What Property Can I Keep if I File Bankruptcy?

By Donald A. Hayes, Attorney at Law


A trustee who administers a Chapter 7 Bankruptcy case will seek to take possession of all non-exempt property, sell it and turn it into cash to pay dividends to all unsecured creditors. This sounds very threatening for those of you who are considering filing Chapter 7, however the truth of the matter is very very few chapter 7 cases ever result in a debtor losing any property. In my 20 years of practice, I have not ever handled a case where the debtor lost any of their property by filing Chapter 7. The reason for this is the fact that the Bankruptcy Code provides a well delineated set of exemptions which allows the debtor to exempt and to keep a wide range of property.

The following is a list of California exemptions which may be utilized in Chapter 7: (1) Equity in a family residence is generally exempt in the amount of $75,000 if single, $100,000 if married or head of household, $125,000 if disabled or at least 65 years of age, or 55 years of age with annual income of less than $15,000. (2) Motor Vehicles the amount of $1,900 equity in an aggregate number of vehicles ; (3) Household furniture, furnishings, appliances, and personal effects, as long as they are reasonable and necessary; (4) Jewelry and works of art to the maximum of $5,000; (5) Health aids; (6) Tools of Trade in the amount of $5,000; (7) Building materials up to $2,000; (8) Term life Insurance in whatever amount is exempt and whole life insurance with a cash value of up to $8,000 or $16,000 if the debtor is married; (9) Disability or Health Insurance Benefits; (10) personal injury claims not yet reduced to judgment or paid are fully exempt, when personal injury claims have been paid the money is exempt to the extent that it is reasonable and necessary for the support of the debtor and/or dependents; (11) Workers Compensation and Unemployment Compensation claims without limitation; (12) Both Public and Private Retirement Benefits and Profit Sharing Plans are exempt without limitation; (13) Self employment Retirement Benefits and IRA=s and individual annuities are exempt up to the extent reasonably necessary for the support of the debtor at the time of retirement; (14) Pre-Petition Wages earned 30 days prior to filing are partially exempt to the extent of 75%.There are other miscellaneous exemptions as well.

However, the debtor may elect a different set of exemptions tailored after Federal law which may prove to be more advantageous. The Federal set of exemptions follows fairly close to the California list of exemptions with a few minor nuances or differences. The one big difference between the Federal set and the California set is that the former allows you to choose a AWildcard Exemption@. Simply put, this wildcard exemption gives you the right to exempt $15,800 to protect any asset, including cash, savings accounts, vehicles or any other asset which the debtor may own. These benefits those of you who have little or no equity in a residence, and who may have exceeded the limits allowed in the other categories, or those who may have other non-exempt assets. You must elect between one set and the other and cannot pick and choose between the two sets.