Exempt assets are assets the person filing for bankruptcy can shield from creditors and the bankruptcy estate. In other words, they are untouchable assets and yours to keep post-bankruptcy.
In California, individuals are allowed to claim their home or a portion of their home’s equity as an exempt asset. If you are single the amount is $75,000; if you are married or have children the amount is $100,000; and if you are elderly or disabled the amount is $175,000. In certain situations, it can be advisable to record a Declaration of Homestead in the California county where you reside before the bankruptcy filing. Other complications can arise if you have recently moved to California from another state. The definition of what is your homestead can sometimes be tricky so property advice from Contra Costa County attorney David A. Arietta is necessary.
If you are divorcing or separated, either spouse can take advantage of the exemption to protect the residence. In addition to the home exemption, your household goods and furnishings are generally exempt plus up to approximately $8,700 in tools of the trade, term life insurance policies, up to approximately $5,900 in a vehicle, and up to approximately $1,800 in jewelry. Note that there are other exemptions that may pertain to your specific situation such as exemptions for personal injury causes of action and wrongful death claims but there are some limits that need to be addressed before any bankruptcy filing. Retirement assets like 401Ks are exempt and IRAs are generally exempt with some limitations.
If you do not have a home, you can exempt approximately $30,800 of miscellaneous property including cash and investments (for California debtors). In addition, your household goods and furnishings are generally exempt plus up to approximately $8,700 in tools of the trade, term life insurance policies, up to approximately $3,300 in a vehicle, and up to $8,725 in jewelry. Non-homeowners can also exempt their retirement assets. Again, note that there are other exemptions that may pertain to your specific situation.
Each person’s situation is unique in terms of what they can and cannot exempt. Note that exemptions can be objected by a bankruptcy trustee if not taken correctly so careful planning is necessary before a bankruptcy is filed. In addition certain pre-bankruptcy planning is allowed. Careful considerations and planning are important at that point in time. A consultation with a certified bankruptcy attorney like David A. Arietta is important to ensure that your assets are protected. Once the bankruptcy is filed it is too late to do any further planning.
Call us at (925) 472-8000 for a review of your unique situation.