In many cases, the most important aspect of filing for bankruptcy protection is the section that determines the debtor’s rights in their belongings. That means that these rules allow a debtor to keep certain assets after bankruptcy. In a Chapter 7 bankruptcy filing, the exemptions can determine whether or not the debtor gets to keep their personal or real property. In a Chapter 13 filing, the value of nonexempt property can affect the amount to be paid to unsecured creditors.

What is the purpose of having exemptions?

Throughout the history of bankruptcy law, providing for exempt property has been a way to allow debtors to keep assets that they need to survive. That way, the debtor has the ability to push the reset button and be able to participate in society and the economy. Without exemptions, debtors could be left with nothing and would likely just become a burden on society. To this day, some foreign countries still have extremely limited exemptions. The United States, however, has relatively generous exemption provisions. California, even more so.

Which of my assets are exempt?

In California, a debtor has the choice between two sets of exemptions. Note: Debtors cannot use both, but must choose one or the other preferably with the help of a bankruptcy attorney. Determining which set to use depends on the assets you have. Whether you have equity in your home is a major factor to determine which set to use. Depending on the particular debtor’s situation, it can be of paramount importance to choose the better choice. When a debtor has moved recently from another state, the available exemptions may be different. These considerations make it very difficult to choose wisely, which is why it is always a good idea to seek the guidance of an experienced bankruptcy attorney in your area.

Some examples of exempt assets in California:

- - Motor vehicles

- - Equity in the debtors’ home

- - Tools of the trade

- - Public benefits

- - Household items and personal effects

*the amounts for the exemptions vary depending on the “set” of exemptions the debtor and her attorney decide to choose.

A few more considerations.

If the debtors in a bankruptcy are a married couple filing for bankruptcy in California, they won’t be allowed to double the exemptions unless the specific exemption particularly allows it. Also, the California Judicial Council adjusts the amounts of the exemptions every three years. The next adjustment is expected in 2016. These rules can get confusing very quickly and understanding them properly can be the difference between failure and success for many debtors. But their complexity is certainly surmountable with the proper counsel.