Exemptions are the rules that decide what a trustee cannot touch. In most consumer cases they cover everything the person owns, which is why the overwhelming majority of Chapter 7 filers lose nothing at all.
California is unusual. It gives you two entirely separate systems and makes you choose one for the whole case. Pick the wrong one and you can hand a trustee an asset the other system would have protected.
System 1 and System 2
System 1, the section 704 exemptions, protects far more home equity and works outside bankruptcy as well. If you own a house with meaningful equity, this is almost always the answer.
System 2, the section 703 exemptions, only exists inside bankruptcy. It protects less home equity but includes a large wildcard you can point at anything: cash, a tax refund, a paid-off car, a coin collection. If you rent, or you own a home with little equity, System 2 is usually stronger.
You cannot mix them
It is one system or the other for the entire case. Married couples filing together must both use the same one. This is the single most common place a cheap filing goes wrong, and the damage is not reversible after the trustee has taken a position.
The homestead is where the money is
California's homestead exemption has been inflation-indexed since 2022, from a statutory floor of $300,000 to a cap of $600,000. Applied to 2026, that puts the working range somewhere around $371,000 to $744,000, and the figure that applies to you depends on the countywide median sale price.
Here is the part other sites will not tell you: no state agency publishes an official county-by-county chart of the current figures, and no court has settled exactly how the median should be calculated. Anyone quoting you a precise number for Los Angeles County with total confidence is guessing more than they are letting on. We work it out for your county, show you the arithmetic, and tell you where the uncertainty sits.
What the exemptions cover
- Equity in your home
- Equity in a vehicle
- Household goods, furniture, appliances and clothing
- Tools, books and equipment you use to earn a living
- Retirement accounts, which are broadly protected under both systems
- Wages you have already earned but not yet been paid
- Public benefits, and in most cases the proceeds of a personal injury claim
“The asset people forget to mention is the tax refund. If you file in February with a $6,000 refund coming, that money is an asset of the estate. It is protectable, but only if we know about it before the trustee does.”
Naomi Reyes-AshfordQuestions we get asked
What happens if something is not exempt?
In Chapter 7 the trustee can sell it and distribute the proceeds. In practice trustees ignore small overages because the cost of selling exceeds the return. In Chapter 13 you keep the asset and pay its non-exempt value into your plan.
Can I move assets around before filing?
Some pre-filing planning is legitimate and some of it is fraud, and the line matters enormously. Do not do anything before you have talked to a lawyer about it.
Do exemption amounts change?
Yes. Most California figures adjust periodically and the homestead adjusts annually. Always confirm the current year's numbers rather than relying on an article.
How long must I have lived in California?
Generally two years to use California's exemptions. If you moved recently, the state you came from may govern, which occasionally produces a much better or much worse result.
Start here
Make a rough list of what you own and what you owe on each item. Equity is the only number that matters, and most people find theirs is smaller than they feared.