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Bankruptcy Exemptions

Bankruptcy exemptions are an essential part of the Chapter 7 or Chapter 13 Bankruptcy process. In Chapter 7 Bankruptcy, exemptions are important because they determine what property the debtor is allowed to keep and what property the debtor must liquidate in order to satisfy his or her debts. In a Chapter 13 Bankruptcy, creditors must not receive less than they would have if the debtor had filed for Chapter 7. Because of this, bankruptcy exemptions are also important for debtors who file for Chapter 13 Bankruptcy.

Bankruptcy exemptions can allow a person who files for bankruptcy to keep certain types of property or assets, such as their:

  • House or home (referred to in bankruptcy as a homestead);
  • Car, truck, or other motor vehicle;
  • Jewelry or heirlooms;
  • Public retirement pension; and
  • 401k account or IRA.

Although many states allow a debtor to choose between different systems of federal and state property exemptions, California does not. In California, a person who files for bankruptcy must use one of California’s property exemption systems. If you are considering filing for bankruptcy but are concerned about what property or assets you will be able to keep, an experienced Hayward Bankruptcy Attorney can advise you on how California’s systems of bankruptcy exemptions can protect your assets.

California System 1 Exemptions

In general, California’s System 1 offers more generous protections for homeowners and for married couples. Although not an exhaustive list, some of the largest exemptions in System 1 include:

  1. The homestead exemption, which protects up to $75,000 of equity in a residence or land for single persons and $100,000 for families who all live in one home. For disabled persons or those who are 65 or older, the homestead exemption is $175,000.
  2. The exemption for public employee pensions or private retirement benefits, which protects all of the pension or retirement funds.
  3. The motor vehicle exemption, which protects up to $2,900 in equity in a motor vehicle.

California System 2 Exemptions

On the other hand, California’s System 2 offers a generous “wildcard” exemption with increased flexibility for filers who do not have home equity or would rather protect other assets. Exemptions in System 2 include:

  1. The wildcard exemption, which can be used on any property that the debtor chooses. The wildcard exemption ranges from $1,350 up to $26,925 depending on how much, if any, of the homestead exemption is used.
  2. The motor vehicle exemption, which protects up to $5,100 of equity in a motor vehicle.
  3. “Tools of the trade,” which protects tools, uniforms, materials, or other equipment that is used in the debtor’s occupation up to $7,625.

Contact a Bankruptcy Exemption Attorney Today

If you are considering filing for bankruptcy, it is important to understand how California’s system of property exemptions can protect your assets. Do not wait – call the Law Office of Melanie Tavare at 510-255-4646 or contact us online to find out how bankruptcy can help you get a fresh start.

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