One of the main concerns you may have when considering bankruptcy is whether you can keep your home, car and other personal property. What you can keep in bankruptcy depends on the available bankruptcy exemptions in your state. When you file for bankruptcy, creditors cannot touch assets that the bankruptcy exemptions protect. In California you can select from either 703 bankruptcy exemptions or 704 bankruptcy exemptions, but not both. The bankruptcy exemptions outline what items are protected from creditors liquidating in a bankruptcy. The practice is generally to use 704 bankruptcy exemptions if there is substantial equity in the home, but which exemption to select depends on the amount of equity and what additional assets you own.
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Under the 704 California bankruptcy exemptions you can protect the following assets and equity:
Motor Vehicle-You can protect up to $2,725 in the value of motor vehicles. Below are some examples of how this exemptions works:
If your vehicle is worth $10,000 and you owe $8,000 then there is $2,000 in equity in the vehicle. Under the bankruptcy exemptions you could protect the equity in the vehicle.
If you own two vehicles that are fully paid for and vehicle #1 is worth $1500 and vehicle #2 is worth $1000, then the total equity in the vehicles is $2500. Under the bankruptcy exemptions you can protect the equity in both vehicles since the total is not above the allowed motor vehicle exemption of $2,725
Household furnishings, appliances and clothing-Your household furniture, and clothing are protected if they are ordinary and reasonably necessary by you and your family. There is no specific amount for this exemption. You can protect all household furnishing, appliances and clothing as long at they are ordinary and reasonably necessary by you and your family.
Jewelry, heirlooms, and works of art- You can protect up to $7,175 in the aggregate value of any jewelry, heirlooms or works of art that you own.
Tools Used for Work-You can protect up to $7175 in tools, instruments, furnishings, books, and one commercial motor vehicle that are considered reasonably necessary for exercising your trade or profession and are actually used to earn a living. Your spouse can also use up to $7175 in tools, instruments, and materials that are reasonably necessary for exercising their profession and are used to earn a living.
Retirement Plans-Public retirement benefits and private retirement plans are exempt including IRA's and profit sharing plans designed for retirement.
Home Equity- The equity in the home were your reside can be protected up the following amount:If you are a single individual with no one else residing in your home then you can protect up to $75,000 in equity in the home.
If you are married and your spouse resides with you then you can protect up to $100,000 in equity in your home.
If you care and maintain any of the following in your household then you can protect up to $100,000 in equity in your home (if they have no interest in the home):
your minor child or grandchild or that of your spouse, or the minor child or grandchild or your deceased spouse or former spouse, minor brother or sister of you or your spouse, or minor child of your deceased brother or sister of you or your spouse, your or your spouse's father, mother or grandparents, or the father, mother, or grandparents of a deceased spouse. An unmarried relative who is described above and who is over the age of 18, but is unable to care or provide support themselves.
If you or your spouse is 65 years or older then you can protect up to $175,000 in equity in your home.
If you are 55 years of age or older and you earn less than $15,000 a year gross income or you are married and your combined income is less than $20,000 then you can protect up to $175,000 in equity in your home.
If you are physically or mentally disabled then you can protect up to $175,000 in equity in your home.
The above information is not intended as legal advice and you should always consult with an experienced bankruptcy attorney to ensure that your home, car or other personal property can be protected. If you are considering bankruptcy you should consult with a local bankruptcy attorney who should be able to review your assets and determine whether they can be protected.
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