California Bankruptcy Exemptions Explained

One of the most important questions bankruptcy filers in California have is what property they can keep throughout the bankruptcy process — particularly their car and home. The main point of bankruptcy is to give people a fresh start. That’s only possible if the filer has something to start with. This is where bankruptcy exemptions come in.

California Bankruptcy Exemptions: What They Are & Why They Matter

If you're filing Chapter 7 bankruptcy in California, bankruptcy exemptions help determine what property you’re allowed to keep. These laws protect certain assets, like your car, household items, or some money in your bank account.

Most Chapter 7 cases in California are what’s called “no-asset” cases. That means the bankruptcy trustee doesn’t take or sell anything you own to repay creditors.

California’s exemption laws are designed to give people a fresh start, not to take everything away. These exemptions help make sure you can keep the basic things you need to live and rebuild after bankruptcy.

Federal vs. State Exemptions: Which Can Californians Use?

If you’re filing for bankruptcy in California, you can only use California’s state exemptions. Some states give you the choice between using federal bankruptcy exemptions or your state’s system. California doesn’t. It’s known as an “opt-out” state, which means you’re not allowed to use the federal bankruptcy exemption list.

That said, California has two different sets of state exemptions: Section 703 and Section 704 of the California Code of Civil Procedure. If you’ve lived in California for at least two years, you’ll need to choose one of these two systems. You can’t mix and match between them, so it’s important to pick the one that works best for your situation.

The good news is that California’s exemptions are usually more generous than the federal ones. Also, in some cases, you may still be able to use certain federal nonbankruptcy exemptions, which are a separate set of protections for things like federal retirement benefits or military survivor benefits.

California Bankruptcy Exemptions: What You Can Keep When You File

California laws allow you to choose from two lists of exemptions when you are filing for bankruptcy in the state, which gives you more options. Note that both of these lists will allow you to claim bankruptcy exemptions for different types of clothing, furniture, tools, pensions, cars, homesteads, and other valuable items. 

Under the California bankruptcy law, you may choose to use one bankruptcy exemption list or the other, but you can’t use both.

Here's a quick overview of how these two systems compare based on the property they protect:

If you aren't sure which set of exemptions will best protect you, you can schedule a free consultation with a local bankruptcy attorney to talk through your case.

The California Homestead Exemption (Real Property)

California offers two different homestead exemptions depending on which exemption system you use when filing for bankruptcy.

• If you use the 704 exemption system, you can protect a significant amount of equity in your primary residence.

  • This includes houses, condos, mobile homes, boats, or other types of property you live in.

  • The amount you can protect depends on the median home price in your county. As of 2025, the protected amount ranges from $361,076 to $722,507.

• If you choose the 703 exemption system, the homestead exemption is a flat amount of $36,750.

  • This can be used to protect equity in a home, condo, or other residence.

You’ll need to choose the system that fits your situation best. Many people with high home equity use the 704 exemptions, while those with little or no equity may prefer the 703 exemptions for their flexibility.

Legal references: California Code of Civil Procedure §§ 704.730 (System 1), 703.140(b)(1) (System 2)

Wild Card Exemption

California’s wildcard exemption gives you a way to protect property that doesn’t fit into other exemption categories. This could include cash, bank account balances, or valuable personal items. However, whether you can use a wildcard exemption depends on which system you choose.

• If you choose to use the 703 exemption System, you get a $1,950 wildcard exemption. plus you can add any unused portion of the homestead or burial exemption for a potential total of $36,750 total.

  • Many people choose the 703 system specifically for the wildcard flexibility when they don’t need the full homestead exemption.

• The 704 exemption System doesn't include a wildcard exemption. This means you can only protect property that falls within specific exemption categories like home equity, vehicles, or retirement accounts

  • If you have property that doesn’t fit into those categories, the 703 system may offer more protection.

Legal reference: California Code of Civil Procedure § 703.140(b)(5)

Motor Vehicle Exemption

Both of California’s bankruptcy exemption systems—703 and 704—allow you to protect up to $8,625 equity you have in one or more motor vehicles (as of 2025).

Here's one key difference though: If you use the 703 exemption system, you can only apply the motor vehicle exemption to one vehicle. If you use the 704 exemption system you can split the motor vehicle exemption across multiple vehicles, if needed.

You can also use the tools of the trade exemption in either system if your vehicle is necessary for your job or small business. If you have more equity in your vehicle than is covered by the exemption, you can use the wildcard exemption to help protect your car if you use the 703 exemption system.

Legal references: California Code of Civil Procedure §§ 703.140(b)(2), 703.140(b)(5), 703.140(b)(6), 704.010, 704.060

Other Personal Property: Section 704

You can protect the following personal property if you choose Section 704.

• Residential building materials for repairing or improving a home. The value is up to $3,500 under Section 704.030.

• You can also protect heirlooms, jewelry, and work of art worth up to $8,725 under Section 704.040.

• Health aids that are necessary to enable you or your spouse or dependents to work or sustain health, and orthopedic and prosthetic appliances, are completely exempt under the law.

• Items, such as food, appliances, clothing, and furnishings, are exempt if they are reasonably and ordinarily necessary to and personally used by you or members of your family. However, these items might not be exempt if they have “extraordinary value.”

• Bank deposits that arise out of Social Security payments are exempt up to $3,500 for one payee ($5,250 for payees who are spouses), and the amount is unlimited if funds aren’t commingled. 

• And bank deposits from any other public benefit payments are exempt up to $1,750 (or $2,600 for payees who are spouses ) under the law.

• Tools of the trade, such as tools, instruments, implements, materials, furnishings, uniforms, books, a single commercial motor vehicle, and other personal property that is used in a business or trade are exempt up to $8,000. However, keep in mind that in a joint bankruptcy in California, if both spouses are in the same occupation, then the limit is $15,975. (Note that the commercial motor vehicle is amount is limited to $4,850 or $9,700 in case both spouses are in the same occupation.)

• Cemetery and burial plot are exempt under the law.

• Personal injury, as well as wrongful death causes of action or recoveries (so, claims that can be filed or judgments you’ve already obtained) that are necessary for support, are also exempt.

Other Personal Property: Section 703

• Tools of the trade, such as implements, instruments, and professional books, are exempt up to $8,000 under the law.

• You will get an exemption of up to $725 per item on clothing, appliances, household goods, furnishings, books, animals, musical instruments, and crops under Section 703.140(b) (3).

• Jewelry used mainly for personal, household, or family use is exempt up to $1,750 under Section 703.140(b) (4).

• Health aids are exempt under Section 703.140(b) (9).

• Personal injury recoveries are exempt up to $29,275 under Section 703.140(b)(11).

• Wrongful death recoveries deemed necessary for support are exempt under Section 703.140 (b) (11).

Money Benefits: Section 704

Pensions

All tax-exempt retirement accounts, such as 401(k)s and 403(b)s, money purchase and profit-sharing plans, Simple IRAs and SEP, and other defined benefit plans) are protected- 11 U.S.C. § 522.

IRAs and Roth IRAs are exempt to the maximum amount. And the amount is set forth by federal law —11 U.S.C. § 522(b)(3)(C).

• Public retirement benefits are exempt under Section 704.110.

• Private retirement benefits, such as IRA and Keogh, are exempt under Section 704.115.

• California Government Code 21255 covers public employees.

• California Government Code 31452 covers County employees.

• California Government Code 32210 covers County firefighters.

• California Government Code 31913 covers County peace officers.

Insurance

Note that matured life insurance benefits you need for support are fully exempt, while an unmatured life insurance policy is exempt up to a value of $13,975 under Section 704.100 of the law.

• Fraternal unemployment benefits are covered under Section 704.120.

• Disability or health benefits are covered under Section 704.130.

• Fraternal benefit society benefits are covered under Section 704.170.

Money Benefits: Section 703

Pensions

All tax-exempt retirement accounts, such as 401(k)s and 403(b)s, money purchase and profit-sharing plans, Simple IRAs and SEP, and other defined benefit plans) are protected -11 U.S.C. § 522. 

Roth IRAs and IRAS are exempt to a certain amount. And the amount is set forth by federal law — 11 U.S.C. § 522(b)(3)(C)(n).

ERISA-qualified benefits that are deemed necessary for support are exempt under Section 703.140(b)(10).

Insurance

Unmatured life insurance policies are exempt under Section 703.140(b) (7).  Life insurance proceeds that are needed for support are exempt under Section 703.140(b)(11).

Disability benefits are covered under Section 703.140. 

Other California Exemptions

Section 704

Public Benefits

Note that unemployment benefits, as well as union benefits because of a labor dispute, are covered under Section 704.120. And workers' compensation is exempt under Section 704.160. Aid to elderly, blind, and disabled or other types of public assistance is exempt under Section 704.170. Relocation benefits are exempt under 704.180. And financial aid to students is exempt under 704.190.

Miscellaneous

• Trust funds of an inmate are exempt up to $1,750 (provided spouses don’t double) under Section 704.090.

• Business partnership property is fully exempt - Corp. 16501.

• You can use any applicable California federal non-bankruptcy exemptions.

Section 703

Public Benefits

Unemployment compensation, Veterans' benefits, Social Security, and public assistance are exempt under Section 703.140(b)(10) of the law. Compensation for crime victims is exempt under Section 703.140 (b) (11).

Retirement

Section 703.140(b)(10(E) exempts payments under a stock bonus, annuity, profit-sharing, or similar plan or a contract on account of disability, illness, death, length of service, or age, to the degree reasonably necessary for your support or the support of your dependent. 

Miscellaneous

You can use any applicable California federal non-bankruptcy exemptions.

Need Help Filing Chapter 7 Bankruptcy? 

If you're thinking about filing Chapter 7 bankruptcy in California and you're worried about protecting your property, you’re not alone. And you don't have to do this alone. You may be eligible to use Upsolve's free filing fool to file Chapter 7. It’s designed to help low-income individuals file Chapter 7 without a lawyer, and it walks you through the process step by step.

If your case is more complex or you're unsure whether your property is protected under California’s 703 or 704 exemption systems, you may want to set up a free consultation with a bankruptcy attorney. A lawyer can explain how the exemptions apply to your situation and help you figure out the best path forward.