How Much Money Can I Keep When I File Bankruptcy?

How much money can I keep when I file bankruptcy?The goal of Chapter 7 bankruptcy is a fresh start after suffering from financial turmoil. The Chapter 7 trustee is not going to demand the shirt off your back after filing bankruptcy.  However, if you have a lot of assets, it may mean that you will need to surrender these assets to the trustee.  There is a balancing act of providing you a fresh start and providing a resource for creditors to become partly whole.     You need to know how you’ll manage and what you’ll have to manage with.Funding that fresh start is what exemptions are all about.  Exemptions protect certain property property you own that bankruptcy permits the debtor to keep from unsecured creditors. For example, in Fresno and the rest of California, you may be able to exempt all or a portion of the equity in your home, up to $150,000, or some or all “tools of the trade” used by you to make a living.  If you are an auto mechanic, you can exempt roughly $7,000 of your auto tools.  The same goes for any trade, including dentists, hair stylists, and even attorneys.  
We are talking here about California.  The exemptions rules outside of California are different.   
So ... How Much Cash Can I Keep?
The answer is not so simple.  California has two distinct exemption schemes that you can choose from.  And you have to choose one or the other.
The Homestead ExemptionThe exemptions originally enacted in California were big on protecting homes.  That is a good thing if you have a lot of equity in your home.  I think California has a great home exemption.  The amount you can exempt from your home ranges from $75,000 to $150,000.  As the real estate market improves, this exemption is becoming more important.  
Unfortunately, this generous exemption has its drawbacks.  If you elect this exemption, your other exemptions to protect equity in cars and cash is very minimal. It is an attempt by the legal system to be fair for to creditors.  

The Wild Card ExemptionHave you ever played cards?  The nickname for this exemption comes from card games.  "Jokers are wild" in a card game means that you can turn a Joker into another card to help your hand of cards out.  The same theory applies in bankruptcy.  Let's say that you are an auto mechanic and you have $10,000 in "tools of the trade".  That means $3,000 of your tools are not exempt.  The trustee has every right to seize the $3000 of your tools, sell them, and use those proceeds for the benefit of your creditors. By using the "wild card" exemption, you can apply an extra $3000 of wild card exemption to protect all of the tools of your trade.  
Presently, the big money "wild card" exemption is $26, 425.  Thus, if you have no equity in your home, and everything is protected by other exemptions, you can protect $26,425 in your checking account.  That’s a pretty good nest egg.
Money photo credit: flickr: MiranCard table credit: flickr: dcjohn