Knowing about bankruptcy exemptions is important for anyone filing for Chapter 7 bankruptcy. Chapter 7, also known as "liquidation bankruptcy," is the process of discharging debts through the liquidation/sale of certain property to pay off creditors. Not all property is fair game though. The U.S. Bankruptcy Codes shed light on which types of property can be liquidated during Chapter 7 and which types of property are protected or "exempt."
The word "homestead" probably conjures up images of the wild west, but it is actually still applicable today. The California Homestead Exemption protects the equity in your home from creditors. Anyone who files Chapter 7 bankruptcy in California is entitled to use California's available bankruptcy exemptions, but it does not guarantee protection under any one of them, including the Homestead Exemption.
System 1 and System 2 Exemptions
There are two exemption systems available to Chapter 7 bankruptcy petitioners. The system you use depends on a number of factors, such as the location of your home and how long you lived there. To learn which category you fall into, speak directly with a bankruptcy attorney at San Diego Legal Pros. With System 1, exemptions include:
- Single (unmarried) and not disabled – up to $75,000 of the equity of their property
- With family – up to $100,000
- 65 years or older – up to $175,000
With System 2, you may be able to exempt a little over $25,000 of the equity you have in your home.
In the state of California, the homestead exemption is automatic, meaning you do not have to file a separate petition.
If you would like to learn more information about California Homestead Exemption, you can visit the statutes directly.
- § 704.710 California Code of Civil Procedure – Important definitions
- § 704.730 California Code of Civil Procedure – Exemption dollar amounts
- § 704.780 California Code of Civil Procedure – Burden of Proof
You can also contact San Diego Legal Pros directly and we will evaluate your case for free. Call 888-875-9190 and we'll provide you with the legal counsel you need!