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Bankruptcy in California, Part 2

Continued from Bankruptcy in California, Part 1


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Federal vs. state exemptions? Not in California


Some states allow Chapter 7 debtors to choose between federal exemptions or state exemptions. California is not one of those states. Instead, California offers two schedules of exemptions for debtors to choose between when listing assets and claiming exemptions.

This is what people commonly refer to as "protecting your property."

According to the California Courts Judicial Council:

Exemptions


The Bankruptcy Code allows each individual who files for bankruptcy to keep basic assets that are necessary for the debtor's “fresh start” after bankruptcy. That property is the debtor’s “exempt property.”

Each state has its own list of property that can be exempt. California gives debtors a choice between the state law exemptions found in Code of Civil Procedure section 704 and a set of bankruptcy-only exemptions in Code of Civil Procedure section 703.140 that mirror the Bankruptcy Code exemptions that were in the federal law when the California law was adopted.

California's unique exemptions system


For instance, System 1 Exemptions are generally better for homeowners, providing a homestead exemption ranging from $75,000 to $150,000, depending on whether single, a family residence, plus age and health status of the debtor. However, System 2 provides an exemption topping out at $17,425 for real or personal property.

Another thing to know: California does not automatically double exemptions for married debtors; California statutes explicitly state when double exemptions apply.

Federal 'non-bankruptcy' exemptions


All that being said, however Californians can use so-called federal "non-bankruptcy" exemptions in addition to the state law exemptions. The four most significant non-bankruptcy exemptions are for:

  • Wages (a limit on how much of your wages can be garnished),

  • Social Security benefits,

  • Civil Service benefits,

  • Veterans Benefits


Exemptions' summary


Other  "non-bankruptcy" exemptions may apply to certain, specific government and military personnel as well as specially-regulated labor markets such as railroad workers, seamen, and longshoremen.

The main takeaway is that these exemptions can protect a variety of assets, from property to jewelry, from wages to insurance policies and retirement benefits.

What the CA courts say about filing without an attorney


Finally, it is legal to file your bankruptcy case as a pro se filer, that is, without benefit of an attorney; you can find legal aid to help; you can even hire what are, essentially, typists, who will fill out forms. But here's what the California Courts advise:

Getting a lawyer to help you with your bankruptcy


Bankruptcy is a specialized area of law that is very complex. And the issues are not always apparent or simple. The bankruptcy laws changed in October 2005 to discourage many people from filing for bankruptcy. So the law became more complicated. And there are more situations where a mistake can result in your case getting dismissed. If your case is dismissed, the bankruptcy court often imposes a penalty of 180 days before you can refile, and in this time period a lot can happen. This is why it is so important to have a lawyer advise you and help you with your bankruptcy.

Find a lawyer who can help you work through the issues, alternatives you may have, and consequences of your choices.

  • Pick a lawyer with whom you are comfortable, one who will allow you to ask questions and give you responses that you can understand.

  • Pick a lawyer who either specializes in bankruptcy or does a large part of his or her practice in the field.

  • Ask questions until you understand what your choices are.

  • Don't be afraid to interview a lawyer and leave without hiring him or her.



Continued in Bankruptcy in California, Part 3.

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