Exempt Property in Bankruptcy

         One of the goals of bankruptcy is to allow debtor-filers to start anew.  This means that after filing bankruptcy and getting a discharge of their debts, these debtors will be in a position to move on financially. Allowing these debtors to keep certain basic assets despite a bankruptcy filing is one way of helping debtor filers. These assets or properties that an individual can keep are called “exempt properties”.

         Each state has its own list of exempt properties. Some states have more liberal exemptions than others. To avail of any of these exemptions, the debtor must comply with the residency requirement rules.  These rules were incorporated to address the concerns that people may move to another state with more liberal exemptions before filing bankruptcy.

        Some of these residency rules include the following:

•          The filer must be a resident of his current state for at least two (2) years before he can use that state’s exemption.
• ·        If the filer has been a resident in his current state for more than ninety one (91) days but less than two (2) years, he must use the exemption of the state where he lived for the greater part of the 180-day period immediately prior to the two-year period preceding the filing.
• ·        If the filer have lived in his current state for less than 91 days, he can file either in his old state (as long as he lived there for at least 91 days or wait until he has lived at least 91 days in his current state and file his petition in his current state.  

        California has adopted two (2) systems of exemptions. Debtors can choose either system and decide which system is most advantageous to them. The first system is based on state law exemptions listed in the California Code of Civil Procedure section 704. The second system is a list of bankruptcy-only exemptions in California Code of Civil Procedure section 703.140 (based on the federal Bankruptcy Code exemptions).

 In the first system, the exemptions include some of the following: real or personal property occupied at time of filing for bankruptcy, including mobile home, boat, stock cooperative, community apartment, planned development or condominium, up to the following limits: $75,000 if single and not disabled; $100,000 if family and no other member has homestead; $175,000 if 65 or older or if physically or mentally disabled; personal property such as motor vehicle up to $3050.00, building materials up to $3,200.00 to repair or improve home, burial plot, health aids and appliances, furnishings, clothing and food needed by the debtor.

On the other hand, some of the exemptions in the second system include the following: real or personal property used as a residence up to $26,800, motor vehicle up to $5,350, personal injury recoveries up to $26,800; tools, books and implements of trade up to $8,000, and alimony and child support necessary for support.

If you are contemplating of filing bankruptcy, it is advisable to seek the counsel of a bankruptcy lawyer to guide you on the intricacies of filing for such a petition.