California Bankruptcy Exemptions – What are They and Can I use them?

The Bankruptcy Code institutes a number of ways for individuals to have a realistic “fresh start” that bankruptcy is intended to provide.  One of these is the allowance of “exemptions” from the bankruptcy estate.  When a debtor files bankruptcy, an estate is created of the assets of the debtor.  However, you can exclude or exempt certain property from the estate.  These exemptions mean that you can retain property that would otherwise be part of the estate, subject to liquidation and distribution to creditors.

The law of exemptions can be quite daunting and complex.  For example, to qualify for the California exemptions, a debtor must have “domiciled” in California for at least 730 days (2 years) before filing for bankruptcy.  Also, California’s exemption statute allows the debtor to choose between a set of state law exemptions and California’s nonbankruptcy exemptions.  The ability to choose between the two is further complicated when a married couple file for bankruptcy.  

Specific California (nonbankruptcy) exemptions include (although there are several other exemptions) $2,550 for a single motor vehicle, ordinary and reasonably necessary household furnishing, clothing, and personal effects, jewelry, heirlooms, and works of art the aggregate value of which do not exceed $6,750, tools of the trade (include potentially a work vehicle) not to exceed $6,750, certain social security benefits, certain life insurance policies, and certain retirement plans.

Further, California nonbankruptcy exemption law provides a homestead exemption valued at varying levels, with a minimum of $50,000.  This homestead exemption is limited to the principal dwelling where the you or your spouse resided on the date the bankruptcy case commenced.  The Bankruptcy Code caps the California homestead exemption to $136,875 for property acquired within 1,215 days before the debtor filed for bankruptcy.  Other caps may also apply by law.

Lastly, California’s alternative Bankruptcy Code-Like Exemptions allow for alternate choices for the debtor and bankruptcy attorney.  One key addition is the inclusion of a “wildcard” provision.  This wildcard allows the debtor to exempt up to $1,100 on any property.  The wildcard ultimately can potentially be used up to an aggregate amount of $20,725.

The bottom line on exemptions is that the debtor has choices.  While the choices are not always clear, a good bankruptcy attorney should be able to look at the debtor’s assets and create a plan that incorporates the exemptions to the full extent the law provides.  Call the Henshaw Law Office today at (408) 599-1305 to discuss whether bankruptcy planning is appropriate for you.