In the last blog post we looked at the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy. In this post, we’ll dive into the two California systems of exemptions. The idea behind these exemptions is to protect certain assets from liquidation during bankruptcy. After all, how “freeing” would bankruptcy be if you lost everything you own upon filing?
703 vs. 704 exemptions
Most of my clients use the 703 exemptions, which refers to section 703 of the California Code of Civil Procedure. California is very generous with 703 exemptions. These exemptions can protect the following:
- Equity in your home: $ 26,800
- Vehicle: $5,350
- Jewelry: $1,600
- Household Goods: Fully protected (up to $675 per item)
- Retirement Accounts: Fully protected.
- Wildcard Exemption: $ 28,255 (depending on whether home equity is protected)
The “wildcard objection” might have raised your eyebrows. This exemption can be used to protect any asset. You could even have $28,255 in the bank fully protected under this exemption.
The other option is to use the 704 exemptions. Here’s what 704 exemptions offer in terms of protection:
- Equity in Your Home: $100,000 for married couples and $175,000 if you are 65 or older.
- Vehicle: $3,050
- Jewelry: $8,000
- Personal Injury Claims: Fully protected if the award is necessary for support.
- Household Goods: Fully protected
- Retirement Accounts: Fully protected
- Wildcard Exemptions: None.
Lining things up like this helps show the pros and cons of both sets of exemptions. If you’re like many of my clients who are renting or don’t have a lot of equity in your home, the 703 exemptions can go a long way towards protecting you (especially the wildcard exemption). The main reason my clients go with the 704 exemptions is to protect the equity in their home.
When it comes to protecting your assets in bankruptcy, always follow the guidance of your Stockton bankruptcy lawyer. They know how to maximize your benefits and minimize any potential risks.
Categorized in: Filing Bankruptcy