Exemptions are “claims” made by the debtor in the Bankruptcy Schedules that assert the rights of the debtor to protect and keep certain types and amounts of property under applicable State law and the Bankruptcy Code. When we asset a claim of exemption under the law, we are telling the Trustee and the creditors that they can’t touch that property.
Exemption claims are sometimes challenged by the Trustee, especially if they are improperly identified under the law. If this occurs, the Court will decide whether the exemption claim is proper and in what amount(s). Exemption claims are typically made under the law to protect a home, a car, personal belongings, furniture, furnishings, so-called tools of the trade or even excess cash. If exemption claims won’t likely protect all of your important property, then it may be necessary to consider a Chapter 13 plan that might allow you to keep everything you own and pay some net money to unsecured creditors over time.
One of the most difficult parts of planning and filing a bankruptcy case is determining what bankruptcy exemptions to use and how to use them. This is true because this area of the law is a confusing mixture of Federal law and State law. Most states force you to use their state exemptions. Some of the states (17 of them) allow you to choose between the state’s list of exemptions and the Federal list provided in the Bankruptcy Code.
California is fairly unique because it has 2 lists (or “sets”) of state exemptions that debtors may choose from. As in California, if you have a “choice” system, you must choose one complete list or the other. You are not allowed to mix and match from both lists.