Call Us Now
Email Us Now
If you are falling behind on your bills in San Francisco, you may be weighing all of your available options for the future. Depending on your specific financial situation, bankruptcy protection could be the best path forward. This raises an important question: Will I lose all my assets if I file for bankruptcy protection? The short answer is “no”—while you could potentially lose some assets, you can keep exempt property, even when you file for Chapter 7 bankruptcy. Here, our San Francisco bankruptcy attorney highlights the most important things you should know about your ability to preserve assets when filing for bankruptcy protection.
Starting Point: Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy
When filing for bankruptcy protection in San Francisco, it is important to understand which type of personal bankruptcy is the right option for your case. You may file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. There are a number of key differences between these two options—including how they impact what will happen to your assets. Here is an overview:
- Chapter 7 Bankruptcy: Chapter 7 bankruptcy is often called a liquidation bankruptcy. It involves the sale of your non-exempt assets by a trustee to pay off creditors. A major benefit of this type of bankruptcy aims to discharge most types of unsecured debt quickly. Still, it is important to emphasize that not all assets are lost in Chapter 7. Quite the contrary, California law offers a comprehensive set of exemptions that may allow you to keep certain personal property through the Chapter 7 bankruptcy process in San Francisco. Each individual’s situation varies, so the exact assets you may retain are case specific.
- Chapter 13 Bankruptcy: Unlike Chapter 7, Chapter 13 bankruptcy is a reorganization of debts. You may hear it called a wage earner’s plan. It allows people with regular income to create a plan to repay all or part of their debts. Under Chapter 13, debtors propose a repayment plan to make installments to creditors over three to five years. One of the central benefits of Chapter 13 is the ability to keep your assets. As long as you maintain the terms of the repayment plan, your assets remain your assets. It is an option that can be particularly beneficial for those with significant equity in their home or other assets.
The Takeaway: You will not lose your assets with Chapter 13 bankruptcy. A successful Chapter 13 bankruptcy petition involves the restructuring of debts, so that they can be rolled into a repayment plan. With Chapter 7 bankruptcy, you could lose some assets—though that is far from guaranteed. Chapter 7 involves the outright liquidation of unsecured debts. Your assets will be used to help pay creditors. However, not all assets are exposed. You have the right to exempt certain property.
Chapter 7 Bankruptcy and Exempt Property in California
Chapter 7 bankruptcy is the type of personal bankruptcy that exposes your assets to potential forfeiture to pay creditors. It is a key issue that needs to be considered before filing for Chapter 7 bankruptcy. However, at the same time, you should also have a full understanding of California’s exempt property regulations for Chapter 7 bankruptcy filings.
Notably, you must choose between taking the System 1 exemptions (Cal. Civ. Proc. Code § 704) or the System 2 exemptions (Cal. Civ. Proc. Code § 703). To be clear, you cannot mix and match between the two options. You have to pick one or the other. Broadly speaking, System 1 is the right choice for people with significant equity in their home. On the other hand, System 2 is the better choice for a person who has limited (or no) home equity. Here are key points to be aware of:
System 1 Chapter 7 Bankruptcy Exemption in California
- Home Equity: System 1 protects equity in your primary residence up to $349,720 tp $699,426.—depending on the county’s median home prices.
- Motor Vehicle: You can exempt the value of a car, up to $3,325.
- Household Goods: You can exempt most household goods, including furniture.
- Jewelry, Heirlooms, etc: You can exempt up to $8,000 in these high value items.
- Retirement Savings: Your IRA, 401(k), etc is generally exempt.
System 2 Chapter 7 Bankruptcy Exemption in California
- Home Equity: System 2 still protects equity in real property, but the maximum amount is only $33,950 in home equity. It is not the right option for those with major home equity.
- Wildcard Exemption: The key for System 2. You can use $1,550 to exempt any property (wildcard) plus you can also use the unused portion of your home equity exemption as a wildcard exemption.
- Motor Vehicle: You can exempt the value of a car, up to $6,825.
- Household Goods: You can exempt most household goods, including furniture.
- Retirement Savings: Your IRA, 401(k), etc is generally exempt.
Why Trust Our San Francisco Bankruptcy Attorney for Help
Filing for bankruptcy protection is complicated. The reality is that your personal assets are at risk. However, there are options to protect your property, even when you are filing for bankruptcy protection. Le’Roy Roberson is a top-rated San Francisco bankruptcy attorney who has the skills and experience to help you find the best path forward. Along with other things, it is our goal to ensure that you keep the most possible assets—whether that is through a Chapter 13 bankruptcy filing or through the exempt property provisions of Chapter 7 bankruptcy. Do not go it alone. Our San Francisco personal bankruptcy attorney provides free, confidential initial strategy sessions.
Consult With Our San Francisco Bankruptcy Lawyer Today
At Resolve Law Firm, APC, our San Francisco personal bankruptcy lawyer is a compassionate and solutions-focused advocate for clients. If you have any questions about bankruptcy and asset protection, we can help. Contact us right away to set up your free 30 minute phone consultation. We provide bankruptcy representation in San Francisco and throughout the Bay Area, including in Oakland, San Jose, Mountain View, Palo Alto, Sunnyvale, San Carlos, and Berkeley.
