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Garden Grove Bankruptcy Lawyers on California's Confusing Bankruptcy Exemptions

March 3, 2009

People who are considering bankruptcy are understandably concerned about what property they would be allowed by the bankruptcy court to keep -- and what they'd have to give up. Of course, this is different for everyone because it depends heavily on the circumstances, but bankruptcy law allows states to define lists of property that is protected from being sold in the bankruptcy and used to pay off debts. These lists are called exemptions, and they may partly or fully protect property. For example, retirement benefits are generally fully exempted, but only a set amount of equity in a home is exempted.

California has the dubious distinction of being the only state with two different lists of exemptions. (However, our state does not allow bankruptcy filers to choose federal exemptions, as some states do.) People filing for bankruptcy must choose one or the other. Married couples can double some exemptions, but they must choose the same list of exemptions. Again, which one you should choose depends on your circumstances, and you should get help from a Southern California bankruptcy lawyer to decide which is best for you. But generally, one list of exemptions is shorter and less complex, while the other exempts more property.

We find that clients are most concerned about the homestead exemption, which shields a certain amount of equity they have built in the homes they actually live in -- that is, investment properties and second homes don't count. Under one exemption list, there is no residency requirement; all filers can exempt up to $17,425 in equity in a home they occupy, including condos, co-ops, mobile homes and houseboats. Under the other exemption list, you can only take the homestead exemption if you have lived in California for at least 40 months (three years and four months), but the exemption amount is higher and depends on your age, income and marital status. The exemption protects:

  • $50,000 for single people
  • $75,000 for families where no member has another homestead
  • $150,000 for people 55 or older if they're single and make less than $15,000; or married and make less than $20,000
  • $150,000 for people 65 or older, or disabled people

Other available California exemptions include:

  • Personal and household property such as furniture, appliances, clothing and food.
  • Health aids (such as a prosthetic limb).
  • Burial plots.
  • A motor vehicle worth up to $1,900 or $2,775, depending on the exemption list.
  • Jewelry up to $5,000 or $1,150.
  • Under one exemption list, 75% of wages paid within 30 days of filing for bankruptcy.
  • Disability benefits and most forms of life insurance.
  • Alimony and child support.
  • Many types of public benefits (such as unemployment) and certain pensions.

As you can see, figuring out how California bankruptcy exemptions will affect your case is usually not accomplished quickly. If you're considering bankruptcy and you want to know more about which property you can protect, you should consider talking to the experienced Anaheim bankruptcy attorneys at Howard Law. Our law firm specializes in helping clients with bankruptcy and debt problems, including mortgage problems. And we offer free consultations to all potential clients. To set up a free, confidential meeting with us, send us an email today or call 1-800-872-5925.