Will I be able to keep my property in a Chapter 7 bankruptcy?

Individuals considering Chapter 7 bankruptcy in California often think they will have to give away all of their property. This bankruptcy myth can keep some people from filing bankruptcy for months, even years. Meanwhile, they continue to build debt and fall further into financial turmoil.

This is exactly what we advise clients not to do. Bankruptcy myths scare many people away from the one thing that could lead to financial independence: filing for bankruptcy.

The truth is that you will be able to keep some of your most important property during Chapter 7 bankruptcy. Both California and federal bankruptcy law allow you to exempt property from bankruptcy. You may choose between using either the California bankruptcy exemptions or the exemptions found under the U.S. Bankruptcy Code. There are also two separate California exemption tracks that you must choose between.

They are:

703 exemptions / Wildcard exemptions

Debtors who do not own a home usually choose this track. Under this track, you may exempt:

  • Up to $22,075 of the equity interest in your home
  • Up to $23,250 of personal property (this is called the “wildcard” exemption)
  • Household goods that do not exceed $550 (per item)
  • Up to $3,525 of the value of one vehicle
  • Government benefits / public benefits
  • Up to $11,800 in the aggregate interest of any unmatured life insurance policies
  • Up to $2,200 of “tools of the trade,” including professional books and tools

704 exemptions / Homestead exemptions

This track is best for those who would like to keep their home during bankruptcy. Under this track, you may exempt:

  • Up to $75,000 of equity in your home if you are a single person under 65 and up to $100,000 if you are a married couple
  • Up to $2,725 in vehicle equity
  • Up to $2,875 in household maintenance or repair
  • Up to $7,175 in art and heirlooms
  • Up to $7,175 in personal property used for a trade or business
  • Certain public benefits

*Note: The dollar values listed above are subject to change. For a current list, please see an experienced bankruptcy attorney.

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