“Exempt” means free from, or not subject to an obligation; or excused. Exempt property is that which a person is entitled to keep, either in the event of collection efforts from a creditor with a judgment, or in a bankruptcy.
What property is exempt depends mostly on the laws of the state in which you reside, and exemptions vary from state to state.
Some of the major exemptions under California law include:
Homestead, meaning property in which you reside. $626,400. California Code of Civil Procedure [CCP] Sec. 704.730.
One motor vehicle. $3,625. CCP Sec. 704.010.
Jewelry, heirlooms, works of art. $9,525. CCP Sec. 704.040.
Tools of the trade, $19,050. Sec. 704.060.
Wages. 75% of take-home pay. Sec. 704.070.
In every state but California, the exemptions are the same regarding collection of judgment and for Bankruptcy. But California prides itself on being different. If the judgment debtor files a bankruptcy in California, then he or she has a choice of a different set of exemptions, under CCP Sec. 703.140. The major exemption available under this set is the “wildcard” exemption, which can be applied to any item or items of property, of $31,950 – but this can’t be used if you use the $626,400 homestead exemption under CCP Sec. 704.730.
In other words, if you are not in bankruptcy and only protecting assets from a judgment creditor, you can only use the 704 exemptions. If you are in a bankruptcy, you can choose the 704 or the 703 exemptions. Debtors who have equity in a home would use the 704 exemptions to protect the equity in their home, up to the amount of $626,400. Debtors without equity in real estate would probably choose the 703 exemptions to take advantage of the wildcard exemption of $31,950.
Does this sound confusing? If the law was easy to understand, who would need lawyers? For a free consultation on what is or is not exempt, call now. (List number.)
(The above has been excerpted from Mr. Crowder’s book, LAWSUIT SURVIVAL 101, available for only $19.98.)