Most people view bankruptcy as the end of the line – a final nail in the coffin of financial stability. However, this couldn’t be further from the truth, all thanks to one specific system in the California bankruptcy process: exemptions.
These powerful legal tools can make all the difference in safeguarding your assets, effectively turning bankruptcy from the “end of the line” type of scenario into a much-needed, reliable lifeline to a fresh start.
Among these tools, none boasts greater versatility than the so-called Wildcard Exemption, allowing Chapter 7 bankruptcy lawyers in San Diego to shield even more of their client’s assets from liquidation.
Interestingly enough, despite their versatility and utility, wildcard exemptions remain mostly unknown and underutilized. Today, we’ll remedy this injustice by delving deeper into the intricacies of this system, empowering you to harness its full potential.
How do you qualify for the wildcard?
Wildcard exemptions are not a standalone system. Rather, they’re a part of the Chapter 7 bankruptcy process. The caveat here is that California, unlike some other jurisdictions, doesn’t have access to federal and state exemptions.
Instead, after passing the Means Test and qualifying for Chapter 7 bankruptcy, you’ll have the option of choosing two different state exemptions, defined under the California Civil Code § 704 (“Set 1” or “System 1”) and § 703 (“Set 2” or “System 2”).
The latter is of particular interest to us, specifically § 703.140(b)(1) and (b)(5), as these are the sections of the Civil Code that constitute wildcard exemptions, whereas Set 2 doesn’t have equivalent regulations, thereby not allowing for wildcard exemptions.
How to use wildcard exemption in Chapter 7 bankruptcy?
To understand how to use wildcard exemptions, first, you must familiarize yourself with the aforementioned sections of the Civil Code:
- Homestead exemption (§ 703.140(b)(1)): You can be eligible for exemptions for real or personal property used as a residence in the amount totaling $31,950;
- Wildcard exemption (§ 703.140(b)(5)): You can use $1,700 and any unused amount of homestead or burial exemption (i.e. $31,950) to protect any property of your choosing.
What this means is that, unless you use the said amount to exempt your residence or burial plot from liquidation, you effectively have a $31,950 “budget” to protect your other assets, even if their value exceeds that defined by the California Civil Code.
Example of wildcard exemption utilization
Let us presume that you have a car that’s worth $10,000 that you would like to protect from liquidation. Under Set 2, the 703 Motor Vehicle Exemption only allows up to $6,375 of equity for your car, leaving you $3,625 short.
However, if you didn’t use your homestead exemption, or used it only partially, you can now utilize the remainder of that sum to cover the exceeding value (i.e. $3,625) of your car, effectively bringing it to the $10,000 mark, thereby ensuring it’s fully exempt from liquidation.
When to use wildcard exemption?
When to use wildcard exemption?As is notable from the above, Set 2 allows Chapter 7 filers to redistribute their homestead exemption amount in order to protect other valuable assets.
Therefore, this system is best suited for debtors with limited home equity, as it gives them much more flexibility.
Where can I find leading Chapter 7 bankruptcy lawyers near me in San Diego?
If you’re looking for some of the best bankruptcy attorneys north of San Ysidro, the Law Offices of Mark L. Miller should be your first choice. With 25+ years of experience and thousands of successful cases behind us, our seasoned team possesses the extensive knowledge necessary to help you maximize your wildcard exemption benefits.
We’re committed to working closely with you to assess your unique situation, devise a tailored asset-protection strategy, and guide you every step of the way toward a more secure financial future. Reach out to us today!