California Bankruptcy Laws

California bankruptcy laws allow the use of federal supplemental exemption in conjunction with California exemptions. These laws are derived from federal bankruptcy laws, from Title 11 of the United States Code.

The state of California is divided into four bankruptcy districts, each with a bankruptcy court named after the district. They are California Eastern bankruptcy court, California Northern bankruptcy court, California Southern bankruptcy court, and California Central bankruptcy court. California bankruptcy laws give the option to pay secured loans, allowing the property to be repossessed or purchased at its current fair market value. Exemptions are shown in the California bankruptcy exemptions chart.

California bankruptcy laws allow different sets of exemptions, mainly System 1 and System 2. One has the right to choose a suitable system. In System 1, the exemptions available are homestead (to $50,000 if single and not disabled, to $75,000 for families, and to $125,000 for senior citizens), personal properties (bank deposits to $2,000, building materials to $2,000, burial plots, appliances, furnishings, clothing and food, health aids, jewelry and heirlooms to $5,000, motor vehicles to $1,900, and personal injury and wrongful death claims), insurances of all kind, pensions, benefits (workers' compensation, health aid, and unemployment benefits), tools of trade (tools, implements, materials, instruments, uniforms, books, furnishings, equipment, vessel and motor vehicle to $5,000), and wages to a minimum of 75%.

System 2 differs from System 1 in the following exemptions: homestead to $17,425 for all categories; jewelry to $1,150; motor vehicle to $2,775; personal benefits to $17,425; tools for work to $1,750; pension benefits only for ERISA-qualified benefits; no wage exemption; and wild card exemption to $925.

The new California bankruptcy law that has taken effect from October 17, 2005, states that if you want to take advantage of California bankruptcy exemptions, you must be a permanent resident of the state of California for the two-year period prior to filing bankruptcy. Otherwise, you must spend most of the 180 days prior to these two years in the state of California.

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