On behalf of Law Offices of Kathleen G. Alvarado posted in chapter 7 bankruptcy on Friday, August 3, 2018.

Like other states, California’s laws balance the principle that people should pay back what they owe against the principle that sometimes people simply run into financial hardships and shouldn’t be expected to starve or be homeless simply because they owe money they cannot pay.

For this reason, California has a series of what are called exemptions that debtors in Riverside can take advantage of whether they are filing a Chapter 7 bankruptcy in a federal court or even if they are facing collection in a state court proceeding.

As the name implies, an exemption is the right of a person who owes money to claim a piece of property, or a portion thereof, exempt from the collection process or, in the case of bankruptcy, immune from the bankruptcy trustee’s ability to round up and sell the debtor’s property in order to pay off creditors.

Although exemptions cover a lot of different types of property, perhaps one of the most important exemptions under California law is the homestead exemption. Using the homestead exemption, a married couple who is filing a bankruptcy can protect up to about $48,000 of equity in their home.

This means that, if a family is upside down in their mortgage or has just a little bit of equity on account of a second mortgage or some other circumstance, they can protect their home from sale at the hands of the bankruptcy trustee.

As a word of warning, however, exemptions generally do not apply to liens such as mortgages or those arising in connection with a car loan. If a debtor has pledged his or her home or car in some way and does not repay those loans, the creditor is going to be allowed to sell the collateral without regard to an exemption.

Questions about exemptions and how to legally use them to one’s best advantage are often complicated and should be addressed with an attorney who has knowledge of the Chapter 7 bankruptcy process.