Understanding the protections offered by the California Bankruptcy Exemptions
Many people are apprehensive about even considering initiating a bankruptcy proceeding because they assume they’ll have to give up all or most of their belongings to help pay off their debts. This is a myth! In most cases, a skilled bankruptcy attorney can help you protect up to $175,000 worth of equity in your home and about $25,000 worth of equity in personal property (including a vehicle). And if you are currently paying off a car or home loan, all you have to do is continue making your payments in order to keep that property.
What Property Can You Exempt from a Bankruptcy?
The point of a bankruptcy is not to leave you debt-free but destitute. Rather, it is to relieve some of your debt burdens so that you can have a better chance at getting your financial life back in order. The courts and the law recognize that you need a home, a vehicle, and various personal property items in order to do this. That’s why exemptions exist. The California bankruptcy exemptions provide for individuals to keep certain types of property and income including:
- A home
- Cemetery plots
- Health aids
- Household items and personal effects
- Heirlooms
- One motor vehicle
- Personal injury compensation
- Wrongful death compensation
- Insurance benefits
- Pension benefits
- Disability benefits
- Tools of the trade (for your business or career)
Because there are actually two separate exemption systems, the dollar amounts you may qualify to exempt from your bankruptcy will vary according to which system you choose. Your bankruptcy attorney can discuss your case with you in detail and advise you of which system will provide the best protection.
Which Type of Bankruptcy Should You File?
The bankruptcy exemptions mainly apply to Chapter 7 bankruptcies. If you have additional property that you wish to keep, such as a vacation home, investment property, additional vehicles, or any property valued above the exemption amounts, you should consider filing Chapter 13 bankruptcy instead of Chapter 7. Filing Chapter 13 will allow you to keep all of your property, regardless of exemption status. The difference is whereas Chapter 7 would potentially allow you to discharge all your debts completely, Chapter 13 requires a repayment plan. You will be given additional time to repay your debts, your total debt burden will be reduced, and you will escape the harassing attentions of creditors, but you won’t receive the same kind of sweeping unsecured debt discharge as you would with Chapter 7. To learn more about exemptions and how they may affect the type of bankruptcy you choose to file, contact California Bankruptcy Relief today.
