Will I lose my property if I file for bankruptcy?
A Chapter 7 bankruptcy is a liquidation bankruptcy, so it is important that you tell your attorney about everything you own. In Chapter 7 bankruptcy, you ask the bankruptcy court to discharge most of the debts you owe. In exchange for this discharge, the bankruptcy trustee can take any property you own that is not exempt from collection, sell it, and distribute the proceeds to your creditors. What property is exempt from collection depends primarily on state law. Typically, exemptions include some equity in your home and car, retirement funds, public benefits, and most household goods, furniture, furnishings, clothing (other than furs), appliances, books, some jewelry, and musical instruments.
Most consumers who file bankruptcy under Chapter 7 are able to retain all of their assets.
Will I lose my house?
Whether or not you can keep your home in a Chapter 7 filing will depend on the amount of equity (equity is the fair market value of the home less the amount of outstanding debt against the property) you have in your home, and whether or not you are in default under your mortgage instruments.If you have no equity in your home, or if you are able to exempt all of your equity, your home will not be liquidated by the bankruptcy trustee to satisfy unsecured creditors. And, if you are current on your monthly payments and not otherwise in default under your mortgage documents, your lender will not foreclose. Therefore, if you have either no equity or your equity is exempt, and you are current on your monthly payments and not in default, you may generally retain your home in a Chapter 7 bankruptcy.
Will I lose my car?
Similarly, in order to retain your car in a Chapter 7 filing you must not be in default (that is you must be current on monthly payments and have the required insurance in place) and you must be able to exempt the equity (if any) that you have in the vehicle. In addition, if you wish to retain the car you are required to either reaffirm the debt with your lender or redeem the vehicle from your bankruptcy estate. Reaffirmation means that you sign new documents promising to pay the vehicle debt after your bankruptcy closes. Redemption is your right to redeem or purchase the vehicle from your bankruptcy estate at its fair market value.Your Household Furnishings and Goods
Generally, your furnishings, household goods, and clothing are exempt from liquidation in a Chapter 7 bankruptcy. There may be exceptions, however, if you have items of extraordinary value, such as antiques or valuable artwork. Specific exemptions are available for jewelry; however, the exemption amount is limited.California’s Property Exemptions
California’s exemption amounts are summarized below. You must chose either exemption set 1 or set 2. You cannot use both or mix and match. Please note that generally, people who file bankruptcy in California will use one of California’s two exemption schemes; however, if you have lived in a state other than California during any part of the past two years you will need to consult an attorney to determine the state exemption scheme applicable to your situation. You may be required to use the federal or your previous state’s exemptions even though you currently reside in California.|
California Exemptions (citations are to the California Code of Civil Procedure unless otherwise indicated) |
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System 1 |
System 2 |
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Homestead 704.730 - Real or personal property occupied at time of filing for bankruptcy, including mobile home, boat, stock cooperative, community apartment, planned development or condominium, up to the following limits: $75,000 if single and not disabled; $100,000 if family and no other member has homestead; $175,000 if 65 or older or if physically or mentally disabled; $175,000 if creditors are seeking to force sale of your home and you are either (a) 55 or older, single and earn under $15,000 per year, or (b) 55 or older, married and earn under $20,000 per year. Sale proceeds are exempt for up to 6 months after sale. 704.920 - Homestead declaration may be filed to protect the proceeds of a voluntary sale up to 6 months or to protect the exemption amount from a judicial lien. |
Homestead 703.140(b)(1) Real or personal property, including co-op, used as a residence up to $22,075.
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Personal Property 704.010 - Motor vehicle or auto insurance if vehicle lost, destroyed or damaged up to $2,725 (spouses may not double). 704.020 - Food, clothing, appliances and furnishings. 704.030 - Building materials to repair or improve home up to $2,875 (spouses may not double). 704.040 - Jewelry, heirlooms and art up to $7,175 total (spouses may not double). 704.050 - Health aids. 704.080 - Bank deposits from Social Security Administration up to $2,875 for single payee ($4,300 for husband and wife payees) and unlimited if funds are not commingled; Bank deposits from other public benefits up to $1,425 ($2,150 for husband and wife). 704.140 & 704.150 - Personal injury causes of action and wrongful death causes of action. Wrongful death and personal injury recoveries that are needed for support. 704.200 - Burial plot. Fin. 17410 - Funds held in escrow. |
Personal Property 703.140(b)(1) - Burial plot up to $22,075, instead of homestead. 703.140(b)(2) - Motor vehicle up to $3,525. 703.140(b)(3) - Clothing, household goods, appliances, furnishings, animals, books, musical instruments and crops up to $550 per item. 703.140(b)(4) - Jewelry up to $1,425. 703.140(b)(9) - Health aids. 703.140(b)(11) - Wrongful death recoveries needed for support. 703.140(b) (11) - Personal injury recoveries up to $22,075, not to include pain, suffering or pecuniary loss.
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Wages 704.070 - 75% of wages paid within 30 days prior to filing bankruptcy. 704.113 - Public employee vacation credits (75% minimum if receiving installment payments). |
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Pensions 11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans). 11 U.S.C. § 522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,171,150. 704.110 - Public retirement benefits. 704.115 - Private retirements benefits, including IRA and Keogh. Government 21255 - Public employees. Government 31452 - County employees. Government 31913 - County peace officers. Government 32210 - County fire fighters. |
Pensions 11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans). 11 U.S.C. § 522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,171,150. 703.140(b)(10) - ERISA-qualified benefits needed for support.
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Public Benefits 704.120 - Unemployment benefits and union benefits due to labor dispute. 704.160 - Workers' compensation. 704.170 - Aid to blind, aged and disabled or other public assistance. 704.180 – Certain relocation benefits. 704.190 - Financial aid to students. |
Public Benefits 703.140(b)(10) - Unemployment compensation, Social Security, Veterans' benefits, and public assistance. 703.140 (b) (11) - Crime victims' compensation.
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Tools of Trade 704.060 - Tools, implements, materials, books, uniforms, instruments, one commercial vehicle, equipment, and furnishings up to $7,175 total, or up to $14,350 if used by both spouses in the same occupation. Commercial vehicle up to $4,850, or $9,700 if used by both spouses in the same occupation. |
Tools of Trade 703.140(b)(6) - Tools, books and implements of trade up to $2,200.
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Insurance 704.100 - Matured life insurance benefits needed for support of unlimited value, or unmatured life insurance policy up to $11,475 in value. 704.120 - Fraternal unemployment benefits. 704.130 - Disability or health benefits. 704.170 - Fraternal benefit society benefits. 704.720 - Homeowners' insurance proceeds for 6 months after received, up to amount of homestead. Labor 404 - Fidelity bonds. Ins. 10132, Ins. 10170, Ins. 10171 - Life insurance proceeds if policy prohibits use to pay creditors. |
Insurance 703.140(b)(7) - Unmatured life insurance policy, other than credit. 703.140(b)(8) - Unmatured life insurance contract accrued interest, dividends, loan, cash or surrender value up to $11,800. 703.140(b)(10) - Disability benefits. 703.140(b)(11) - Life insurance proceeds needed for support.
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Alimony & Child Support 703.140(b)(10) - Alimony and child support needed for support. |
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Wildcard 703.140(b)(5) - $1,175 of any property plus any unused amount of burial or homestead exemption of any property. |
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Misc. 695.060 - Business or professional licenses. 704.090 - Trust funds of inmates up to $1,425 (spouses may not double). Corp. 16501 - Business partnership property. |
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Other Add any applicable Federal Nonbankruptcy Exemptions.
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Other Add any applicable Federal Nonbankruptcy Exemptions. |
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