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Bankruptcy in California: Allowable cash on hand

On Behalf of | Dec 9, 2022 | Chapter 7 Bankruptcy

Bankruptcy laws are very complicated and can confuse the most astute filer. However, it’s vital to know the laws governing bankruptcy, both federal and state, and how much cash is allowed.

If you’re considering filing bankruptcy in San Diego, whether Chapter 7 or Chapter 13, it’s vital to know the items that are considered cash and how that’s determined. Cash doesn’t necessarily mean cash in your wallet. Rather, it means assets, such as cash in your wallet, bank accounts, and savings, as well as your vehicle, your primary residence, your clothes, furniture, and so on. These are called exemptions.

Luxury items such as jewelry and furs are generally not exempt.

The laws that govern the allowable cash exemptions for both types of bankruptcy are complicated and vary by state.

What’s the difference between Chapter 7 and Chapter 13?

Chapter 7 is a liquidation bankruptcy that discharges unsecured debts and some secured debts like vehicle loans and mortgages. However, you must surrender the secured property to the creditor in Chapter 7, so you might not want to include your home in the list of secured debts.

Chapter 13 is a reorganization bankruptcy that allows you to restructure your debt to a manageable level. Many consumers opt for Chapter 13 if they don’t qualify for Chapter 7.

Your residence during the preceding two-and-one-half years will determine the amount of exempt cash you can keep. Since Chapter 7 filers will need some property for daily living, exemptions allow them to do so.

What is net value?

Net value is determined by subtracting outstanding liens from the property’s market value. Some assets will have no value after deducting liens, and the debtor can keep them. Other assets may have value and can be sold to repay creditors.

What is a wildcard exemption?

A wildcard exemption allows the debtor to protect up to $1,325 of value for any item, in addition to the $12,575 homestead exemption.

Are state and federal exemptions the same?

No, state and federal bankruptcy exemptions are different, but some states permit the use of federal bankruptcy regulations.

Filing Bankruptcy

Bankruptcy was designed to give debtors a fresh start while providing their creditors with as much remediation as possible. It can help alleviate a substantial burden from those who became upside down financially through no fault of their own.