My goal, as your San Diego Bankruptcy attorney, is to have all of your property be considered "exempt property" so that you don't lose any property in the bankruptcy.

The theory behind the bankruptcy system is that  it is good for society to give people a fresh start when those people have suffered  financial misfortune.  In the old days, before the bankruptcy laws, there was no fresh start provided by the law.  In fact, in England, people were jailed if they couldn't pay their debts.  If people can not get a fresh start due to financial misfortune then they will be overly cautious about borrowing any money.  This would hurt the economy.  This is the reason that society allows people to get a fresh start by declaring bankruptcy.

People require some basic amount of property in order to launch their fresh start.  The property that people are allowed to keep is called  "exempt property".

This is an area where a lawyer's expertise is important.

Each state has its own system of exemptions. In California you must choose between 2 sets of exemptions.  They are usually called the 703 exemptions and the 704 exemptions.

They change every three years as they are adjusted for inflation.  Here ia a link to the California web site where you can check on the latest amounts:  http://www.courtinfo.ca.gov/forms/documents/exemptions.pdf

The California exemptions can be a little confusing. As mentioned above, there are two separate sets of exceptions. These are called the 703 exemptions and the 704 exemptions. You must decide which set you use. You can not pick and chose from two sets of exemptions.

The first decision you and your attorney make is which exemption set do you use: The 703 set or the 704 set?

The answer to the question usually boils down to whether you have a significant amount of equity in your home. If you do not have significant equity in your home you will probably use the 703 exemptions. If you do have significant equity in your home you will probably use the 704 exemption.

The main difference between the 703 and the 704 exemptions is that in the 704 exemptions you get a relatively large amount of exemption for your home. This is usually called the Homestead Exemption.

Under the 704 exemptions, the homestead exemption is $100,000 if you live in the house with your spouse or another family member. If you live alone it's $75,000. If you’re 65 or disabled or 55 and earn less than a certain amount then the homestead exemption goes up to $175,000.  You are disabled if you are unable to engage in "substantial gainful employment".  It presumed that you are unable to engage in "substantial gainful employment" if you are receiving social security or SSI benefits. 

There is a cap on the amount of homestead exemption you can take.  The cap only applies if you acquired the property during the 1,215-day period (3 years, 4 months) before filing of the bankruptcy petition.  At the present time the cap is $135,750.00.

By the way it is not necessary for you to file a Declaration of Homestead exemption in order to get the benefit of the homestead exemption.  It is automatic.

By contrast the home exemption under the 703 set of exemptions is only $20,725. But you can use the 703 home exemption for any property. For this reason it is often called the "wild card" exemption.

So if you have some cash or other property that would not otherwise be exempt you can exempt it under the 703 wild card exemption. But if you had equity in your home to protect then you would want to spend the non exempt cash before filing for bankruptcy and use the 704 home exemption.

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