Bankruptcy is a difficult option for anyone to choose. However, in California there is more to consider because while they require all residents filing for bankruptcy to use state exemption standards for their claims, there are two state systems from which to choose and which cannot be combined.
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- California state exemption system #1 – up to $2,550 in equity or in insurance payments covering loss or damage (cannot be doubled)
- California state exemption system #2 – up to $3,300
Regardless of which plan a debtor chooses, they must continue to make scheduled loan payments on any debt secured by their vehicle or the lien holder may have the right to repossess it.
How to Keep Your Home
- Federal homestead exemption - $20,200
- California state exemption system #1 –
- up to $75,000 in real or personal property they occupy, including a mobile home, boat, stock cooperative, community apartment, planned development, or condo if single
- up to $100,000 for families in which no other member owns a homestead
- up to $150,000 for those 65 or older, or disabled
- up to $100,000 for those 55 or older, single, and earning less than $15,000 or married and earning under $20,000
- sale proceeds exempt for 6 months (may not be doubled)
- California state exemption system #2 – up to $20,725
- Any unused portion of homestead may be applied to any other property
Any loans or mortgages secured by the homestead property must be paid regularly or the lien holder may still be able to foreclose.
California allows exemptions for other forms of personal property:
- California bankruptcy exemptions, system #1:
- Necessary appliances, furnishings, clothing, food, burial plot, and health aids
- Jewelry, heirlooms, and art – up to $6,750 total (may not be doubled)
- Personal injury and wrongful death causes of action or recoveries
- Tools of the trade – up to $6,750 total
- California bankruptcy exemptions, system #2:
- Animals, crops, furnishings, appliances, household goods, musical instruments, books, and clothing – up to $525 per item
- Burial plot – up to $20,725 in lieu of homestead
- Health aids
- Jewelry – up to $1,350
- Personal injury recoveries to $20,775 (pain and suffering or pecuniary loss not to be included)
- Wrongful death recoveries necessary for support
- Tools of the trade – up to $2,075
- Wild card – up to $1,100 of any property, plus any unused portion of homestead or burial exemption – not to exceed $21,825
Filing Schedule C of a Bankruptcy Petition
California residents must choose either California system #1 or system #2. Once made, that decision must be outlined in Schedule C and attached to the bankruptcy petition, including these details:
- A listing of the property or properties being claimed
- The state system and statutes that apply to each claim
- The exemption value of each
- The current assessed value of each claim (not the market value)
Getting Legal Help
The California system is a more complicated than most, and without the aid of a bankruptcy attorney, many filers without a legal background can get lost in the decision-making process. With the appropriate advice, however, the system can provide the powerful protections for debtors in this state.
