Before filing Chapter 7 bankruptcy in California, it is important to consult with an attorney about your assets and the possibility of liquidation of your assets by the trustee for the benefit of creditors. This is especially true if you have equity in your home. I am often asked by clients about whether they will lose their home and/or car in chapter 7 bankruptcy in California. Most clients will be able to protect these items in bankruptcy, but it depends on a variety of factors and the amount of assets. Although bankruptcy is federal law, the laws of each state dictates what assets are recoverable by creditors. The assets that debtors may keep are called exemptions. California has two different sets of exemptions for debtors in bankruptcy. A debtor may elect to use only one of the sets of exemptions and it is important to consult with an attorney about the exemptions that make the most sense for each case. The exemptions are set out in Code of Civil Procedure 703 and Code of Civil Procedure 704. While the total exemptions are too numerous to list here, the primary difference revolves around equity in the debtor’s primary residence. If the debtor owns his primary residence and has significant equity, it will likely make sense to exempt the assets under California Code of Civil Procedure 704 which can exempt equity in a homestead in the range of $75,000 up to $175,000. The actual amount will depend on a variety of factors including the age of the debtor and the physical condition of the debtor. If the debtors assets are primarily focused in non-household equity, the debtor will likely want to exempt their assets under California Code of Civil Procedure 703 which provides a “wildcard” exemption that allows a debtor to protect more personal property. These same two sets of exemptions will also apply in Chapter 13 bankruptcy but a debtor may be able to protect more property depending on their plan payment. I recommend you discuss your case with a licensed attorney for a better understanding.
