In bankruptcy cases, individuals can protect property from the reach of creditors and the bankruptcy trustee. To protect property, the debtor 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 546 days). The set that is the subject of this article is commonly known as the "703 exemptions." The number 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 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, 2019. 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.
Also note that if you are filing for bankruptcy and you are married, you should speak with a bankruptcy lawyer about a spousal waiver. This relates to your ability to use the 703 exemptions.
The first exemption is made pursuant to section 703.140(b)(1). This section allows you to exempt up to $29,275 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 of the debtor or a dependent.
Section 703.140(b)(2) allows you to exempt no more than $5,850 in one or more motor vehicles.
Household Furnishings and Goods
Section 703.140(b)(3) permits exemption in the amount of $725 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 the exempted amount.
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 $1,750. 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 for all of your jewelry.
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 $1,550 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 $30,825 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 $8,725. For example, this may include electrician's tools if you are an electrician.
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 $15,650 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.
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 and benefits, local public assistance benefits, veteran's benefits, disability benefits, illness benefits, and alimony or support maintenance necessary to support the debtor and any dependent. This exemption is in an unlimited amount.
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 and maximum amounts may be different depending on the exception.
Section 703.140(b)(11) allows you to exempt property that you can trace to any of the following:
- An award under a crime victim's reparation law (unlimited).
- Payment on account of a wrongful death of whom you were a dependent, to the extent reasonably necessary for support.
- Payment under a life insurance contract that insured the life of an individual of whom you were dependent, to the extent reasonably necessary to support the debtor and dependents.
- Payment not to exceed $29,275 on account of personal bodily injury of the debtor, or of whom the debtor is a dependent.
- 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.
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.