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Will I Lose Everything in Chapter 7 Bankruptcy?


Facing financial hardship can be overwhelming, and when debt becomes unmanageable, people often consider filing for bankruptcy to get a fresh start. Many who qualify for it will turn to Chapter 7, but not without concerns about what they can lose during the process.

This blog is a primer to help you understand the liquidation aspect of Chapter 7 bankruptcy. It will also introduce you to the exemptions you can claim in California to protect more property than you might realize.

Liquidation in Chapter 7 Bankruptcy

Liquidation is a process where the bankruptcy trustee seizes certain property, assesses its value, and sells it. The purpose of liquidation in Chapter 7 bankruptcy is to generate cash to repay someone’s creditors. After liquidation, the court typically orders a discharge of unsecured debt even if selling off assets doesn’t fully satisfy the remainder balance.

Examples of assets that may be liquidated include the following:

  • Real estate
  • Vehicles
  • Luxury goods
  • Savings accounts
  • Artwork
  • Jewelry
  • Family heirlooms

When someone files for Chapter 7, they are required to disclose all of their assets. This doesn’t mean that everything disclosed can or will be liquidated, however. It’s understandable to feel distressed about what you might lose if you file for Chapter 7, but you can leverage bankruptcy exemptions in California to property the property that matters most to you.

Chapter 7 Exemptions in California

When filing for Chapter 7 bankruptcy in California, individuals have the option to choose between two sets of exemptions: the 703 series and the 704 series. These exemptions outline which assets debtors can protect from liquidation by creditors during bankruptcy proceedings.

The 703 Series of Exemptions

The 703 series of exemptions in California provides a broad range of protections for debtors, allowing them to shield various types of property from liquidation.

Some key exemptions included in the 703 series are:

  • Homestead exemption: Debtors can protect equity in their primary residence up to $678,391. This exemption is particularly beneficial for homeowners seeking to retain their homes during bankruptcy.
  • Motor vehicle exemption: Debtors can protect up to $7,500 in equity in their vehicles, ensuring they can maintain reliable transportation.
  • Personal property exemptions: The 703 series includes exemptions for household goods, furnishings, clothing, jewelry, and other personal belongings, up to specified dollar amounts.
  • Wildcard exemption: Debtors can use the wildcard exemption to protect any property of their choosing, up to $1,550 plus any unused portion of the homestead exemption.

Overall, the 703 series of exemptions offers flexibility and comprehensive protection for a wide range of assets, allowing debtors to retain essential property and possessions during bankruptcy proceedings.

The 704 Series of Exemptions

The 704 series of exemptions in California provides a different set of protections for debtors filing for Chapter 7 bankruptcy.

Some key exemptions included in the 704 series are:

  • Homestead exemption: Debtors can protect equity in their primary residence, with varying exemption amounts depending on factors such as marital status, age, and disability. Homestead exemptions can be as great as $678,391.
  • Personal property exemptions: The 704 series includes exemptions for household goods, furnishings, clothing, jewelry, and other personal belongings, with varying dollar amounts depending on the specific exemption.
  • Retirement accounts: Most retirement accounts, including 401(k)s, IRAs, and pensions, are exempt from liquidation in Chapter 7 bankruptcy under the 704 series.

While the 704 series of exemptions provides substantial protections for certain assets, it may not offer as much flexibility as the 703 series, particularly regarding the wildcard exemption.

Consult an Attorney for Specific Guidance

No two bankruptcy cases are alike, and yours will be as unique as you are. For this reason, you should consult with a bankruptcy lawyer who can address your specific financial situation and offer informed advice and personalized service.

That’s the kind of legal support you can get from Arnold Law Group, APC. If you want to learn more about how we can help, reach out to us at any time and request a consultation.

Get started now by contacting us online.

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