How to Use California’s Wildcard Exemption in Bankruptcy

When you file for bankruptcy in California, many of your assets become subject to the bankruptcy. Chapter 7 bankruptcies, in particular, could involve the liquidation of many of your non-exempt assets in order to pay off your creditors. But not all property must be liquidated, and not all of your assets are within the reach of your creditors. California includes several specific exemptions for certain types of properties. A knowledgeable California bankruptcy attorney can help you determine which bankruptcy option is best for you and aid you in keeping your most prized assets out of the hands of your creditors.

The “Wildcard” Exemption and How to Use It

When you file for Chapter 7 bankruptcy, you can select either Section 703 or 704 bankruptcy exemptions to protect certain property. Section 704 details specific types of items that are protected, but it does not contain the wildcard exemption. If you select section 703, you can utilize the wildcard exemption.

What we call the “wildcard” exemption is actually the combination of the exemptions that are provided in California Civil Code sections 703.140(b)(1) and (b)(5), or the aggregate of the debtor’s interest in any real or personal property. The current wildcard total is $30,825.

This amount is readjusted every three years to reflect changes in the cost of living.

The wildcard can be split up or apportioned among different items and types of assets. It works as follows: Suppose you have a car with a Kelly Blue Book value of $10,000. The current exemption for vehicles under 703.140(b)(2) is only $5,860, but you want to keep your car. You can add $4,140 of your wildcard funds to the vehicle exemption and thus protect the entire value of your car. You still have the remaining wildcard amount to apportion among other assets you wish to keep.

Section 703 also includes specific exemption amounts for vehicles (as noted), jewelry, “tools of the trade” like professional books, a cash surrender value of a “whole life” insurance contract, and other personal household goods. The wildcard amount can be added to any of these exemption amounts to protect specific assets. You can use the wildcard to protect any number of items, including: cash, tax refunds, stocks and bonds, art, jewelry, equity in vehicles, sports equipment, or other household items, to name a few. A knowledgeable California bankruptcy attorney can help you determine what other items or assets might be eligible for the exemption and how best to apportion the available exemption amount. With the right kind of help, it’s quite possible you can obtain a Chapter 7 bankruptcy without having any of your assets liquidated or sold.

Talk to an Experienced Southern California Bankruptcy Attorney

If you or your company are struggling with debt and considering bankruptcy, please contact Rounds & Sutter for a free consultation. With offices in Ventura, Santa Barbara, and Westlake Village, we represent clients throughout Southern California, offering smart, compassionate legal counsel in the face of life’s challenges.