January 30, 2014 /24-7PressRelease/
-- While overwhelming debt can be a challenging experience for almost anyone, it can be particularly stressful when an individual has no idea as to how he or she is going to escape the vicious cycle. Even worse, many people actively avoid one of the best possible debt remedies - namely, bankruptcy - due to their mistaken belief that they will lose everything they own, including their homes, during the process.
However, those mired in debt - especially those in California - need to be aware that they can actually keep a great deal of their property, if not all of their property, by utilizing bankruptcy exemptions. Essentially, exemptions are used to protect certain forms of property from liquidation during a Chapter 7 bankruptcy
. For many people, the most important exemption is the one that protects the equity in their house, otherwise known as homestead exemption.
California's Homestead Exemption
When it comes to bankruptcy exemptions, it is quite common for each individual state to craft their own, which California has indeed done. However, California is also distinct in that it has two separate sets of exemptions that a person can choose from - although he or she must pick one or the other.
For instance, California's homestead exemption under System 1 permits an individual to protect up to $75,000 in home equity during a California bankruptcy if he or she is single and not disabled, which can increase to $100,000 if the individual lives in the home with a family member. Importantly, the homestead exemption can further grow to $175,000 under System 1 if the person is aged 65 or older, has a mental or physical disability, or if he or she is 55 or older, single, earns less than $25,000 ($35,000 if married) and creditors are seeking a forced sale. Conversely, the homestead exemption under System 2 in California is $25,575.
However, it is important to note that just because the homestead exemption under one system is larger than the other that does not mean everyone will select the same exemption system as other types of property exemptions may come into play.
For instance, while $2,900 in motor vehicle equity can be safeguarded under System 1, System 2 provides $5,100 in equity protection for motor vehicles - not to mention that System 2 has an additional "wildcard" exemption. Ultimately, a great deal of planning and strategy is needed when determining which California exemption
system will be best suited to maximize an individual's protected assets.
If you are currently facing impossible debt and believe bankruptcy may be able to help, it is typically best to consult with an experienced bankruptcy attorney. A knowledgeable attorney can help review your finances and assist in ensuring you get the financial fresh start you so desperately need.
Article provided by Sobti Law Group
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