California Bankruptcy Exemptions

Learn what property you can keep if you file for bankruptcy in California.

When filing for Chapter 7 or Chapter 13 bankruptcy, California allows you to choose between two different sets of exemptions. Exemptions protect your property in any bankruptcy chapter that you file. In a Chapter 7 bankruptcy, the trustee will sell the property you can’t exempt and use the funds to pay unsecured debts—such as credit card balances, personal loans, and utility bills. In Chapter 13 bankruptcy, the trustee doesn’t sell your nonexempt property. Instead, you keep it and pay the value of it to your unsecured creditors through your three- to five-year repayment plan.

For more information on how bankruptcy exemptions work, see Bankruptcy Exemptions.

California Requires Debtors to Use State Exemptions

Certain states offer you a choice between state exemptions and the federal bankruptcy exemption system but California is not one of them. In California, you must use state exemptions. Luckily, California has two state exemption systems you can choose from (you must choose one system or the other).

Generally, debtors with substantial home equity prefer System 1 while System 2 is more beneficial for debtors who have valuable property other than home equity. Be sure to compare each set and choose the one that works best for your situation. In addition to the exemptions found in System 1 or System 2, you might also use any applicable amounts in the federal nonbankruptcy exemptions.

California Doesn't Allow Married Couples to Double Exemptions

If you are a married couple filing together (a joint bankruptcy), some states allow you to double the exemption amount. But California is not one of these states. In California, married couples cannot double exemptions unless a particular exemption expressly allows it.

The Trustee Can Object to Your Exemptions

If you don’t exempt your property carefully, you could lose it. You’ll want to steer clear of these common issues.

Do I automatically get to keep exempt property? No. In most cases, you’ll be allowed to exempt property that you’ll need to maintain a job and household, such as furnishings, clothing, and some equity in a vehicle. You must choose the California exemption scheme that you wish to use, list the assets you can protect official 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 that you have the right to protect the claimed property. A trustee who doesn’t agree 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 to the exemption with the court. After consideration, the judge will likely side with the trustee and determine 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 the issue out informally.

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

California Bankruptcy Exemption System 1 (704 Exemptions)

Unless otherwise noted, all law references are to the California Code of Civil Procedure. These exemptions were last updated by the California Judicial Council to adjust for inflation on April 1, 2016. The next update will be April 1, 2019.

Homestead

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: $75,000 if single and not disabled; $100,000 if family and at least one family member has no interest in the homestead; $175,000 if 65 or older or if physically or mentally disabled; $175,000 if creditors are seeking to force the sale of your home and you are either (a) 55 or older, single and earn under $25,000 per year, or (b) 55 or older, married and earn under $35,000 per year - 704.730.

Motor Vehicle

The motor vehicle exemption is designed to protect a certain amount of equity in your car, truck, motorcycle, or another vehicle. Under System 1, your motor vehicle exemption is $3,050 - 704.010.

Personal Property

  • Household items and personal effects - 704.020.
  • Residential building materials to repair or improve home up to $3,200 - 704.030.
  • Jewelry, heirlooms and works of art up to $8,000 - 704.040.
  • Health aids - 704.050.
  • Bank deposits arising out of Social Security payments up to $3,200 for a single payee ($4,800 for husband and wife payees) and unlimited if funds are not commingled; bank deposits from other public benefit payments up to $1,600 ($2,375 for husband and wife as joint payees) - 704.080.
  • Personal injury and wrongful death causes of action and recoveries that are necessary for support - 704.140 & 704.150.
  • Cemetery and burial plot - 704.200.

Wages

  • 75% of wages paid within 30 days prior to 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 updates on this dollar amount.)
  • 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 fire fighters - 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.

Tools of Trade

  • Tools, implements, materials, books, uniforms, instruments, one commercial vehicle, equipment, and furnishings up to $8,000 total, or up to $15,975 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 policy up to $12,800 - 704.100.
  • Disability or health insurance benefits - 704.130.
  • Homeowners' insurance proceeds for six months after received, up the to 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 $1,600 - 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 (they can’t be used to protect your property against creditors outside of bankruptcy). Certain courts have deemed bankruptcy-only exemption systems to be unconstitutional while others allow debtors to use them.

This means that some courts (especially if you are filing for bankruptcy outside of California but are still using California exemptions because of domicile rules) might not allow you to use the System 2 exemptions. As a result, consider talking to a knowledgeable bankruptcy attorney to determine which exemptions are permitted in your area.

Unless otherwise noted, all law references are to the California Code of Civil Procedure. These exemptions were last updated by the California Judicial Council to adjust for inflation on April 1, 2016. The next update will be April 1, 2019.

Homestead

Under System 2, California’s homestead exemption is $26,800 for real or personal property used as a residence - 703.140(b)(1).

For more information, see The California Homestead Exemption.

Motor Vehicle

In System 2, you can exempt up to $5,350 of equity in your motor vehicles.

Personal Property

  • Burial plot up to $26,800 instead of the homestead exemption - 703.140(b)(1).
  • Clothing, household goods, appliances, furnishings, animals, books, musical instruments and crops up to $675 per item - 703.140(b)(3).
  • Jewelry up to $1,600 - 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 $26,800 - 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 (limits apply) - 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 $8,000 - 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 $14,325 - 703.140(b)(8).
  • Disability benefits - 703.140(b)(10).
  • Loss of future earnings payments needed for support - 703.140(b)(11)(E).

Wildcard

  • $1,425 plus any unused amount of burial or homestead exemption in any property (currently $28,225 in total if no homestead exemption is used) - 703.140(b)(5).

Last updated: April 7, 2017

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