Household Furnishings, Wearing Apparel & Personal Effects California 704 Bankruptcy Exemption
The California 704 bankruptcy exemption scheme exempts ordinary and reasonably necessary household furnishings, appliances, wearing apparel, and personal effects. For these items to be exempt they must have been personally used by, or acquired for use by, the debtor or the debtor’s family members at the debtor’s principal place of residence. If the debtor and spouse live apart, the items must have been personally used by, or acquired for use by, the spouse or the spouse’s family members at the spouse’s principal place of residence. Furthermore, for items to be ordinary and reasonably necessary they must be of a type ordinarily found in a household and not have extraordinary value compared to items of the same type in other households. Hence, a $10,000 sub-zero refrigerator would probably not be an ordinary and reasonably necessary appliance since it has extraordinary value compared to other refrigerators found in other households. Likewise, a mink coat would not be ordinary and reasonably necessary wearing apparel since it has extraordinary value compared to other coats in other households.
Proceeds Exemption Rules
There are two rules regarding exempt household furnishings, wearing apparel, and personal effects proceeds. First, proceeds from an execution sale of these items remain exempt for 90 days. For the proceeds to be exempt they must be traceable to the sale of the exempt items. Second, proceeds from the sale of one of these items due to its extraordinary value are exempt in the amount of the replacement cost of an ordinary and reasonably necessary item of the same type if replacement is reasonably necessary. For example, assume that a caterer uses her home kitchen to prepare catered foods. The caterer owns a $7,000 deluxe oven she uses for baking, and without an oven she cannot prepare her catered foods. Now, assuming that the tools of the trade exemption does not apply, the caterer’s oven may have extraordinary value compared to ovens in other households. Consequently, while the Trustee may be able to sell the deluxe appliance in bankruptcy due to its extraordinary value the Trustee may also be forced to cut our caterer a check for the replacement cost of an ordinary and reasonably necessary oven since replacement of the oven is reasonably necessary for our debtor.
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