CALIFORNIA BANKRUPTCY LAW

California Bankruptcy: Attorneys, Statistics, Exemptions and Courts.

California Bankruptcy Statistics: in 2009, in the state of California, over 209,818 bankruptcies were filed. Business bankruptcies accounted for only 4.30% or 9,012 of all the filings, the other 200,806 filings were personal bankruptcies.

California State Bankruptcy Exemptions:

NOTE: In California there are two sets of available exemptions. The system #1 allows a large exemption for the family home (“the homestead exemption) – this is similar to the majority of states. The second system, allow for the use of the homestead exemption for other property – and not just for the family home. This is similar to federal exemptions, which are not recognized in California.

SYSTEM #1 EXEMPTION

Homestead

The home (“homestead”) is exempt when filing for bankruptcy up to the value of $75,000 for a single person and $100,000 for a family. Homes valued at more than this are not exempt for any value exceeding the stated amounts. If a married person files alone, they are entitled to exempt up to $50,000, if the property is a community property of the marriage (the other $50,000 exemption belongs to the other spouse). If the filer is over 65 years of age, or is physically or mentally disabled the homestead exemption increases to $175,000. An individual over the age of 55, whose income is less than $15,000 if single or less than $20,000 if married can also exempt $175,000; however, only when the creditors are trying to force the sale of the home.

The home is defined broadly – the land and the buildings or a condo. Personal property, which is nevertheless your home, is also exempt – such as a motor home, a boat, or a co-op property.

Note: Profits from a forced sale of the home are exempt in bankruptcy for six month after the sale, according to the limits imposed on the homestead exemption. Also insurance proceeds from homeowners insurance are exempt for six month after received.

Personal Property:

The following exemptions are unlimited.

1. Appliances
2. Furnishings
3. Clothing
4. Food
5. Health aids
6. Social security deposits – only if they are not commingled – or intermixed with other funds.
7. Causes of actions (“torts) for person injury or wrongful death
8. Funds held in escrow
9. Burial plot

The following exemptions have specific limits.

• Motor Vehicles are exempt up to $2,550 in value – the amount does not change for an individual or a married couple
• Buildings materials are exempt up to $2,700 for both a single person and for a married couple
• Art, heirlooms and jewelry are exempt up to $6750 for both a single person and for a married couple
• Social security deposits are exempt up to $2,700 for a single person and $4,050 for a married couple ( unlimited if not commingled)
• The amount recovered in personal injury or wrongful death action - all that is necessary for support or 75% of the recovered amount – whichever is larger

Insurance:

The following types of insurance are exempt in California Bankruptcy.

1. Life insurance
   • Payments to the person who purchased the policy:
     • Unvested or not matured – the entirety of the cash surrender value and up to $10,775 of the loan value.
     • Vest or matured – the benefits necessary for support
   • Payments to the beneficiary - the entirety of the policy, but only if the policy contains a valid clause prohibiting the payment of proceeds to creditors of the beneficiary
2. Fraternal unemployment benefits
3. Health or disability benefits
4. Homeowners insurance – limited by the California’s homestead exemption, for up to six month after received.

Pensions

*Federal Pension exemptions do apply, even though general federal exemptions do not apply. This means ERISA qualified pensions are exempt.

Pensions received by the following individuals and their survivors are exempt when filing bankruptcy in California.

1. Public Employees
2. County Employees
3. County Peach officers
4. County Firefighters

Pensions of the following types are exempt when filing for bankruptcy in California.

1. Public retirement benefits
2. Private retirement benefits such as the KEOGHS and IRAS

Public Benefits

The following public benefits are exempt when filing for bankruptcy in California.

1. Unemployment benefits
2. Workers compensation
3. Public assistance
4. Student Financial Aid
5. Aid for the blind, aged or disabled
6. Relocation benefits

Tools of the Trade

The exemption value is limited to $6,750 for a single person or $13,475 for a couple engaged in the same profession.

The following are examples of acceptable “tools of the trade”: uniforms, implements, instruments, furnishings and equipment.

Wages

When wages are paid to the debtor within 30 days of filing for bankruptcy in California, the exemption covers at least 75%.

Also, for public employees, at least 75% of the vacation credits are exempt when filing for bankruptcy.

Wildcard: No

Federal exemptions: NO – but California’s System II is very similar to the Federal System .

SYSTEM II EXEMPTIONS

Note: Married Couples cannot double the exemption. The limiting amounts are the same for a married couple or a single individual.

Homestead

The home (“homestead”) is exempt when filing for bankruptcy for up to $20,725. The home can be either real property or personal property as long as it is used as the residence. The amount of this exemption can be applied to other property if it is not used up by the home.

Personal Property

The exemption for the following items is unlimited.

1. Health Aids
2. Wrongful death recovery, if it needed for support

The exemption for the following items is limited.

1. Burial plot – the exemption is limited to the value unused by the homestead exemption.
2. Motor Vehicle – the exemption is limited to $3,300
3. A recovery for a personal injury action of debtor or person who relies on debtor is limited to $20,725. This does not include recovery for pain and suffering or pecuniary loss
4. Books, furnishings, appliances, household goods, clothing, musical instruments, animals and crops – are all limited to $525 per item.

Insurance

The following types of insurance are exempt in California Bankruptcy.

1. Life insurance
   • Payments to the person who purchased the policy:
     • Unvested or not matured – the entirety of the cash surrender value and up to $10,075 of the loan value.
     • Vest or matured – the benefit necessary for support
   • Payments to the beneficiary - whatever is needed to support the family
2. Fraternal unemployment benefits
3. Health or disability benefits

Pensions

*Federal exemptions apply, even though federal exemptions generally do not apply to bankruptcy in California. This means the ERISA qualified pensions are exempt.

Tools of the Trade

The exemption is limited to $1,750. Examples of items accepted under this category are implements, books, and tools.

Miscellaneous

Child support and alimony, to the extent that the funds are necessary for support, are exempt under system II in California.

Wages: No

Wild Card:

System II in California includes $950 exemptions that can be used on any property. Also any value permitted, but unused for the homestead exemption, can be used for any other personal property.

Federal Bankruptcy Exemptions: NO

California Bankruptcy Courts:

United States Bankruptcy Court, Eastern District of California

United States Bankruptcy Court, Northern District of California

United States Bankruptcy Court, Southern District of California

United States Bankruptcy Court, Central District of California