An exemption is a certain type and amount of property that the debtor keeps during and after bankruptcy, or a set amount of home equity that is protected. Claiming all available exemptions is one of the keys to getting the maximum benefit from a bankruptcy case. The exemptions that are available to you depend on where you lived prior to filing your bankruptcy case.
A person who has lived in California for at least two years will choose between two sets of exemptions. The choice is often determined by whether the debtor is a homeowner.
The “704” Exemption Scheme
The this set of exemptions includes a generous homestead exemption, found in Code of Civil Procedure § 704.730:
(a) The amount of the homestead exemption is the greater of the following:
(1) The countywide median sale price for a single-family home in the calendar year prior to the calendar year in which the judgment debtor claims the exemption, not to exceed six hundred thousand dollars ($600,000).
(2) Three hundred thousand dollars ($300,000).
According to data published by the California Association of Realtors, the 2022 median sale price of single-family home in San Francisco was $1,522,827. Based on that figure, a San Francisco resident filing for bankruptcy in 2023 can exempt up to $600,000 of equity in his or her residence. Median prices in other Bay Area counties are well above $600,000; therefore, the maximum exemption amount should be available to all Bay Area homeowners.
Note that the homestead exemption does not apply to rental property, vacation homes or other property where the debtor does not reside.
Code of Civil Procedure § 704.010 provides an exemption of up to $7,500 for one motor vehicle.
Another important exemption is Code of Civil Procedure § 704.060, which exempts materials used in the debtor’s trade, business or profession, up to $8,725.00.
For all 704 exemptions that may be claimed, see Code of Civil Procedure § 704.010 through § 704.200.
The “703” Exemption Scheme – The Wildcard Exemption
The “703” exemption scheme provides more flexibility for the debtor who does not own a home, or does not have significant amount of equity in the property.
Section 703.140 (b)(1) provides a homestead exemption of $29,725.
Section 703.140 (b)(5) protects $1,550 of value in any property, plus any unused amount of the homestead exemption provided in Section 703.140 (b)(1). This is known as the “wildcard” exemption. A debtor who does not own a home can exempt up to $30,825 for “any property” that would not otherwise be exempt. This exemption can be used to protect a second vehicle, cash and other financial products, business property, etc.
Section 703.140 (b)(2) exempts up to $7,500 of the value of one vehicle.
Section 703.140 (b)(6) exempts up to $8,750 of materials used in connection with the debtor’s business or profession.
Section 703.140 (b)(10) exempts the value of most pension and retirement accounts “to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.”
For all “703” exemptions that may be claimed, see Code of Civil Procedure § 703.140 (a)-(c).
Bankruptcy is not the end. It is a system of laws which have benefitted people in all walks of life, including middle-class people who own property and other assets. Allow me to help you navigate the complex bankruptcy laws and procedures, to discharge your debts and get a fresh start.