California 703 Exemptions

San Francisco California
Californians can choose between two exemptions schemes to protect property in a bankruptcy case. Getty Images

In bankruptcy cases, individuals can protect property from the reach of creditors and the bankruptcy trustee. To protect property, the debtor (the person who files a bankruptcy case) has to claim the property as exempt. These exemptions are only available for certain types of property and in certain maximum amounts. Exemptions vary by state. Some states allow their residents to use the exemption list found in the bankruptcy code.

Some states, like California, require that its residents use state-specific exemptions.

In California, there are two sets of exemptions available for use in bankruptcy to California residents (if you have been domiciled there for the last 2 years). The set that is the subject of this article is commonly known as the "703 exemptions." 703 refers to the code section of the California Code of Civil Procedure. Specifically, these exemptions can be found within section 703.140 if you would like to review them yourself. Recall that you use your exemptions to protect property in a bankruptcy so that the trustee does not sell it to pay your creditors. Exemptions must be claimed on bankruptcy Schedule C.

The current amounts of the California 703 bankruptcy exemptions are valid as of April 1, 2017. The exemption amounts are adjusted every three years, ending on March 31. The adjustment is based upon the California Consumer Price Index for all Urban Consumers.

If you are reading this article, make sure to check the California Courts website to determine if the exemption amounts have increased.

Also note that if you are filing for bankruptcy and you are married (and your spouse is not filing for bankruptcy), you should speak with a bankruptcy lawyer about a spousal waiver.

This relates to your ability to use the 703 exemptions.

Residence

The first exemption is made pursuant to section 703.140(b)(1). This section allows you to exempt up to $25,575 of your interest in real (e.g., house) or personal (e.g., motor home) property that you or your dependent use as a residence. This amount also applies to an owned cooperative or a burial plot for the debtor or a dependent.

Motor Vehicle

Section 703.140(b)(2) allows you to exempt no more than $5,100 in one motor vehicle. You cannot split this exemption between two or more vehicles. 

Household Furnishings and Goods

Section 703.140(b)(3) permits exemption in the amount of $550 in any household furnishings, goods, wearing apparel, appliances, books, animals, crops, or musical instruments. Note that these items must be for primarily personal, family, or household use of the debtor or a dependent. This exemption is somewhat different in that you can exempt each and every item that falls into this category up to $650 of its value.

Jewelry

Section 703.140(b)(4) allows you to exempt your aggregate interest in jewelry that is for primarily personal, family, or household use of the debtor or a dependent. The exemption amount is $1,525.

Please note that this amount does not apply to each item of jewelry, but is aggregate, meaning this is the total amount you can exempt in all of your jewelry.

Wildcard

Section 703.140(b)(5) is often called the "wildcard" exemption. This exemption permits you to exempt any type of property that you have an interest in, in the amount of $1,350 plus any unused amount of the (b)(1) residence or burial plot exemption. Thus, if you do not use the residence or burial plot exemptions, you can exempt $26,925  worth of property.

Tools of the Trade

Section 703.140(b)(6) provides for an exemption in your aggregate interest (meaning total, not per item) in any implements, professional books, or tools of the trade or of a dependent. The exemption amount is $7,625. For example, this may include electrician's tools if you are an electrician.

Life Insurance

Sections 703.140(b)(7) and (8) allow you to exempt your interest in life insurance. Section (b)(7) allows you to exempt an unmatured life insurance policy, other than credit. Section (b)(8) protects up to $13,675 in your aggregate interest in an accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor, under which the insured is the debtor, or an individual of whom the debtor is a dependent.

Health Aids

Section 703.140(b)(9) permits exemption of professional prescribed health aids of the debtor or a dependent. This exemption is in an unlimited amount.

Right to Receive Certain Payments

Section 703.140(b)(10)(A)-(D) protects the debtor's interest in social security benefits, unemployment compensation, local public assistance benefits, veteran's benefits, disability benefits, illness benefits, unemployment benefits, and alimony or support maintenance to the extent reasonably necessary to support the debtor and any dependent. This exemption is in an unlimited amount.

Retirement

Section 703.140(b)(10(E) allows exemption of payments under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for support of the debtor and any dependent. For example, this may be a 401(k). This exemption is in an unlimited amount. Please note that there are several exceptions to this exemption, which you should read carefully.

Traceable Property

Section 703.140(b)(11) allows you to exempt property that you can trace to any of the following: (A) an award under a crime victim's reparation law (unlimited), (B) payment on account of wrongful death of whom you were a dependent, to the extent reasonably necessary for support of debt and any dependent, (C) payment under a life insurance contract that insured the life of an individual of whom you were a dependent, to the extent reasonably necessary to support the debtor and dependents, (D) payment not to exceed $25,575 on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss of the debtor of whom the debtor is a dependent, and (E) payment in compensation for loss of future earnings of the debtor or an individual whom the debtor was a dependent, to the extent reasonably necessary to support the debtor and dependents.

LEGAL DISCLAIMER

This article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this article does not create an attorney-client relationship between the author of this article and the user or browser.

 

Updated March 2017 by Carron Nicks