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Chapter 7 Bankruptcy Exemptions – Law Offices of Omar Zambrano Bankruptcy Attorney

Upon filing a bankruptcy petition in US Bankruptcy Court, with certain exceptions, everything the debtor owns as well as any interests in property that the debtor may not even possess at time the bankruptcy is filed become known as the "bankruptcy estate."

If the filing is a Chapter 7 Bankruptcy, then the Trustee appointed to the debtor's case controls all the assets that are included in the debtor's bankruptcy estate until the case is closed or the assets are otherwise abandoned by the Trustee.

 If the filing is a Chapter 13 bankruptcy the debtor maintains some control over the estate assets although he or she must generally obtain the Court's approval to sell, encumber, or transfer property while the Chapter 13 case is pending. Chapter 7 and Chapter 13 differ fundamentally with respect to their treatment of a debtor’s assets. In Chapter 7, the Trustee may seize any portion of the debtor’s assets that exceed the value of the arbitrary limits (or “exemptions”) that the debtor is allowed to keep.

The Chapter 13 Trustee, on the other hand, has no authority to take any assets away from the debtor.

What Property May I Exempt? How Much Can I Exempt?

In some states, bankruptcy debtors have a choice of either using the federal exemptions provided under the Bankruptcy Code or the exemptions provided by his or her state of residence. Some states, like California, have opted out of the federal exemptions, so California exemptions must be applied unless the debtor has resided here for less than two years prior to filing bankruptcy.

As our bankruptcy law firm is located in Los Angeles, our Chapter 7 clients generally must use the California exemptions applicable in bankruptcy. Further, those filing bankruptcy in California have a choice between two tracks of exemptions. The choice of which exemptions to claim can be quite complicated, however, and should be made only with the advice of an experienced bankruptcy attorney. Our analysis of the value of our client's assets and which exemptions will best protect those assets exemplifies how we strive to protect our clients' interests.

In California, the Chapter 7 debtor must select one set or the other; bankruptcy law does not permit mixing and matching of the exemptions for the debtor's benefit. The track of exemptions that we apply is largely dependent on whether the client owns his or her primary residence and whether that home has any equity.

The following is a list of some of the most common exemptions taken within each exemption track by our clients in Chapter 7 bankruptcy. This is not intended to be a complete list. If you have any questions regarding any asset you own and the possibility of exempting it, please contact attorney Omar Zambrano for a free consultation 1-800-562-0004.

California Exemption Track #1 – 703 (“Wildcard”) Exemptions

This track of exemptions is commonly referred to as the “703” Exemptions due to the number of the Code section in the California Code of Civil Procedure in which they are enumerated (C.C.P. §703.140). It is also commonly referred to as the “Wildcard” Exemption, getting its name from the fact that §703.140(b) (5) allows for the protection of miscellaneous personal property up to the amount outlined below.

Homestead Exemption (not to be confused with the 704 homestead exemption below) – Debtors are able to keep any equity interest in any real property or personal property used as a residence (such as a mobile home) that they or their dependents actually live in, up to $24,060 in value. Because the 704 homestead exemption is far more generous, the Wildcard Exemptions are usually chosen precisely because the debtor does not have a home or has no equity in that home needing an exemption. Therefore, the "Miscellaneous" exemption listed below is generally taken in lieu of this Homestead exemption under 703 and can be combined in such a way as to create a maximum exemption of $25,340.

Miscellaneous Personal Property ("Wildcard") – Up to $24,060 (provided no Homestead exemption is taken) in the debtor’s aggregate interest in any property that he/she owns, plus an additional $1,280 for a combined maximum of $25,340. Thus, if you do not own a home or have no equity in your home, then the combined Wildcard exemption will protect up to a cumulative total of $25,340 worth of any variety of assets that you own. Importantly, the Wildcard exemption may be combined with the other categorized exemptions below, such as the vehicle exemption, for example, in order to protect a car worth far more than the vehicle exemption would otherwise allow.

Household Goods and Furnishings (e.g. clothing, appliances, books, instruments, sporting goods, animals, crops, etc.) – Debtors are allowed to keep any item not exceeding $600 in value in any particular item.

Jewelry – Up to $1,425.

Motor Vehicle – Up to a cumulative $4,800 for one or more vehicles. As noted above, if the value of your vehicle exceeds this amount, or you have multiple vehicles, generally we can use some portion of the Wildcard exemption above to exempt the remaining value of the vehicles. Also note, that a vehicle that is not paid for, only the equity in the vehicle, if any, must be exempted.

Public Benefits – Benefits offered by the government such as Unemployment, Social Security, Disability, Public Welfare, and Veteran’s benefits are exempt.

Life Insurance with a Cash Surrender Value (e.g., "whole life") – Up to $12,860 in the debtor’s aggregate interest in any accrued dividend or interest under, or loan value of, any un-matured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.

Tools of the Trade (implements, professional books, tools, other things used for your occupation) – Up to $7,175.

California Exemption Track #2 – 704 (Homestead) Exemptions

This track of exemptions is commonly known as the “Homestead Exemption” due to the fact that the majority of debtors who use this track of exemptions do so to protect the equity in their Homestead.

Homestead – Covers equity in a primary residence of up to $75,000 for a single person fewer than 65; up to $100,000 for a married couple or the head of a household; and up to $175,000 for persons over age 65, disabled persons or certain low-income individuals over the age of 55.
Motor Vehicle – Up to $2,725 in any number of vehicles. However, the TOTAL amount of the exemption is $2,725.

Material to be applied to repair or maintenance of residence – Up to $2,875.
Jewelry, Heirlooms, and Art – Up to $7,175.

Personal Property used in debtor’s or debtor’s spouse’s trade, business, or profession (amount of exemption for commercial motor vehicle may not exceed $4,850; or $9,700 for married couples) – Up to $7,175, unless both spouses are engaged in business, then $14,350. Note, however, that commercial motor vehicle exemption may not be claimed if the motor vehicle exemption above is also claimed and such motor vehicle could reasonably be used in business.
Life Insurance with a Cash Surrender Value (e.g., "whole life") – Up to $11,475 or $22,950 for joint debtors.

Public Benefits – Benefits offered by the government such as Unemployment, Social Security, Disability, Public Welfare, and Veteran’s benefits are exempt.

The Law Offices of Omar Zambrano are here to explain all your options face to face. 

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Be aware that for the majority those filing bankruptcy in California, the California statutory exemptions will apply. However, any debtor who has moved to California within the last two years from another state will be required by bankruptcy law to use the exemptions provided by his or her former state of residence, or in some cases, the federal exemptions. Also note that in addition to 401(k) s as described above, other common retirement savings accounts, such as Individual Retirement Accounts (IRAs) are covered under certain federal bankruptcy exemptions that supersede state exemptions, specifically, under Bankruptcy Code Section 522(d) (12). The exemption on some other retirement accounts is in some instances unlimited. However Section 522(n) does place a cap on amounts in IRAs not attributable to earnings or roll-overs (as of this writing) of slightly over $1 Million. The federal exemption available to cover retirement savings such as IRAs may be taken in addition to one of the California tracks of exemptions listed below.

California bankruptcy exemptions include only some of the most common exemptions taken. If you have a question as to whether an asset in your possession will be exempted from seizure by the Trustee if you file for Chapter 7 Bankruptcy, you are advised to retain us so that one of our seasoned bankruptcy attorneys may provide you with the knowledgeable legal advice that is so critical to a successful bankruptcy.

This discussion of California bankruptcy exemptions has focused primarily on Chapter 7 bankruptcy, and protecting assets from seizure and liquidation by the Chapter 7 Trustee, assets also matter in Chapter 13 bankruptcy. Under the “best interests of the creditors test,” if a debtor who files Chapter 13 bankruptcy has assets whose values exceed the exemptions that would apply had he or she filed Chapter 7, then the Chapter 13 payment plan must provide for payment to the general unsecured creditors of at least as much as they would have received from a Chapter 7 liquidation.

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Short Sales Real Estate Broker & Attorney Omar Zambrano

Top Rated California Real Estate Attorney Omar Zambrano

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Home |  What Happens to Second Mortgage in Chapter 7? |  Lien Stripping Chapter 7 |  Chapter 13 Lien Stripping Second Mortgage |  Can a Second Mortgage be Discharged in Bankruptcy? |  Eliminating the Second Mortgage |  Second Mortgage and Bankruptcy in Chapter 7 |  Bankruptcy and 2nd Mortgage |  Lien Stripping Second Mortgage Chapter 7 |  Chapter 7 Bankruptcy |  Chapter 7 Bankruptcy Exemptions |  Keeping Your Business Through Chapter 7 Bankruptcy |  Small Business Chapter 7 Bankruptcy Relief |  Chapter 13 Bankruptcy |  Chapter 13 Lien Stripping  |  Chapter 13 Bankruptcy Trustee Information |  What To Do If You Are Being Sued |  Wage Garnishment Creditor Harassment |  Predatory Lending |  Contact Us |  About Us |  Book Your Consultation |  FAQ |  Partners |