When you file for bankruptcy, there are a number of decisions you must make, including, what type of exemptions to claim. In many states, you can choose between state exemptions or the federal exemption system. However, under California’s bankruptcy law, you do not have such a choice and instead are required to claim state exemptions.
California has two exemption systems from which someone can choose. The systems are different and each offers certain advantages depending upon the financial situation of the debtor. Those with substantial home equity often rely on the first system, while those with liquid assets or other valuables tend to prefer the second system.
California’s first bankruptcy exemption system protects a certain amount of equity in a debtor’s principal home. Under this law, you may exempt real or personal property you reside in up to $75,000 if you are single and up to $175,000 depending upon the size of your family. You also have the right to exempt certain amounts of personal property, including household items, health aids and up to $7,625 in jewelry and works of art. Additionally, you are allowed to exempt a portion of your wages as well as retirement funds and other assets.
Under California’s second bankruptcy exemption system, your right to exempt your home is limited to up to $25,575 – far less than allowed under the first system. It also includes similar exemptions to the first system, including motor vehicle and personal property exemptions. However, this system offers a caveat not provided for by the first exemption system.: a wild card exemption. This allows for up to $1,350 plus any unused portion of the burial or homestead exemptions (up to $26,925). This is an excellent option for debtors with assets other than equity in their homes, for example, cash in the bank, or vehicles that are paid for.
Choosing between the two exemption systems is only one part of California’s complex bankruptcy system. If you are thinking of filing for bankruptcy in or near Bakersfield, speak with Max Gardner, an experienced bankruptcy attorney at 661-888-4335