Bankruptcy Exemption Laws In California

Like any other states in the US, there are specific bankruptcy exemption laws in California also, as per which, the debtor might be allowed to keep some assets and properties up to a certain value. The idea behind these laws is to provide an opportunity to the debtor to continue living his basic life and give a fresh start to his/her finances. However, the laws regarding property exemptions vary significantly from one state to another. The following provisions are applicable specifically to the residents of California.

Federal Laws Do Not Apply

Though the majority of states provide the option to choose between federal and state-specific exemptions, California is an exception. In bankruptcy cases that fall in a California jurisdiction, the debtors cannot claim federal exemptions. Their assets and properties are exempted as per the bankruptcy exemption laws explained in Chapters 703 and 704 of the California Code of Civil Procedure. You though have the option to choose between chapter 703 and chapter 704. The guidelines are regularly updated every three years. The last update was made in 2007. The new updates are scheduled by the end of this year, 2010.


The assets and properties that can be exempted have been divided into different categories. The general categories include tools of trade, public benefits, personal property, pensions, insurance, and homestead. In both chapter 703 and chapter 704, there is also a miscellaneous category that covers items like professional licenses, alimony, and other such things. Most categories also have several sub-categories that include specific items. For every category, the laws have set a maximum limit; you cannot exempt a specific property more than that value.

Mixing And Matching Of Exemptions

The bankruptcy exemption laws in California are very strict. Once you choose to go with a specific chapter (either 703 or 704), you will have to stick with it. You are not allowed to mix and match exemptions from both chapters to ensure maximum advantage. The positive side is that the maximum limit that can be exempted in California is much higher than many other states. For example, an individual can keep his/her home up to the value of $50,000. The maximum limit in homestead exemption for a family of two is $75,000. In chapter 704, the bankrupt individual can even utilize the unused portion of homestead exemption with any other property.

Chapter 703 Vs Chapter 704

As per the bankruptcy exemption laws of chapter 703, the maximum limit is doubled in case of married couples. But, chapter 704 does not offer such benefits (the amount is not doubled). Unlike 704, the chapter 703 also exempts at least 3/4th of the total wages that the debtor earned in the previous three months. Student financial aid is also exempted under chapter 703, but not in 704. However, both chapters allow exemptions for household furnishings, food, clothing, jewelry, and automobiles.

In case the value of a specific property, such as a home, exceeds the maximum limit, the bankruptcy trustee appointed by the court sells the property and pays the debtor the cash amount of the exemption. Overall, your awareness plays the key role when it comes to making the best use of the bankruptcy exemption laws in California.

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Posted in Bankruptcy, Bankruptcy Exemptions | 4 Comments »

4 Responses to “Bankruptcy Exemption Laws In California”

  1. Payroll Processing Albany says:

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  2. Hobert Woerner says:

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  4. kelvin says:

    Very wisely described. Bankruptcy does not mean that you will have nothing with you or you have to sell all your assets and valuables. If you are living in the state of California, you can give a new start to your life even after bankruptcy. Here you will not be able to use Federal laws only state specific laws can be chosen. Here the laws regarding bankruptcy exemptions are provided under two different chapters, you can choose one between them. You can have the exemptions under different categories like tolls of trade, public benefits, pensions and insurance etc. You can keep your home or any other property for a certain amount under homestead category. Some other exemptions can be taken under miscellaneous category like you can take the exemptions in case of license, alimony, pensions etc. Before filing for bankruptcy under a specific chapter 703 or 704, you should always study all the rules thoroughly because California state authorities will not allow you to interchange the rules, chapter 703 provides some exemptions while 704 provides some other exemptions, it will be better to study both and then make a decision.

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