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Protecting Your Property – Common California Exemptions

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Debtors in Bankruptcy can chose one of two exemption sets:  Civil Procedure Code 703 exemptions or Civil Procedure Code 704 exemptions.  See analysis below for the differences. 703 Exemptions These exemptions are generally for debtors who do not own a home or have a home and there is no equity.  These exemptions are commonly referred to as the "703" exemptions.  Here are some of the most popular exemptions: 1.    Miscellaneous Personal Property (“Wildcard”) – Up to $30,825 in any property owned. If you do not own a home or have no equity in your home, then the Wildcard exemption will protect up to $30,825 worth of your assets. Importantly, the Wildcard exemption may be combined with the other categorized exemptions below, such as the vehicle exemption, for example, in order to protect a car worth far more than the vehicle exemption would otherwise allow. 2.    Household Goods and Furnishings (for example clothing, furniture, appliances, books, instruments, sporting goods, etc.) – are protected so long as any one item does not exceed $725. 3.    Jewelry – Up to $1,750 4.    Motor Vehicle(s) – Up to a total of $5,850 for one or more vehicles. For a vehicle that is not paid for, only the equity in the vehicle, if any, must be exempted. 5.    Life Insurance with a Cash Surrender Value (a whole life policy) – Up to $15,650 in cash value. Cash value is not the same as the death benefit. 6.    Retirement Accounts – These are exempt in their entirety so long as the retirement is an IRA or an employer sponsored plan like a union pension, 401(k), or 403(b). Self-employment retirement plans like SEP IRAs have special rules and must be properly administered to be exempt. In addition, there are some federal caps on the amounts in an IRA. 704 Exemptions These exemptions are generally for debtors who do own a home and the home has some equity.  These exemptions are commonly referred to as the “704” exemptions. Here are a few of the most popular exemptions: 1.    Homestead – Covers equity in a primary residence of a minimum of $300,000 but can be as high as $600,000, depending on the county you live in.  For all of the counties in the Bay Area the amount will be $600,000.  Counties outside of the Bay Area will likely have lower homestead amounts.  Note that there are other homestead rules, such as when a debtor recently moved from another state to California. 2.    Motor Vehicle – Up to $3,325 in one or more vehicles. 3.    Jewelry, Heirlooms, and Art – Up to $8,725. 4.    Life Insurance with a Cash Surrender Value (a whole life policy) – Up to $13,975 or $27,950 if a husband and wife file bankruptcy together. 5.    Retirement Accounts – Are exempt in their entirety so long as the retirement is an IRA or an employer sponsored plan like a union pension, 401(k), or 403(b). Self-employment retirement plans like SEP IRAs have special rules and must be properly administered to be exempt. In addition, there are some caps on the amounts in an IRA. Failure to properly select exemptions can result in you losing your property.  Contact a certified bankruptcy specialist like David A. Arietta, Esq. at (925) 472-8000 to go over your specific situation..