Learn how California's bankruptcy exemptions protect your home, car, personal property, and more.
Table of Contents
- How Do Bankruptcy Exemptions Work?
- How Do I Use California Exemptions to Protect Property?
- Will California Bankruptcy Exemptions Protect My Property?
- What Are Commonly Used Bankruptcy Exemptions in California?
- How Do I Find California's Bankruptcy Exemptions?
- What Happens to Property I Can't Exempt in a California Bankruptcy?
- What Are the Differences Between Chapters 7 and 13 Bankruptcy?
- How Long Does it Take to File for Bankruptcy in California?
- How Long Do I Have to Live in California Before I Can Use Its Bankruptcy Exemptions?
- How Can I Avoid Bankruptcy Exemption Problems in California?
- What Will Happen If I Make an Exemption Mistake in California?
- Should I Hire a Lawyer to Help With Bankruptcy Exemptions in California?
- How Much Does It Cost to File for Bankruptcy in California?
- Can I Make Payments to My Bankruptcy Lawyer?
- Need More Bankruptcy Info?
California bankruptcy exemptions protect your property in bankruptcy, and becoming familiar with bankruptcy exemptions before filing will help you determine whether your assets will be at risk.
If you have more questions, read Filing for Bankruptcy in California. You'll find answers, helpful checklists, and an interactive bankruptcy quiz link.
How Do Bankruptcy Exemptions Work?
Bankruptcy helps struggling people get back on their feet by lessening their debt burden, not stripping them of everything they own. Exemptions allow bankruptcy filers to keep things needed to maintain a home and employment.
But paying creditors is also an important consideration. Bankruptcy exemptions balance these interests by letting filers keep necessary property but not unnecessary luxury items. Creditors receive bankruptcy funds when a bankruptcy filer owns "nonexempt" property not covered by a bankruptcy exemption.
How Do I Use California Bankruptcy Exemptions to Protect Property?
You'll compare your property to California's exemption laws. In most states (not all), debtors can use exemption laws to keep property from a creditor's reach in and outside bankruptcy. California has limitations, too, which we explain below. However, here's how it works generally.
Example. Big Creditor sued Ronin and received a $5,000 money judgment. When Big Creditor attempted to "levy" or remove money from Ronin's bank account, Ronin objected in court. Because the state's exemption law allowed Ronin to protect $1,500 of funds in a bank account, Big Creditor could seize only $3,500.
Example. When Maria filed for bankruptcy, she also had $5,000 in her checking account. She listed the state's $1,500 cash exemption in her bankruptcy petition and gave the nonexempt $3,500 to the bankruptcy trustee.
Will California Bankruptcy Exemptions Protect My Property?
Yes, but you must use the California bankruptcy exemptions because the federal bankruptcy exemptions aren't available in this state. However, California filers can use the federal nonbankruptcy exemptions. You'll find both lists below.
In many cases, married filers can double the exemption amount when filing together when they both own the property. Check with a local bankruptcy lawyer for specifics.
What Are Commonly Used Bankruptcy Exemptions in California?
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, California is the only state with two state exemption systems and you'll still be able to select the California exemption set that works best for you. 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 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.
California 704 Retirement & Pension Benefits
Most tax-exempt pensions and retirement accounts are exempt because federal law lets filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 USC 522(b)(3)(C), (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)
You can check with your fund to find out if it qualifies for tax-exempt status. Additionally, California provides that the following pensions and retirement accounts are exempt under California law:
- Public retirement benefits - 704.110.
- Private retirement plans and benefits, including IRA and Keogh - 704.115.
More California 704 Bankruptcy Exemptions
California 704 Personal Property Exemptions
- 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.
- 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 spouses in the same occupation - 704.060.
- Trust funds of inmates up to $325 - 704.090.
California 704 Wage Benefits
- 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.
California 704 Public Benefits
- Unemployment and disability benefits - 704.120.
- 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.
California 704 Insurance Benefits
- 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.
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). 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. 703.140(b)(2).
California 703 Wildcard Exemption
You can protect $1,700 and any unused amount of burial or homestead exemption (currently $31,950 in total if the filer doesn't use the homestead exemption) toward any property you choose. 703.140(b)(5). Find out about the wildcard exemption in bankruptcy.
California 703 Retirement and Pension Benefits
Most tax-exempt pensions and retirement accounts are exempt because federal law lets filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 USC 522(b)(3)(C), (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)
Additionally, California protects ERISA-qualified pension, annuities, and benefits necessary for support under § 703.140(b)(10). You can check with your fund to determine if it qualifies for tax-exempt status.
More California 703 Bankruptcy Exemptions
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).
- Tools, books, and implements of trade up to $9,525 - 703.140(b)(6).
- Alimony and child support 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).
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).
How Do I Find California Bankruptcy Exemptions?
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.
You'll find California's statutes online on the California Legislative Information website. The best way to verify exemptions is by consulting a local bankruptcy lawyer.
What Happens to Property I Can't Exempt in a California Bankruptcy?
One of two things will happen. You'll either lose nonexempt property or pay to keep it, depending on whether you file for Chapter 7 or Chapter 13. Here's how it works.
In Chapter 7, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors. In Chapter 13, filers pay the value of the nonexempt property to unsecured creditors. Learn about secured and unsecured debt in bankruptcy.
The procedural differences are necessary because filers can keep all property in Chapter 13 but not in Chapter 7. Without different systems, creditors would receive less in Chapter 13 than in a Chapter 7 case.
Example. Suppose you couldn't exempt a motorcycle in Chapter 7, and the Chapter 7 trustee sold it and paid unsecured creditors $10,000 after deducting sales costs. If you filed for Chapter 13, you'd pay unsecured creditors at least $10,000 through the Chapter 13 repayment plan to keep the motorcycle.
What Are the Differences Between Chapters 7 and 13 Bankruptcy?
Chapter 7 works for people who can't afford to repay creditors. Chapter 13 filers typically earn too much to qualify for Chapter 7 and must pay into a five-year repayment plan. Before filing for bankruptcy, you'll take a "means test" to determine whether you qualify for Chapter 7 or 13.
Occasionally, people qualifying for Chapter 7 file for Chapter 13 to prevent a home foreclosure, car repossession, or wage garnishment. The Chapter 13 plan allows the filer to catch up on back payments over time, a benefit not available in Chapter 7.
How Long Does it Take to File for Bankruptcy in California?
Most Chapter 7 cases close after four months, although the Chapter 7 bankruptcy trustee sometimes needs additional time to sell property or resolve a dispute. Chapter 13 cases take three to five years to complete.
How Long Do I Have to Live in California Before I Can Use Its Bankruptcy Exemptions?
You can file for bankruptcy in California after living there for over 180 days. However, you must live in California for at least 730 days before using California exemptions. Otherwise, you'd use the previous state's exemptions.
Suppose you hadn't lived in one state the entire two years before filing. In that case, you'd use the exemptions of the state you lived in the longest during the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)
More rules exist, including requirements for multiple bankruptcy filings. Find out more about filing for bankruptcy after moving to a new state and who can and can't file for bankruptcy.
How Can I Avoid Bankruptcy Exemption Problems in California?
If you don't exempt your property carefully, you could lose it. Answers to these questions might help you steer clear of typical issues.
Do I automatically get to keep my exempt property? Generally, no. Here's the procedure you'll need to follow: Select the exemption set that best protects your property, list the exempt assets and applicable exemption laws on Schedule C: The Property You Claim as Exempt, and file it with your other required paperwork.
Will someone check my bankruptcy 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 will only partially protect it. Believing that the car qualifies as art, 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 Will Happen If I Make an Exemption Mistake in California?
Most trustees will likely try to work out the matter informally by discussing it at the 341 meeting of creditors or by phone or email. If you can't resolve the problem, the trustee will file a motion with the bankruptcy court.
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 fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Should I Hire a Lawyer to Help With Bankruptcy Exemptions in California?
Chapter 13 bankruptcy filers will almost always want to hire a bankruptcy lawyer. Chapter 13 is too complicated for most people to navigate successfully.
Chapter 7 filers also benefit from hiring a bankruptcy lawyer. Still, it's more feasible to represent yourself if you have a relatively simple Chapter 7 case. But you should know that Chapter 7 filers can't dismiss a Chapter 7 matter without court approval, so it's prudent to consult a bankruptcy lawyer about potential issues. The extra step could help prevent unexpected property loss.
How Much Does It Cost to File for Bankruptcy in California?
You can expect to pay $1,500 to $2,500 for the average Chapter 7 case and more for a Chapter 13 matter. Bankruptcy lawyers with more experience will charge higher fees than those practicing in large cities because of the costs associated with doing business.
Even so, most bankruptcy matters won't require a top-tier lawyer. But because of the specialized nature of bankruptcy rules, you will want someone who has filed many cases.
At the time of writing, filing fees are $338 for Chapter 7 and $313 for Chapter 13, and costs for mandatory credit counseling and debt management courses run $50 to $75.
Can I Make Payments to My Bankruptcy Lawyer?
No, not in a Chapter 7 case. Chapter 7 lawyers won't file your matter before you've paid in full because the bankruptcy court would erase any outstanding balance with other dischargeable debts. You can pay Chapter 13 attorneys' fees in installments through the Chapter 13 plan.
Need More Bankruptcy Help?
Did you know Nolo has made the law easy for over fifty years? It's true, and we want to ensure you find what you need. Below, you'll find more articles explaining bankruptcy and how it works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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Updated August 29, 2023
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