UPDATE: Unfortunately, SB 308 failed to pass this year.
The California Legislature is currently debating a bill that would greatly expand legal protections for bankruptcy filers in California. Senate Bill 308, introduced by Senator Wieckowski, would expand and improve upon California’s current two-tier system of bankruptcy exemptions.
Bankruptcy exemptions are laws that allow bankruptcy filers to retain a certain amount of property. In a traditional Chapter 7 bankruptcy, otherwise known as a liquidation bankruptcy, the court is empowered to seize the debtor’s property and sell it for the benefit of the debtor’s unsecured creditors.
All states have bankruptcy exemptions that protect a certain amount of a debtor’s property. For instance, a debtor in California can currently exempt a specified amount of equity in a car or house, tools of the trade, most household goods, clothing, and even some jewelry! In 99% of my bankruptcy cases, the debtor does not have to surrender any property whatsoever.
SB 308 makes several important changes to California exemption laws. As currently drafted, SB 308 would, among other things:
1. Increase the motor vehicle exemption to $6,000.
2. Allow a self employed debtor to exempt up to $5,000 in cash, accounts receivable, and inventory of the business. This is a big change that would provide a huge protection to business owners that otherwise can’t exempt their operating cash, accounts receivable or inventory under current law.
3. Increase the CCP 704 homestead exemption to $300,000.
These are the three main changes in SB 308, but there are others as well. You can click here to go to the legislative digest of the bill to learn more.
SB 308 has already been approved by the Senate and is now pending in the Assembly. The bill must go through the Assembly Judiciary Committee and then to the full Assembly for a floor vote. As long as major changes aren’t made to the bill in the Assembly, the bill would then head to the Governor’s desk for his signature or veto.
If signed into law, SB 308 would take effect January 1, 2016. The bill could also materially change between now and when it is put in front of the Governor for consideration, so I am not recommending that my clients alter their bankruptcy plans at this time. If the bill does become law, I will work with my clients to determine whether delaying their bankruptcy filing would make sense.
I will keep an eye on this bill and track its progress.
I am a Sacramento Bankruptcy Attorney and I am available to answer your questions regarding Chapter 7 and Chapter 13 bankruptcy in Sacramento. Please call my office at (916) 333-2222.