How California Exemption System 1 Differs From System 2

April 7, 2017

California allows debtors to choose from two different sets of bankruptcy exemption schemes. They are informally called System 1 and System 2. To learn more about what exemptions are and how they work in bankruptcy,  see  Bankruptcy Exemptions – What Can I Keep When I File for Bankruptcy?  

Below we discuss some of the major differences between California's two exemption systems. For a detailed list of the exemptions in each of California's exemption systems, see California Bankruptcy Exemptions.

Differences Between System 1 (Section 704) and System 2 (Section 703) Exemptions

There are lots of differences between the exemptions allowed in California's System 1 and System 2. Here are some of the big ones.  

  • Married Couples - System 1 allows married couples filing jointly for bankruptcy to each claim the amount of the exemption for some, but not all, exemptions (which means as a couple, they get twice the amount of the listed exemption). This is called "doubling." System 2 does not allow married couples filing jointly to double.
  • Homestead Exemption - Generally debtors who own their homes prefer System 1 as the value of the homestead exemption allowed under System 1 is up to $75,000 for single filers; $100,000 for a family; $175,000 if the homeowner is 65 or older or physically or mentally disabled; and $175,000 if the debtor is 55 or older and has a low income. Under System 2, the homestead exemption is $26,800.
  • Wage Exemption - No wage exemption is permitted under System 2 while System 1 allows an exemption of at least 75 percent of the wages received by the debtor within 30 days of the bankruptcy filing.
  • Jewelry - System 1 allows debtors to exempt up to $8,000 of jewels, heirlooms, and art. System 2 caps the value of this exemption at $1,600.
  • Child Support and Alimony - All funds for child support and alimony can be exempted under System 2, but not under System 1.
  • Wildcard - Under System 2, you can exempt up to $1,425 of any property plus an unused amount of the homestead exemption (which is $26,800). System 1 doesn't have a wildcard. For this reason, many bankruptcy filers that do not own a home (or who have a home with no or low equity) find System 2 to be most advantageous.

Other reasons exist for favoring one system over the other, as well. You should consult with a knowledgeable bankruptcy who practices in your area to be sure that you are properly protecting your assets.

FEATURED LISTINGS FROM NOLO
Swipe to view more

Talk to a Bankruptcy Lawyer

Need professional help? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
NEED PROFESSIONAL HELP ?

Get debt relief now.

We've helped 205 clients find attorneys today.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you