What are the differences in property exemptions in a Chapter 13 Bankruptcy from California Law vs. Federal Law?

“Exemptions” are the statutory provisions that define what assets a bankruptcy debtor can keep, free from the claims of her creditors, even in bankruptcy.  Statutory exemptions are set forth in the federal bankruptcy code, but the federal law also gives the states to right to “opt out” and prohibit their residents from using those exemptions in favor of their state exemptions.  And, exemption laws differ between the states.  Sixteen states – not including California – allow petitioners to choose between the federal exemptions and those in the law of their state.  For the balance of the states, only the state exemptions can be selected.

California bankruptcy law gives petitioners a choice between the general state law exemptions applicable to enforcement of judgments found in Code of Civil Procedure §704.010, and a set of bankruptcy-only exemptions in Code of Civil Procedure §703.140  that mirror the bankruptcy code exemptions in the federal law at the time the California law was initially adopted.  Usually, homeowners chose the general state law exemptions because the statute provides a generous homestead exemption for equity in a primary residence.  Renters or those with no equity in their homes generally chose the bankruptcy-only exemptions because the statute permits a “wild card” exemption for equity in any kind of property.

Because choice of law issues are involved, you should obtain the services of a bankruptcy attorney to navigate the complex federal and state substantive and procedural bankruptcy and tax laws.  Debtors who try to prepare their own bankruptcy schedules frequently have the most trouble getting the claims of exemption done properly and to their advantage.