California doesn't let you use the federal bankruptcy exemptions. It offers two state systems and makes you pick one. System 1 (CCP § 704) protects large home equity, up to $743,459 in Los Angeles County for 2026. System 2 (CCP § 703.140) gives you a wildcard of roughly $35,000 for cash, refunds and anything else. Homeowners with equity usually take System 1. Renters usually take System 2.
Two systems, one choice, no going back
Exemptions are the list of things a trustee can't touch. Every state has one. California has two, and you choose a system for the whole case, not the better line from each.
The choice is made on the schedules Naomi files, and it's the decision most likely to cost money if made wrong. Pick System 1 as a renter with $30,000 in the bank and the trustee takes most of the cash. Pick System 2 with $400,000 of home equity and the trustee sells the house. How we decide, and the handful of cases where the answer flips, is on California System 1 vs System 2: how to choose.
The two systems side by side
Most figures are indexed and change over time. Where the table says roughly, we confirm the current indexed figure before filing.
| Asset | System 1 (CCP § 704) | System 2 (CCP § 703.140) |
|---|---|---|
| Home equity (homestead) | $371,547 to $743,459 for 2026, by county; Los Angeles County at the cap | A much smaller homestead; the unused portion feeds the wildcard |
| Wildcard (anything at all) | None | Roughly $35,000 for most renters, combining the base wildcard and the unused homestead |
| Motor vehicle | Roughly $7,500 in equity | A smaller vehicle figure, but the wildcard can be added to it |
| Household goods and clothing | Fully exempt if ordinary and reasonably necessary | Exempt with per-item limits |
| Tools of the trade | Roughly $9,000–$10,000; doubles if a spouse is in the same trade | A smaller figure, plus wildcard |
| 401(k), 403(b), pensions (ERISA) | Fully protected | Fully protected |
| IRAs | To the extent reasonably necessary for support | Federal cap, well over a million dollars |
| Wages | 75% of earnings paid within 30 days before filing | Covered by the wildcard, if anything is left |
| Cash, bank balances, tax refunds | Very little, beyond the wage rule and a few specific categories | Wildcard |
The homestead, and why Los Angeles is at the cap
Since 2021 the California homestead has been tied to the median home price in the county where you live. For 2026 the floor is $371,547 and the cap is $743,459, and each county's figure is the prior year's countywide median sale price, held between those two numbers. No state agency publishes an official chart, which is why lawyers argue about Riverside every January. Nobody argues about Los Angeles. The median has been above the cap for years, so the figure here is $743,459.
That number protects equity, not value. A $1.4 million house in Westwood with a $900,000 mortgage has $500,000 of equity, which fits inside the exemption, and a Chapter 7 trustee has no reason to touch it. The same house with a $300,000 mortgage doesn't fit, and the conversation turns to Chapter 13. The California homestead exemption goes through how the figure is calculated, who qualifies as living in the home, and what happens to the proceeds if the house is later sold.
Cars, tools and the things in your house
The car question is about equity, and most financed cars in Los Angeles have almost none. A $28,000 car with a $26,000 loan has $2,000 of equity, which fits inside the roughly $7,500 System 1 vehicle exemption with room to spare. A paid-off ten-year-old sedan usually fits too. Where it gets tight is the paid-off car worth $20,000, and the motor vehicle exemption page explains the choices in that case.
If you earn a living with equipment, System 1 protects roughly $9,000 to $10,000 of it, doubled if your spouse works the same trade. A contractor's work truck, a hairdresser's chair and dryers. Tools of the trade covers what counts.
Nobody wants your couch. Ordinary household furniture, appliances and clothing are fully exempt under System 1 and exempt with per-item limits under System 2. Jewelry, art and collectibles get a closer look, and trustees value used property at what it would sell for, not what you paid. Household goods, jewelry and personal property has the specifics.
Cash, wages, refunds and the wildcard
Money in the bank on the filing date belongs to the estate unless an exemption covers it. That includes the paycheck that just landed and the tax refund you haven't received yet. System 1 has almost nothing for cash beyond 75% of wages paid in the 30 days before filing and a few narrow categories. System 2 has the wildcard, roughly $35,000 for most renters once the unused homestead is added to the base figure, and it covers anything: a bank balance, a refund, a second car.
The wildcard is the reason most Los Angeles renters take System 2, and it's explained on the wildcard exemption under CCP 703.140(b)(5). Timing does the rest of the work. We often file after the rent has cleared and before the refund arrives, and wages, tax refunds and cash on filing day shows how a two-week shift in the petition date changes what's protected.
Retirement accounts
Leave them alone. A 401(k), 403(b) or pension under ERISA is fully protected in either system, with no dollar limit, and it isn't even property of the bankruptcy estate. IRAs are protected under state law to the extent reasonably necessary for your support in System 1, and under a federal cap of well over a million dollars in System 2.
The worst thing we see, several times a year, is someone who cashed out $40,000 of retirement savings to pay credit cards, paid the tax and the penalty, and then filed anyway six months later. The cards would have been discharged. Every dollar of the retirement money would have been untouched. Retirement accounts, 401(k)s and pensions in bankruptcy is the page to read before you touch one.
Why this is a lawyer's decision, not a form's
The two systems interact with the means test, the timing of the petition, your marital status and the chapter you're filing. A petition preparer can't advise you on any of that. Naomi has been choosing between 704 and 703.140 for Los Angeles filers since 2006, and she runs the numbers both ways on every case before picking one.
If the exemptions don't cover something you want to keep, that's often the reason a case becomes a Chapter 13 rather than a Chapter 7; Chapter 7 or Chapter 13 explains that trade. The exemption analysis is part of the flat fee published on what bankruptcy costs in Los Angeles, and part of the free first call with our Beverly Hills bankruptcy practice.
The mistake I see most often on cases that come to me for repair isn't a hidden asset. It's the wrong system. Someone with a condo in Palms and $280,000 of equity chose 703.140 because the wildcard sounded useful, and now a trustee is asking about the condo. Or a renter with a $12,000 refund on the way chose 704 because a website said homeowners pick it, and they don't own a home. Both are fixable if caught early, and both are expensive if caught at the 341 meeting. I run every case both ways before I choose.
Questions people ask about this
Can I use the federal bankruptcy exemptions in California?
No. California opted out of the federal exemption list. You choose between the two state systems, CCP § 704 (System 1) and CCP § 703.140 (System 2), and you use one system for the whole case.
How much home equity is protected in Los Angeles County?
For 2026, $743,459 under System 1, which is the statewide cap. The figure is tied to the county's median home sale price for the prior year, and Los Angeles County has been above the cap since the law changed in 2021.
Will the trustee take my car?
Only if your equity, meaning value minus the loan balance, is more than the exemption and worth the trouble of selling. System 1 protects roughly $7,500 of equity; System 2 protects a smaller vehicle figure plus whatever wildcard you have left. Most financed cars have little equity.
Is my 401(k) safe if I file bankruptcy?
Yes, fully, in either system and with no dollar cap. ERISA plans aren't even part of the bankruptcy estate. IRAs are protected too, subject to a reasonably-necessary standard in System 1 and a federal cap well over a million dollars in System 2. Don't cash one out to pay cards.
What is the wildcard exemption?
A System 2 exemption that can be applied to anything you own: cash, a tax refund, a second vehicle, equity above another exemption. It combines a base amount with the unused portion of the System 2 homestead, and for most renters it comes to roughly $35,000. We confirm the current indexed figure before filing.
Can married couples each pick a different system?
Not in a joint case. Spouses filing together must use the same system, and exemptions are generally not doubled under System 1 for a couple. Whether one spouse should file alone is a separate question that depends on community property.
Talk it through with the attorney
Bring a rough list of what you own and what's owed on it to a free video consultation, and Naomi will tell you which system protects more of it and whether anything is at risk.