Generally, the answer depends on what exemption system (of the two available in California) the debtor selects and the amount of assets the debtor has. Selecting the appropriate exemption system and applying the correct exemption(s) and correct amount of each exemption to the property to protect is equally as important.
Example: Debby Debtor has $20,000 in cash and a vehicle (free and clear of a lien) valued at $10,000. Debby has no other assets to complicate this example.
It would be in Debby’s best interest to apply her 703 “wild card” exemption to the cash in full, leaving $3,250 of the remaining wild card exemption to be applied to her vehicle. An available 703 vehicle exemption can be applied to the vehicle ($3,525 in exemption amount), leaving $6,750 of value/equity in the vehicle to protect. The remaining unused wild card exemption of $3,250 can be then applied to the vehicle equity of $6,750, leaving a remaining $3,500 that is subject to the bankruptcy court seeking to sell.
In Debby’s case, the unprotected amount of $3,500 in the vehicle may be lucrative for the assigned trustee to look into liquidating to pay a portion of Debby’s creditors. However, the assigned trustee will factor in the costs associated of picking up the vehicle, selling it, and administration costs, and will most likely determine that it is not profitable to sell the vehicle. Thus, Debby is able to discharge her debt and keep both of her assets by properly applying the correct exemptions and in the correct amounts to each item of property.
Bankruptcy planning, especially determining which exemption system and how much exemptions to use for each item, requires many hours of proper planning and case preparation, and therefore should not be done without the assistance of an experienced bankruptcy attorney. As a highly skilled bankruptcy attorney, I make it my goal to provide each client dedicated the time and experience to assist clients with their bankruptcy filing.