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California Bankruptcy Laws

The state of California is divided into four bankruptcy districts: California Eastern bankruptcy court, California Northern bankruptcy court, California Southern bankruptcy court, and California Central bankruptcy court. Although there are nine chapters of bankruptcy under which a person can file in California , approximately two-thirds of all the bankruptcies filed around the country each year are filed under Chapter 7, also known as the fresh start or total liquidation bankruptcy. The other two most common chapters under which Californians file are Chap 13 BK and Chap 11 BK.

California State Exemptions
Under the California bankruptcy laws, debtors are allowed to protect certain assets from judgment creditors and bankruptcy trustees. There are two main exemption categories from which a person must choose: System One and System Two.

System One provides for a homestead exemption of up to $50,000 for a single person who is not disabled, up to $75,000 for families, and up to $125,000 for those who are senior citizens. System One also allows for the following personal property exemptions: cash in the bank up to $2,000; building materials of up to $2,000; jewelry and heirlooms up to a value of $5,000; motor vehicles up to a value of $1,900; burial plots; appliances; home furnishings; personal clothing; health related aids; food; and any money that comes from personal injury or wrongful death claims. System One also makes allowances for insurance claims of any type; pensions; benefits such as unemployment compensation; workers' compensation claims; health aid claims; tools of the trade which includes such items as tools, uniforms, equipment, books and manuals needed to continue in a trade; and wages exempt at a minimum of 75%.

System Two provides for a maximum homestead exemption of $17,425 for all homestead categories. The jewelry and heirloom exemption is capped at $1,150. The motor vehicle exemption is up to $2,775 and the trade tools exemption is limited to $1,750. System Two also limits the total amount of personal benefits that can be exempted to $17,425 and also allows for a wild card exemption of up to a value of $925. Under System Two there is no wage exemption and only ERISA-qualified pension benefits are exempt.

As of October 17, 2005, you now must have been a permanent resident in the State of California for two years prior to filing for bankruptcy in order to use its state exemptions.

NOTE: These are the major bankruptcy exemptions. Check with your bankruptcy lawyer for a full exemptions list.

New Bankruptcy Law Changes - Outlines major changes you should know about in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), also known as the new bankruptcy laws.

This is important! The new bankruptcy law requires all debtors to fulfill two education requirements: a credit counseling course prior to filing and a financial management course before obtaining a discharge. Failure to complete either of these courses and file the appropriate certificates with the court will prevent a successful bankruptcy. The Chapter 13 Trustee will offer the required courses to Chapter 13 debtors, but Chapter 7 debtors are required to take the courses on their own.

Find a U.S. Trustee Approved Pre-Bankruptcy Counseling Provider and Post-Filing Debtor Education Provider.

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