What Are Chapter 7 Exemptions in California?

When you file Chapter 7 bankruptcy in California, you choose between two state-created exemption systems that determine what property you keep. California does not let filers use the federal bankruptcy exemptions, and it does not let you mix and match between its two sets. The Chapter 7 exemptions in California are found at Code of Civil Procedure section 704 (often called System 1, built for homeowners with real equity) and Code of Civil Procedure section 703.140(b) (System 2, built around a flexible wildcard that favors renters and low-equity homeowners).¹

Why the Choice Between the Two Systems Matters

You pick one system for your entire case. Once your case proceeds, the choice is effectively locked in, and the wrong pick can cost you thousands of dollars in protected equity. If you and your spouse file jointly, both of you must use the same set.

The two systems are built for different situations. The 704 set offers one of the largest homestead exemptions in the country but nothing in the way of a wildcard and only modest protection for personal property. The 703 set has a small homestead but a wildcard that can be applied to almost anything, which is what makes it powerful for people who don’t own a home or don’t have meaningful equity in one.

CCP 704 Exemptions (System 1)

Homestead

The CCP 704 homestead protects the greater of $300,000 or the countywide median sale price for a single-family home in the prior calendar year, with a cap of $600,000. Both figures adjust every January 1 for inflation based on the California Consumer Price Index.² After several years of adjustments since 2022, the floor is now above $360,000 and the cap above $720,000, with the exact number tied to the calendar year you claim the exemption. In counties where the median sale price runs high, such as San Francisco or Los Angeles, the higher amount applies automatically.

Motor Vehicle

You can protect up to $7,500 in aggregate equity across all your motor vehicles under CCP 704.010. If your only vehicle is sold at an execution sale, the same $7,500 in proceeds is exempt automatically, without a separate claim.³

Household Goods, Jewelry, and Wages

System 1 does not put dollar caps on most household goods. It protects furnishings, appliances, clothing, and personal effects that are “ordinarily and reasonably necessary” for you and your family. An antique dining set worth $15,000 may fall outside that standard; ordinary household furniture generally fits inside it. Jewelry, heirlooms, and works of art have a separate dollar cap under CCP 704.040.

California’s wage protection is more generous than federal law. Under CCP 706.050, a creditor can garnish the lesser of 20% of your disposable earnings or 40% of the amount by which your weekly disposable earnings exceed 48 times the state minimum hourly wage. Where a local minimum wage is higher, the local rate applies.⁴ Federal law allows garnishment of up to 25% of disposable earnings, so California workers keep a larger slice of each paycheck.⁵

CCP 703.140(b) Exemptions (System 2)

The amounts below reflect the statutory figures in effect as of January 1, 2025.¹

Homestead

System 2’s homestead protects up to $29,275 of equity in your primary residence. That’s a small fraction of what System 1 offers, which is why this set is a poor fit for homeowners with significant equity.

Wildcard

This is what makes System 2 powerful. Under CCP 703.140(b)(5), you can protect $1,550 of any property, plus any unused portion of the $29,275 homestead exemption. A renter with no home equity effectively has a wildcard of up to $30,825, applicable to anything: cash in a bank account, a tax refund, a valuable collection, or vehicle equity above the vehicle exemption.

Motor Vehicle

System 2 protects up to $7,500 in equity across one or more motor vehicles, the same dollar figure as System 1. If your equity is higher, you can stack part of your wildcard on top.

Household Goods, Jewelry, and Tools

Household furnishings, clothing, appliances, books, and similar personal items are exempt up to $725 per individual item. Jewelry worn for personal use is exempt up to $1,750 total. Tools and professional books used in your trade are protected up to $8,725. These per-item and category caps are tighter than System 1’s “reasonably necessary” test in some situations, but the wildcard usually more than closes the gap.

Which System Fits Your Situation

Run the comparison against your actual property before you commit. A few rules of thumb from the two statutes:

If you own a home and have more than $29,275 of equity in it, System 1 is almost always the right choice. The larger the equity, the more decisive that becomes.
If you rent, or you own a home with little or no equity, System 2 is usually better because the wildcard can shield cash, a tax refund, extra vehicle equity, and other property that System 1 leaves exposed.
If your equity sits close to the System 2 homestead cap, add up your nonexempt cash, refunds, and other loose property. When those numbers together exceed what System 1 protects outside the homestead, the math can still favor System 2.

Because the choice sticks, this is the moment in a California Chapter 7 case where careful arithmetic pays off.

Retirement Accounts

Retirement savings are protected in bankruptcy under federal law, so the protection applies whichever California system you pick. Employer-sponsored plans covered by ERISA, including most 401(k)s and 403(b)s, are excluded from your bankruptcy estate entirely. No dollar cap. A trustee cannot reach those funds to pay creditors, with narrow exceptions for IRS tax levies and qualified domestic relations orders from a divorce.⁶

Traditional and Roth IRAs share a combined protection cap of $1,711,975 for the period from April 2025 through early 2028. The cap adjusts for inflation every three years. Money rolled over from an employer-sponsored plan into an IRA does not count toward the cap and keeps unlimited protection, provided the rollover was properly executed. Keep documentation showing the rollover source so the trustee can verify it.

You Must Have Lived in California Long Enough to Use These Exemptions

The California exemptions are only available if you lived in the state for the full two years before your filing date. If you moved to California more recently, the exemptions of your prior state may apply instead, based on where you lived during the 180 days before that two-year lookback period. Someone who relocated last year cannot pick System 1 or System 2 just because the case is being filed in a California court.

Where You Claim Exemptions in the Case

Exemptions are formally claimed on Schedule C of your bankruptcy petition. For each piece of property you want to protect, you identify the exemption statute and the dollar amount you’re claiming.⁷ The Chapter 7 trustee then reviews your schedules against your financial documents and tax return. The trustee’s job is to look for nonexempt assets, sell them, and distribute the proceeds to creditors, so an error or omission on Schedule C is where an exemption dispute usually starts.⁶ Most California Chapter 7 cases end as “no-asset” cases because the exemptions cover everything; getting the claim right on Schedule C is how you make sure yours is one of them.

1
California Legislative Information. California Code CCP 703.140 – Exemptions in Bankruptcy
2
California Legislative Information. California Code CCP 704.730
3
California Legislative Information. California Code CCP 704.010
4
California Legislative Information. California Code CCP 706.050
5
U.S. Department of Labor. Wage and Hour Division Fact Sheet 30 – Wage Garnishment Protections of the Consumer Credit Protection Act
6
United States Courts. Chapter 7 – Bankruptcy Basics
7
United States Courts. Schedule C – The Property You Claim as Exempt