While bankruptcy relief is a function of federal law, your state of residence will determine the exemptions you are able to use in your Chapter 7 or Chapter 13 bankruptcy.

Each state has its own exemption system and rules. Below is an overview of the bankruptcy exemption system in California.

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Exemptions: What Are They?

Exemptions protect your assets when you file bankruptcy. In other words, you get to keep a certain amount of “stuff” when you file bankruptcy– this is your exemption amount.

If you have assets in excess of your exempt amounts, your Chapter 7 bankruptcy trustee can sell the non-exempt assets and distribute the sales proceeds to your creditors. THIS IS RARE IN THE AVERAGE CHAPTER 7 BANKRUPTCY, HOWEVER.

In a Chapter 13 with non-exempt assets, the value of the non-exempt assets would help calculate your bankruptcy payment plan amount.

Exemption Systems in California

Some states let bankruptcy filers choose between state exemptions and the federal bankruptcy exemption system – but California is not one of them.

In California, you must use state exemptions. But, California has two separate state exemption systems you can choose from. These are informally called the “703 exemptions” and the “704 exemptions.”

“703” and “704” refer to the code sections of the California Code of Civil Procedure that provide for the exemption systems.

Generally, debtors with a lot of equity in their homestead will use the 704 exemptions.

The 703 exemptions might be better for debtors who have a lot of money in the bank or other valuable items. This is because the 703 exemptions include a generous wildcard exemption, which can be used to protect many different kinds of assets.

Other Rules for Applying Exemptions in California

You must choose one system or the other- you can’t pick some exemptions from the 703 exemptions, and some from the 704 exemptions.

If you are a married couple filing a joint bankruptcy, some states allow you to double the amount of your exemptions. But California is not one of these states.

In California, married couples may not double their exemptions unless a particular exemption expressly allows for it.

There are also exemptions that are scattered throughout federal non-bankruptcy law. They often apply in bankruptcy cases as well. But, they should NOT be confused with the federal bankruptcy exemptions. The federal bankruptcy exemptions are not available to California bankruptcy filers.

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Learn more about the 703 Exemptions

Learn more about the 704 Exemptions

Learn more about federal nonbankruptcy exemptions