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BANKRUPTCY EXEMPTIONS PROTECT YOUR PROPERTY FROM A CHAPTER 7 LIQUIDATION SALE

In a bankruptcy action, exemptions generally allow a person to protect certain types of assets and property during the bankruptcy process.  

Stated another way, in Chapter 7 bankruptcies, “exemption” laws generally protect your property from liquidation and sale by the bankruptcy trustee who acts on behalf of creditors.  Bankruptcy trustees can and often do sell property that is not protected or is underprotected by exemption laws.   However, in most bankruptcy cases, no property is liquidated or sold.

CALIFORNIA EXEMPTION LAWS

Compared to many states, California has generous exemptions.

California has two different exemption systems.  A bankruptcy debtor must choose one of the two exemption systems.  You can't mix and combine them.  There is Code of  Civil Procedure (CCP) Section 703.140(b) exemptions, and there are CCP  Section 704 exemptions.  

The "703 exemptions," consist of eleven categories.  One of the categories is the "wild card" exemption of up to $23,250.  

In comparison, the "704 exemptions," contained in Code of Civil Procedure Sections 704.010 through 704.210, have 21 different types of exemptions that protect a wider range of property but do not include a "wildcard" exemption.  But, the CCP 704 exemptions contain a  homestead exemption on a personal residence equity providing a base exemption of $75,000, $100,000 for married individuals, and $175,000 for senior citizens and disabled individuals.

In most bankruptcies, the CCP 703.140 exemptions work best at protecting property of the debtor.  In a small minority of cases, CCP 704 best benefits debtors, especially when a residence has significant equity.

REASON FOR EXEMPTION LAWS

The concept behind exemptions is to provide an individual with a minimum amount of property and money that can be used to give him/her a "fresh start."  

The rationale for allowing exemptions is that average citizen ought be be able to keep their property so that they do not have incur debt again after bankruptcy.  Accordingly, in most cases, they can file bankruptcy and keep their residence (if there is not too much equity), their furniture, their vehicles, and other life's necessities.  Retirement savings are usually fully protected not just by the state exemption, but also by special federal exemptions that override state exemptions.

EXEMPTION LAWS CAN BE COMPLEX

Exemption protection can be complex and can be affected by one's marital status, how long one has lived in a particular state, legal interpretation of statutes, case law, the amount and type of assets, and various other factors.

Bankruptcy exemption planning is crucial and can be performed legally with the help of an experienced bankruptcy lawyer.

Therefore, you are encouraged and advised to seek legal advice and representation regarding these issues.

For a free and confidential consultation, contact Christian bankruptcy attorney  Matthew B. Tozer.

Copyright 2011

 Disclaimer

Under the new bankruptcy law, Mr. Tozer is a debt relief agency because he helps people file for bankruptcy relief under the Bankruptcy Code.

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