It is a big decision to declare bankruptcy. You need to understand the implications of this process. It is important to understand the details of California bankruptcy filings. This article will help you understand the exemptions in California bankruptcy.
California Bankruptcy Exemptions
A bankruptcy filing can choose between state and federal exemptions in some states. California does not allow anyone to exempt property from bankruptcy. That being said, if applicable, you may be able to claim certain federal non-bankruptcy exemptions if you worked in certain professions or belong to a particular group.
Two Types of California Exemptions
California bankruptcy filers will not be able to choose between state and federal exemptions. However, they will have two options for their exemptions. There are two types of exemptions available: Set 1 or 704 exemptions and Set 2 or 703 exemptions. Both sets allow debtors to exempt certain possessions from the tax.
The homestead exemption is a significant difference between 704 & 703. The exemption value under Section 704 is substantially higher than that under Section 703. Homeowners with significant equity in their homes often choose Set 1 (704 exemptions). Set 2 (703 exemptions) is the most popular choice for filers who don’t have real estate or who don’t have a lot of equity in their home.
Set 1 (704 Exemptions)
Filers with substantial equity in their home typically use the “704 exemptions” or set 1. The California legislature passed a homestead exemption last year. A bankruptcy debtor may now exempt the greater of:
- “The countywide median sales price for a single-family house in the calendar years preceding the year in which the judgment creditor claims the exemption is not more than six hundred thousand dollars ($600,000. [or]
- Three hundred thousand dollars ($300,000.)
Set 2 (703 Exemptions)
Usually selected by people who don’t own any real property or have very little equity. Protected by the 703 homestead exemption:
- “(1) The aggregate interest of the debtor, not exceeding twenty-nine thousand two hundred seventy-five dollars ($29,275), in real property and personal property the debtor, or a dependent, uses as a home, in a cooperative which owns the property the debtor, or a dependent, uses as a residence.”
This article was written by Alla Tenina. Alla is a top Sherman Oaks personal injury lawyer, and the founder of Tenina Law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.
