California Exemptions Explained: What Bankruptcy Will — and Won’t — Protect

Introduction — Why California Exemptions Matter

When you file bankruptcy in California, exemptions determine which property you keep and which becomes available to creditors. California is an "opt‑out" state for bankruptcy exemptions: filers cannot elect the federal exemption schedule and instead must choose between two state systems—commonly called the "703" and "704" exemption schemes. This choice (you may use either System 703 or System 704, but not both) is a central strategic decision when preparing a consumer bankruptcy petition.

This article explains the key differences, common exemption categories (homestead, vehicle, wildcard/personal property, retirement and public benefits), and how the federal means test interacts with California exemptions to determine Chapter 7 eligibility.

System 704 (Often Best for Homeowners): Homestead, Retirement & Other Protections

System 704 (statutory citations in the Code of Civil Procedure) tends to favor homeowners with significant equity. Under 704, the homestead exemption is county‑dependent and tied to the countywide median sale price of a single‑family home for the prior calendar year; the law sets a floor and a capped maximum and the amounts are adjusted annually. Practically speaking, the 704 homestead often ranges in the low hundreds of thousands up to a capped maximum (the exact dollar floor and cap vary by annual adjustment and county). That means many California homeowners can protect a substantial portion (or all) of their home equity under 704, depending on county figures and timing.

Other common 704 features:

• Retirement and ERISA‑qualified plans: many qualified retirement accounts (401(k), most IRAs up to statutory caps, pension plans) are protected to a degree under California exemptions and federal law interplay — consult counsel for account‑specific limits.
• Vehicle equity: 704 sets certain vehicle exemptions (benchmarks change with the statute’s annual adjustments).
• Personal property categories (jewelry, household goods, health aids) have defined limits under 704; some categories may be more generous for debtors with dependents or special circumstances.

Because 704 is often the better choice for debtors with substantial home equity, homeowners should run the numbers before filing to decide whether 704 or 703 gives the stronger result.

System 703 (Often Better for Renters, Vehicles & Mixed Assets): Wildcard & Itemized Protections

System 703 is generally more attractive to debtors who do not own a home or whose equity is small. Key features include:

• Fixed homestead amount (significantly smaller than the high 704 floor/cap in many counties), useful when you have little or no home equity.
• "Wildcard" style protection: 703 includes a more flexible allowance that can be applied to any property (cash, second vehicle, business tools, etc.), which makes 703 useful when a debtor’s non‑real‑estate assets need protection.
• Itemized personal property caps for items like household goods, jewelry, tools of the trade and motor vehicle equity—these caps are statutory and are adjusted periodically. Examples and figures published by bankruptcy practitioners show the 703 vehicle and wildcard values are often preferred by non‑homeowners.

Because you must elect either 703 or 704 in whole, debtors who rent, who have a high value in a vehicle or stock of business tools, or who need the wildcard flexibility often pick 703.

Means Test, Practical Steps, and Next Steps for Los Angeles Filers

How the means test ties in: Chapter 7 eligibility is screened by the federal means test, which compares your recent household income to the median income for California for a household of your size. Median income figures are updated periodically; for cases filed on or after April 1, 2025, published median income benchmarks for California are, for example, approximately $76,190 (single), $99,936 (two‑person), $112,536 (three‑person) and $130,845 (four‑person), with add‑ons for additional household members. If your current monthly income (averaged over the six months before filing) is below the median for your household size, you typically pass the first step of the means test; if it is above, the test looks to allowable expenses and disposable income to determine whether Chapter 7 is appropriate.

Practical checklist for Los Angeles debtors:

1. Inventory assets and estimate equity in home and vehicles — get quick market values and pay‑off figures.
2. Calculate which California system (703 or 704) protects more of your assets; don’t mix systems. Use current exemption tables or ask a bankruptcy attorney to run the comparison.
3. Run the means test using the latest median income numbers and your recent 6‑month average income to determine Chapter 7 eligibility; if you fail, evaluate Chapter 13 alternatives.
4. Do not transfer assets or make large preferential payments before filing — these can be reversed by the trustee.
5. Consult a qualified bankruptcy attorney or a reputable legal aid clinic in Los Angeles to confirm current exemption amounts for your county and to prepare schedules and exemptions correctly.

Because California exemption amounts and means‑test median incomes are updated annually (typically effective each April 1 or on the dates published by federal agencies), always verify the current numbers before filing; the statutory text and judicial summaries explain the legal rules, but application to a real case requires exact current figures and careful valuation.

Need local help? If you live in Los Angeles County and are weighing bankruptcy, bring recent pay stubs (six months), mortgage and vehicle statements, retirement account statements, and a list of monthly expenses to a consultation. An attorney can run the 703 vs 704 comparison quickly and advise whether Chapter 7, Chapter 13, or an out‑of‑court solution is the best path.