and the next update will be on April 1, 2025.

Avoiding Exemption Issues in California

If you don't exempt your property carefully, you could lose the property in bankruptcy. Answers to these common questions might help you steer clear of common issues.

Do I automatically get to keep exempt property? Generally, no (although two exemptions newly adopted in 2020 are automatic). In most cases, you can exempt property needed to maintain a job and household, such as furnishings, clothing, and some vehicle equity. You'll select the California exemption set that best protects your property, list your assets on bankruptcy form Schedule C: The Property You Claim as Exempt, and file it along with other required paperwork.

Will someone check my exemptions? The bankruptcy trustee—the court-appointed official tasked with managing your case—will review Schedule C to ensure you have the right to protect the claimed property. A trustee who disagrees with your exemptions will file an objection with the court. The judge will decide whether you can keep the property.

Example. Jeff owns a rare, classic car worth $15,000, but the state vehicle exemption won't adequately protect it. Believing that the car qualifies as art—at least in his mind—Jeff exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C, disagrees with Jeff's characterization, and files an objection with the court. After consideration, the judge will likely side with the trustee, determining that the vehicle doesn't qualify as a piece of art.

What if I make a mistake? Most trustees won't file an objection unless it's clear that the debtor is trying to pull something over on the court. At least not without trying to resolve the issue first. If there's a minor exemption problem, the trustee will likely call you to work out the matter informally.

It's worth noting that it's not a good idea to finesse exemptions. Not only are you obligated to supply correct information on your bankruptcy forms, but purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Need More Bankruptcy Help?

Did you know Nolo has been making the law easy for over fifty years? It's true—and we want to make sure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Updated April 5, 2022