Chapter 7 Bankruptcy Lawsuit in California

California Chapter 7 Exemptions

California has opted out of the federal bankruptcy exemptions, so a California debtor may not elect the federal Section 522(d) set. Instead, California gives debtors a choice between two state systems under the Code of Civil Procedure, and the debtor must pick one — the two systems cannot be combined. (Source: Nolo, California Bankruptcy Exemptions.)

System 1 (CCP Section 704)

System 1 protects homestead equity up to $743,681.08 (the 2026 statewide maximum under CCP Section 704.730; the figure is indexed annually and the protected amount can be lower depending on county median home price), a motor vehicle up to $8,625 (CCP Section 704.010), and has no general wildcard. System 1 is generally best for debtors with significant home equity. (Source: Nolo, California Bankruptcy Exemptions.)

System 2 (CCP Section 703.140)

System 2 protects homestead equity of $36,750 (CCP Section 703.140(b)(1)), a motor vehicle up to $8,625 (CCP Section 703.140(b)(2)), and offers a wildcard of $1,950 plus any unused homestead amount — up to roughly $38,700 of any property if the homestead is not used (CCP Section 703.140(b)(5)). System 2 is generally best for debtors with little or no home equity. (Source: Nolo, California Bankruptcy Exemptions.)

Means Test: California Median Income

The Chapter 7 means test compares a debtor's six-month average gross income to the state median family income for the household size. For California, the U.S. Trustee median family income for a household of four is $139,071 (U.S. Trustee median family income, eff. April 1, 2026; lower household sizes use lower figures). A debtor below the applicable median is generally not presumed to be abusing Chapter 7; a debtor above the median completes the longer Form 122A-2 calculation. (Source: U.S. Trustee Program, justice.gov/ust.)

Which State's Exemptions Apply

Under the 730-day domicile rule (11 U.S.C. Section 522(b)(3)), a debtor must have been domiciled in California for the 730 days before filing to use California's exemptions; otherwise an earlier state's set or the federal exemptions may apply. Recently relocated debtors should confirm domicile before assuming California's figures control.

To compare your six-month income against the California median, use the Chapter 7 means test calculator at /tools/chapter-7-means-test-calculator. To estimate what property a California system might protect, use the bankruptcy exemption estimator at /tools/bankruptcy-exemption-estimator.

Exemption amounts change — verify current figures with an attorney. People's Justice is not a law firm and does not provide legal advice; we connect you with licensed attorneys, and we are not a government agency.