The liquidation in Chapter 7 bankruptcy is confusing to many. The quandary is on the expectation that one can keep every property they have. However, it is worthy to note that exemptions always exist in any type of bankruptcy. If it is your first time filing for bankruptcy, this might sound new to you – there are bankruptcy exemptions in Chapter 7 that will only let you retain your essential properties, hence, not all.
Bankruptcy process is confusing, that’s why most people consult with an experienced California bankruptcy attorney before taking any step. The Law Office of Daniela Romero is a firm believer in community service. Our years of experience in giving back to the community made us understand every unique situation of our clients. With our quick and efficient way of providing legal help, you can certainly have a solution for your financial problems. If you want to discuss your situation with us, don’t hesitate to schedule an appointment now!
How Bankruptcy Exemptions Work in California?
In California, you can still retain your property through bankruptcy exemptions notwithstanding if it is a Chapter 7 or Chapter 13 Bankruptcy. However, it is worthy to note that each bankruptcy chapter has its own rules as to how they treat non exempt properties. Since they cover things differently, it is therefore imperative to know and understand their differences.. Below are their distinctions:
- In Chapter 7, the trustee in bankruptcy sells nonexempt properties and disseminates the funds to the lenders or creditors.
- In contrast, Chapter 13 Bankruptcy allows you to retain all your properties. But, you will be required to pay the value of the equity of the nonexempt properties through your repayment plan, or disposable income, among other means.
Regardless of the different approaches of each bankruptcy chapter, both of them ensure that the creditors will receive the same amount.
When Can You Exempt a Property in California Bankruptcy?
It is a well-established rule in California Bankruptcy that you must have lived in the state for more than 180 days before filing for bankruptcy – that’s for bankruptcy filing alone. However, in filing for chapter 7 bankruptcy exemptions in California, the requirement is much longer. – you should have at least lived for 730 days before you can use California Bankruptcy Exemptions.
If you are not present in California two years prior to filing for bankruptcy, you may use the bankruptcy exemptions of the state in which you reside for the last 180 days prior to the two-year timeframe immediately preceding your bankruptcy filing.
Common Bankruptcy Exemptions in California
There are some states that permit bankruptcy petitioners to choose between federal and state bankruptcy exemption laws. However, one must remember that California is not one of them. In California, state exemptions are used to retain a property. However, you can still choose which exemption is suitable for you. Of all the states, only California has two systems of exemptions.
If they have significant home equity, more debtors would prefer System 704 exemptions. System 703 exemptions are likely to be preferred by debtors with less or no home equity. This is due to the fact that they can use the large wildcard exemption to keep their other significant properties.
In the case of a married couple filing jointly, some states allow you to double the amount of exemption. California, however, is not one of them.
Exemptions in Chapter 7 Bankruptcy – How To Use It?
In Chapter 7 Bankruptcy filings, the bankruptcy court requires a trustee to take your assets and sell them. These assets fall under the nonexempt, in other words, those that are not covered by the bankruptcy exemption. This is done to pay back to your creditors. If getting a fresh start is your primary goal, Chapter 7 Bankruptcy does not require you to give up all of your assets. This is to allow for a fresh start following the bankruptcy proceedings.
How Many Properties Can You Keep in Chapter 7 Bankruptcy Exemptions?
The answer will always vary from one state to another. Every state has a different set of rules for chapter 7 bankruptcy exemptions in California. In most cases, states require debtors to use federal exemptions. There are also other states which permit you to use the federal or state exemptions. The state law exemption and the federal system will, in most cases, allow you to retain a particular amount of equity in your personal property such as house, retirement accounts, house, wages or monthly income, and sometimes, cash. Furthermore, all states usually exempt clothing and household goods unless they are no longer in use.
What is the Chapter 7 Bankruptcy Estate?
Once you filed bankruptcy, all your, every property you have will be part of the bankruptcy estate, except for educational trusts and pensions. The assets listed below are examples of those that will be included in your bankruptcy estate.
- Personally property
- Property of others (e.g., an item you’ve loaned from your friend)
- Property that you previously gave away
- Property that you are entitled to albeit you have not receive it
- Property proceeds (dividends or rental income)
- Received assets from 180 days of filing
- Your share on your property as married couple
Throughout your case, the trustee in bankruptcy will obtain control of the property in the bankruptcy estate. As far as your properties are concerned, it will always depend on whether they fall under the bankruptcy protection or in other words, exemption.
Call our Chapter 7 Bankruptcy Attorney Now!
In declaring bankruptcy, it is critical to have an attorney that can specifically identify your needs. Your undue hardship requires serious attention, and your unpaid debts must be eliminated to have a fresh start. You need a bankruptcy lawyer who knows very well the ins and outs of Chapter 7 bankruptcy exemptions in California.
While there are many bankruptcy lawyers out there, hiring the Law Office of Daniela Romero is your wisest decision. In our 24 years of legal service to the community, serving you with strong dedication and significant amount of empathy is our salient goal.
Aside from Bankruptcy, we also handle cases of Personal Injury, Repossession, Pasadena Tax Resolution, Student Loans, Foreclosure, and Credit Repair. If you have debt or tax issues, our legal team is ready to assist. Schedule your free phone consultation now and let’s evaluate your case!