One of the biggest fears about filing bankruptcy is losing everything you've worked for. In most California cases, that fear is far larger than reality.
When you file for bankruptcy, federal law allows each state to set its own list of "exempt" property — assets that creditors and the bankruptcy trustee cannot touch. California's exemptions are among the most generous in the country, and they're specifically designed so that filers don't lose the basic property they need to live and work.
In the large majority of Chapter 7 cases handled by our office, clients keep every asset they own — their home equity (within exemption limits), their vehicle, their retirement accounts, and their household belongings.
California's homestead exemption protects a significant amount of home equity — the exact amount depends on factors like your age and household. If your equity is below the exemption, your home is fully protected in Chapter 7. If it exceeds the exemption, Chapter 13 can let you keep the home by repaying the difference over time.
A motor vehicle exemption protects equity in your car up to a set limit. If you're financing a car and current on payments, you can typically keep making payments and keep the car regardless of the exemption — the exemption mainly matters for equity in a vehicle you own outright.
401(k)s, 403(b)s, pensions, and most IRAs are protected under federal law in bankruptcy — often without any dollar limit for employer-sponsored plans. Your retirement savings are generally safe regardless of which chapter you file.
Furniture, clothing, appliances, electronics, and other ordinary household goods are covered by California's personal property exemptions, which are designed to cover the typical contents of a household. Tools of your trade — equipment you need to earn a living — have their own exemption as well.
The bottom line: bankruptcy trustees are not interested in your couch, your kids' clothes, or your work laptop. Their role is to identify non-exempt assets of real value — and for most individual filers, there simply aren't any.
The main scenarios involve high-value non-exempt assets — a second property, a valuable vehicle owned free and clear with equity above the exemption, or significant investment accounts outside of retirement plans. Even then, Chapter 13 often allows you to keep the asset by repaying creditors its non-exempt value over the plan period. We map your specific assets against the exemptions at your free consultation — before you decide anything.
Tell us what you own. We'll map it against California's exemptions and give you a clear, honest picture — free of charge.
310.820.3800This article is provided for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship between you and Westwood Law Center. Legal advice must be tailored to the specific facts of your situation — nothing in this article should be relied upon as a substitute for consultation with a licensed attorney. The information here may not reflect the most current legal developments. If you have a legal issue, contact our office for a free consultation.
The key differences in eligibility, timelines, and what debts can be discharged under each chapter.
How the automatic stay works and what happens to your house in Chapter 7 and Chapter 13.