Asaph Abrams Attorney at law

San Diego Bankruptcy

bankruptcy attorney san diego
 

Will I keep all my property?

Maybe.

Federal and state bankruptcy laws describe what property is exempt, meaning what you get to protect from creditors and keep to yourself.  In a chapter 7 bankruptcy, none of your exempt (protected) property can be liquidated (sold) for the purpose of repaying creditors. 


If you’ve lived in California for at least 2 years, then California’s bankruptcy exemption statutes apply.  Otherwise the Federal bankruptcy exemption laws or your former state’s bankruptcy laws apply.  Other states may have more or less generous provisions than California.  In California, you’ll choose from two sets of exemptions.  Under both systems, normal household goods, from clothing to furniture, TVs, etc. are generally protected.  Under both systems, retirement accounts are generally exempt.  However, there are differences between the systems.  System 1 emphasizes protection of home equity.  System 2 gives you more freedom to protect a great variety of personal property.  When we consider values, we’re looking at used values or what the items would fetch at auction. Here are some highlights that distinguish the two sets of exemptions available in California:


California’s “System 1” derives from the Code of Civil Procedure §704.  That funny-lookin’ S means “section.”  For verbose people, lawyers sure like their abbreviations.  System 1 has a large protection for equity in your residence:  the amount depends on the type of ownership, your age, family situation and other variables.  The range is $37.5K to $175K.  For motor vehicles, System 1 lets you protect $2,725 in equity.  So, let’s say you owe Ford $20,000 on your Mustang, and the pony’s worth $22,725.  You have $2,725 of equity in the sports car, which is all exempt from liquidation.  Under System 1, jewelry, heirlooms and art are covered up to a value of $7,175 total.  Equity in goods used in your occupation are covered up to $7,175 or about twice that amount if you work with your spouse.


California’s second exemption system derives from the Code of Civil Procedure §703.  This system is designed primarily for debtors with minimal or no home equity.  There are some limited specific exemptions, such as $3,525 of equity in a vehicle, $1,425 in jewelry and $2,200 in tools of trade.  However, System 2 also gives you an allowance of $22,075 to protect any type of personal property, from cash to that first edition, first printing of Harry Potter and the Sorceror’s Stone signed by J.K. herself.  Let’s say you have a limited Dark Highland Green Mustang GT Bullitt, worth $25,600 and you own it free and clear.  Well, you can apply the $3,525 vehicle exemption AND the $22,075 “wildcard” allowance and thus protect the car, (if not your gas costs at 15 mpg in the city). 


Here is the primary or official source for these exemptions, however the amounts therein are not current.  Beware: a lot of secondary sources also don’t update the amounts (Web sites are a pain to update).  But no worries, we keep apprised and will keep you covered.



I have equity in my car. Will I be able to keep it?

Maybe.  It depends on what exemption (protection) laws you choose.  If you use California’s exemption system 1, which provides greater protection for your home, then you can only protect $2,725 in a vehicle and it can’t be doubled if you’re filing for bankruptcy protection with your spouse.  You can also protect $4,850 in a commercial vehicle (e.g. pick-up truck integral for hauling equipment; not just commuting) and that can be doubled if both spouses work together.  If you’re using California’s exemption system 2, you can protect $3,525 in equity in a motor vehicle.  However, if you haven’t used system 2’s $22,075 homestead (residential home) exemption, you can apply that amount to any property or asset. You can also throw in a $1,175 wildcard allotment.  Added up, you’d have $26,775 in possible vehicle equity protection.  Note, we often lump together the $22,075 unused homestead exemption with the $1,175

wildcard exemption and just call it all a wildcard.  I’d be flattering myself to think you’d read this whole site to be able to note the inconsistency, but flattery isn’t the worst vice.



What happens if my property is liquidated in a chapter 7 bankruptcy?

The bankruptcy exemption protections still apply.  If a property is sold in bankruptcy, you’re still entitled to the exemption amount taken from the sale proceeds. 



What if my equity is right near the bankruptcy exemption limit?

In weighing whether to sell the property, the bankruptcy trustee will consider the sale costs and the trustee’s own commission.  Those factors essentially increase the amount of equity.  This is particularly significant when it comes to the high sales and closing costs for homes.  Also, a non-exempt property may have no market and not be readily sold.  The bankruptcy trustee might then abandon the property and let you keep it, even though technically, it’s not exempt.



If I file for bankruptcy and return my car would I still be liable for the car payments?

If you return the car, bankruptcy wipes out the balance on the loan.  It protects you from deficiency claims.  You can then buy a new (used) car that you can afford and owe the lender nothing on the first car.  However, if you really dig the current vehicle, you can try to redeem it from the lender by paying its current worth in a lump sum or simply maintain the contract by reaffirming it (if necessary) and continuing the payments (if you can afford them after your other debts are gone).



Can I keep my car after bankruptcy? 

This is one of my most frequently asked “frequently-asked questions.”  The value of the car is not of essence.  Your equity, which means the value less your loan balance is what matters.  Chapter 7 bankruptcy petitioners generally don’t have enough equity in their vehicles to warrant liquidation.  Usually if people have car loans they have little or no equity.  They would keep their cars after chapter 7 bankruptcy as long as they can afford to make their payments.  When our clients own vehicles free and clear, they are usually older and/or non-luxury models with  minimal value.  Nothing depreciates better than a car.


 

I’m still paying Sears for my stove. Will they come take it if I file for bankruptcy?

Only if the purchase contract created an explicit lien or security interest.  If you simply acquired the stove with a Sears credit card (hard to resist those 10% one-time savings-- but please do, next time), then there's no need to fear the repo man.  Like all other credit cards, the debt is viewed as unsecured, and will be wiped out in the course of your bankruptcy.  If there is a lien, then usually you need only keep your payments current, though you may also reaffirm (re-sign) the loan, so that your repayment of debt can be reflected on your credit report.



If I file for bankruptcy personally, can I keep my business?  

You can certainly keep your business, but it can't be separated from your bankruptcy filing. All of your business assets must be listed in your bankruptcy petition.  If you have considerable business assets, you'll likely need to enter a Chapter 13 bankruptcy to pay back at least part of your debt, but under the protection of the Bankruptcy Court and over manageable time.

General Bankruptcy Questions

San Diego bankruptcy attorney
San Diego bankruptcy attorney

To discuss your particular situation, please call (858) 344-0500 to schedule your free consultation.