Individuals preparing to file for personal bankruptcy have many choices to make. They need to decide what type of bankruptcy they intend to pursue.
In many states, Chapter 7 filers choose between federal exemptions and state exemptions for protecting property during bankruptcy. California does not allow filers to use federal exemptions. However, they still have a choice between two different types of exemptions. The type of exemptions filers choose influences the amount of home equity they can protect.
What are the two types of California exemptions?
California has two unique sets of property exemptions that apply in Chapter 7 bankruptcy cases. Those who have only owned their homes for a few years or who have high-value property other than real estate may want to consider using Section 703 exemptions. There are various exemptions for valuable personal property. Filers can also protect up to $26,800 in total home equity.
Those who have lived in the state for multiple years or whose main source of personal wealth is their home equity may want to use Section 704 bankruptcy exemptions. They may be able to protect as much as $300,000 or $600,000 in equity, depending on the county where they live and the median home values in the area.
Many filers can preserve most, if not all, of their accumulated equity with the right exemptions during a personal bankruptcy filing. Working with an experienced bankruptcy attorney can help Chapter 7 filers choose the right exemptions to protect their assets. Home equity is often a key consideration when choosing the type of bankruptcy and the exemptions utilized.