If you are having difficulty paying your bills and making loan repayments, you may consider filing bankruptcy to help stop all collection attempts and have your debts discharged. When filing for bankruptcy, your creditors may try to collect what they can from you by trying to seize some of your assets, like money in your bank accounts, garnishing wages and make other attempts to fulfill your debt to them. However, under California law, certain types of property are exempt from debt collection efforts.
System 1 Exemptions
Under California bankruptcy law, there are two systems for claiming exemptions, System 1 and System 2. Here are some of the exemptions for System 1:
Homestead: Any real property you own and occupy may be exempt from debt collection, which may include a boat, mobile home, condo, and other property types valued up to $75,000 if single and not disabled, $150,000 if you have a family and your spouse doesn’t have a homestead, $175,000 for those 65 and older, or if you are mentally or physically disabled; $100,000 if 55 or older, single and make less than $25,000 per year or married and make less than $35,000 per year.
Personal Property: Any furnishings or appliances in your home, food or clothing that you need are exempt from debt collection. Your personal jewelry, any art or heirlooms you own valued at $5,000 total is also exempt. Other exempt items include burial plots, building materials to repair your home up to $2,000, any money you receive from Social Security up to $2,000 or $3,000 total for a husband and wife, health aids, motor vehicles worth up to $1,900, as well as some payments received from a personal injury.
Wages – Up to 75% of your wages may be exempt from collection attempts.
Trade Tools – If you are a trade professional, such as a carpenter or plumber, any tools you need for work, along with your work vehicle up to $5,000 total, or $10,000 for both spouses if you both need your tools for work, are exempt.
In addition, some insurance policies, public benefits and pensions are also exempt.
System 2 Exemptions
Under System 2, most of the exemptions are the same, but the values of the items may be vastly different. For example, for the real property you occupy, the exempt value is only $25,575 and any unused part of the property can be applied to any property.
Under personal property, instead of a total value, each exempt item is given a value of $650 and may include books, livestock, crops, appliances, furniture, musical instruments, clothing and other household goods. The jewelry you own is exempt only up to a value of $1,525 and the equity in your vehicles increases to $5,100. None of your wages are exempt, the tools you use for work are exempt up to $7,625 and you can exempt $1,350 of any unused burial or homestead exemption for property under a “Wild Card.”
You can only pick one system to file bankruptcy under and, before filing bankruptcy, you need to consult with the attorneys of SM Law Group.