Bankruptcy Exemptions.

An exemption is property that the debtor keeps during and after bankruptcy, or a certain amount of equity that is protected from creditor’s claims and liens. Claiming all available exemptions is one of the keys to getting the maximum benefit from a bankruptcy case. Which exemptions are available to you depends on where you lived prior to filing your case.

730-day rule. If you have lived in one state for at least 730 days (2 years) prior to filing your bankruptcy petition, you can use that state’s exemptions or the federal exemptions, if your state allows you a choice. (In California, you must use the state exemptions.)

180-day rule. If you have not lived in one state continuously for at least 730 days prior to filing the case, you must use the exemptions from the state in which you lived the majority of the time during the 180 days prior to the 730-day period before filing.  In other words, you use the exemptions from the state where you lived for at least 91 days during the 730 to 910 day period before your case is filed.

(It has been said that this complicated rule is intended to discourage debtors from moving from one state to another just prior to filing for bankruptcy, in order to claim more favorable exemptions.)

CALIFORNIA EXEMPTIONS

The following is an overview of the main exemptions available for people who file for bankruptcy in California. It is not a complete list.  If you don’t qualify for California exemptions, another set of exemptions will apply.  If you have questions about a specific item of property and whether it would be exempt, speak to a bankruptcy attorney.

California has 2 sets of exemptions. If you are a homeowner, you would typically use System 1, which provides a larger homestead exemption.

System 1

Type of Property

Amount of Exemption

California Code of Civil Procedure (CCP) or Bankruptcy Code Section

Homestead (property you own that is your residence) $75,000 if you are single and not disabled$100,000 if you reside with spouse or with at least one family member who does not have an ownership interest in the home$175,000 if you or your spouse is age 65 or older$175,000 if you are physically or mentally disabled and unable to engage in substantial gainful employment$175,000 if you are single, age 55 or over, and your gross annual income is $25,000 or less$175,000 if you are married, age 55 and over, and your combined gross annual income is $35,000 or less CCP 704.730 (a)
One motor vehicle, proceeds of sale of vehicle or auto insurance proceeds $2,900 CCP 704.010 (a)
Household furnishings, appliances and personal effects that are reasonably necessary for you or your family No set value, but the value of your property cannot exceed value of property found in similar households CCP 704.020
Construction materials which are to be used for repair or improvement of family residence $3,050 (spouses may not double) CCP 704.030
Jewelry, heirlooms and works of art $7,625 (spouses may not double) CCP 704.040
Personal property used in debtor’s or debtor’s spouse’s trade, business or professionPersonal property used in debtor’s and debtor’s spouse’s common trade, business or profession $7,625$15,250 CCP 704.060
Bank deposits or cash from earnings 75 per cent of earnings paid within 30 days prior to filing bankruptcy CCP 704.070
Bank deposits from Social Security Administration $3,050 for a single payee$4,575 for a couple (two payees)Payments must be deposited directly into the account. CCP 704.080
Bank deposits from public benefits $1,525 for a single payee$2,275 for couple (two payees)Payments must be deposited directly into the account. CCP 704.080
Tax-exempt retirement accounts such as 401(k)s, 403(b)s and defined benefit plans Accounts in tax-exempt or tax-deferred group retirement plans cannot be claimed by creditors or made part of a bankruptcy estate.
Individual Retirement Accounts (IRA and Roth IRA) Funds held in an IRA are exempt up to $1,171,650 per person. CCP 704.115 and USC 522 (n)
There are a number of other exemptions available in System 1, including personal injury and wrongful death causes of action, burial plots, funds held in escrow, life insurance and proceeds from insurance claims.

System 2

Type of Property Amount of Exemption California Code of Civil Procedure (CCP) or Bankruptcy Code Section
Real or personal property that debtor and/or dependent(s) of debtor uses as a residence, or a burial plot $25,575 CCP 703.140(b)(1)
One motor vehicle $5,100 CCP 703.140(b)(2)
Household furnishings and personal effects $650 maximum value of any single item CCP 703.140(b)(3)
Jewelry $1.525 CCP 703.140(b)(4)
Any property (Wildcard exemption) $1,350 plus unused portion of the $25,075 homestead exemption CCP 703.140(b)(5)
Tools and materials used in a profession or trade $7,575 CCP 703.140(b)(6)
Value of debtor’s interest in unmatured life insurance policy $13,675 CCP 703.140(b)(7)
Personal injury causes of action $25,575 CCP 703.140(b)(8)
Social security and public benefits; spousal and child support Most public benefits are fully exempt; spousal and child support payments are exempt to the extent deemed reasonably necessary for the support of the debtor and debtor’s dependents CCP 703.140(b)(10)
Tax-exempt retirement accounts such as 401(k)s, 403(b)s and defined benefit plans Accounts in tax-exempt or tax-deferred group retirement plans cannot be claimed by creditors or made part of a bankruptcy estate.
Individual Retirement Accounts (IRA and Roth IRA) Payments from a qualified retirement account are exempt to the extent reasonably necessary for support of the debtor or debtor’s dependents. CCP 703.140 (b)(10)(E)
Under this exemption scheme, the “wildcard” exemption allows you to take any unused portion of the homestead exemption, add $1,350 to that amount, and use for any property that you want to exempt.  For example, if you don’t own a home (or have no equity in your home) but own a motorcycle worth $10,000, it may be fully exempted, and you’ll still have $16,425 left over to protect other property.