Bankruptcy Exemptions to Protect Your Home and Other Property
The phrase, ‘exempting an asset, means protecting an asset in one of two ways.
The first way is to use exemptions. California exemptions are very generous compared to most other states. For example, the homestead exemption in California can protect between $75,000 and $175,000 of equity in your home depending on your age, income, marital status or disability. On January 1st of 2021, the homestead exemption increases to $600,000 in many cases !
For clients who are in the military or from
outside California, I may need to use the exemptions of other states.
The second way an asset can be protected is by debt. If there is a secured debt, such as a house that is worth $300,000 with
$400,000 still owed on the mortgage, the bankruptcy trustee is not going to take the house and sell it. There would be no point in such a sale, since no money would be left for unsecured creditors.
At our San Diego law firm, we understand
bankruptcy exemptions and your rights. Contact our office for a free initial consultation.
Asset Protection and Exemptions Attorney in California
In the state of California, there are two exemption schemes: the 703
exemptions and the 704 exemptions.
The 704 exemptions allow you to use your homestead exemption, anywhere
from $75,000 to $175,000, to protect equity in your house. The effectiveness of 704 is dependent on your age, marital status, income and or disability status. Since not everyone needs to protect a house, and the 704 has weak protections for cash, cars and other property,
the vast majority of people filing bankruptcy in California use the
703 exemptions instead.
The 703 is much easier to use. The 703 has an exemption called the “wildcard”, which can be used to protect up to $23,250 in value of anything: cash, equity in a vehicle, artwork or other property. You also get a protection of $3,525 for a car. If the car is worth more than that, you can dip into your wild card. There are all sorts of exemptions for assets such as insurance, jewelry, tools and household
Not knowing how to properly exempt your property can cost you, and your bankruptcy lawyer should know how to help you through this process. Too many cases get filed too early without proper preparation. It is important to be patient and pick the best time for the client. It is
possible to do things in such a way that when the case is filed, no assets will be lost. In the meantime, we will deal with all of the creditors and collection agencies.