California Bankruptcy Exemptions 704
California is unlike many other states in that it has 2 bankruptcy exemption schemes. Unlike other states, California does not permit California residents filing for bankruptcy to use the Federal exemption scheme found in the bankruptcy code. Instead, California provides two exemption schemes found in Section 703 and 704 of the California Code of Civil Procedure. California 703 bankruptcy exemptions can only be used in bankruptcy and cannot be used to protect against a judgment creditor seeking to execute against your property outside of bankruptcy. In contrast, California 704 bankruptcy exemptions apply to judgment creditors in and outside of bankruptcy.
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The Purpose of 704 Exemptions
California 704 bankruptcy exemptions protect your property from creditor collection actions. Think of chapter 7 bankruptcy like this: in chapter 7 bankruptcy, you are putting all of your property and assets up for auction. However, on Schedule C you claim certain property as exempt and thereby remove those items from the auction. After claiming all applicable exemptions, many times there is no property remaining to be sold at auction. When that occurs, meaning when all assets are protected by applicable exemptions and there is no liquidation of property in chapter 7 bankruptcy, the chapter 7 case is called a “no asset case.”
Claiming California 704 Bankruptcy Exemptions
To claim California 704 bankruptcy exemptions you must first select an exemption scheme. To claim California 704 bankruptcy exemptions you will elect to apply the exemption statutes under section 704 of the California Code of Civil Procedure as opposed to statutes under section 703. On schedule C, you will itemize your current assets as of filing and cite the corresponding exemption statutes. For instance, if you list a 1992 Ford Thunderbird valued at $1,500 on Schedule C you will cite section 704.010 (motor vehicles exemption) and claim the vehicle as exempt in an amount not to exceed $3,625.
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