If you are considering bankruptcy in California, you may worry that filing means giving up your home or car. That fear can make an already difficult financial situation feel even harder.
California gives you two different exemption systems for bankruptcy. You must choose one, and the system you choose can affect how much of your home, car and other property you can protect. One system includes a wildcard exemption that you can use for different types of property, while the other provides stronger protection for certain home equity but does not include that wildcard.
Exemptions can protect your property
California law lets you protect certain property through bankruptcy exemptions. These rules may help you keep some of your home, car and other belongings. If you file Chapter 7, exemptions can protect property that meets the legal requirements. The amount you can protect depends on the type and value of the property.
Your home’s equity matters in Chapter 7
If you own a home, you should look at how much of the property you actually own before filing Chapter 7.
- Find your home’s current value: Get a reasonable estimate of what your home is worth.
- Check what you still owe: Look at your current mortgage balance.
- Work out your equity: The difference between these amounts shows how much equity you have in the home.
Your equity can affect whether the bankruptcy trustee can sell the home or whether an exemption can protect it.
Your car can receive protection too
Your car does not automatically become something you must give up when you file for bankruptcy. California exemptions may protect a vehicle up to a certain value. In Chapter 7, the trustee may review your car and the exemption you claim. Chapter 13 generally lets you keep your property while you follow a court-approved repayment plan. The type of bankruptcy you choose can therefore affect what happens to your car.
Review your home and car before filing
If bankruptcy feels overwhelming, start by reviewing your home, car and other property before filing. Knowing their value and the protections available to you can help you avoid surprises.
Take time to review your finances, also check which exemptions may apply and understand how your property could be treated before you file.