When you file bankruptcy, the law does not take everything you own. Exemptions are the rules that decide which property you keep, and in California they are unusually important — because California is the only state that gives filers a choice between two completely separate exemption systems. Pick the right one and you may protect your home, your car, your savings, and your household goods. Pick the wrong one and you could lose property you could have kept. This guide explains how California’s exemptions work, the difference between the “703” and “704” systems, and the current dollar amounts you need to know.

This guide provides general information about California exemption law, not legal advice. Exemption amounts are adjusted for inflation on a schedule and change over time, so always verify the current figure before relying on it. For guidance about your property, consult an attorney licensed by the State Bar of California.

California opted out of the federal exemptions

The federal Bankruptcy Code contains its own list of exemptions in 11 U.S.C. § 522(d), but Congress let each state “opt out” and require its residents to use state exemptions instead. California has opted out. That means a California bankruptcy filer cannot use the federal § 522(d) exemption list. Instead, you must use one of California’s two state exemption systems — and you must pick one system for your entire case. You cannot take the homestead from one system and the wildcard from the other.

The 704 system: big homestead, no wildcard

The first system lives in Code of Civil Procedure § 704 and is usually called the “704 system” or “System 1.” These are the same exemptions Californians use to protect property from judgment creditors outside of bankruptcy. Its defining feature is a very large homestead exemption. The 704 system is generally the better choice for homeowners with meaningful equity in their principal residence, because the homestead can shelter hundreds of thousands of dollars of that equity. Its weakness is that it has no general “wildcard” — you cannot freely apply unused homestead to other property — so a renter or a low-equity homeowner often gets less protection here than under the 703 system.

The 703 system: the wildcard for everyone else

The second system lives in Code of Civil Procedure § 703.140(b) and is called the “703 system” or “System 2.” These exemptions exist only in bankruptcy — you cannot use them to fight off creditors outside a bankruptcy case. The 703 system has a much smaller homestead, but it makes up for it with a powerful wildcard exemption under § 703.140(b)(5). The wildcard is the base amount plus any unused portion of the homestead exemption, and it can be applied to any property you choose — cash in the bank, a tax refund, a paid-off car, tools, anything. For renters and homeowners with little equity, the wildcard often protects far more than the 704 system would.

The homestead exemption under CCP § 704.730

The 704 homestead is California’s headline exemption. Under CCP § 704.730, the exemption equals the countywide median sale price of a single-family home in the prior calendar year, subject to a floor and a cap. The base statute sets that range at $300,000 to $600,000, but the statute requires annual inflation adjustments tied to the California Consumer Price Index. After several years of adjustments, the 2026 figures land at roughly a $371,547 floor and a cap of about $743,000 (the exact cap depends on rounding conventions, and the amount is not always published in one official place). A homeowner in a high-cost coastal county will generally receive a larger exemption than one in a lower-cost inland county, because the figure is tied to the local median home price.

The homestead protects equity, not the home’s full value — what matters is how much of the property you actually own after the mortgage. This generous homestead is the main reason so many California homeowners can file bankruptcy and keep their houses.

Current 703 exemption amounts

The 703 amounts were last adjusted on April 1, 2025, with the next scheduled adjustment on April 1, 2028. The most commonly used 703 exemptions are:

  • Homestead (§ 703.140(b)(1)) — up to $36,750 of equity in your residence (or a burial plot).
  • Motor vehicle (§ 703.140(b)(2)) — up to $8,625 of equity in one or more vehicles.
  • Household goods (§ 703.140(b)(3)) — clothing, appliances, furnishings, books, animals, and the like, up to $925 per item.
  • Jewelry (§ 703.140(b)(4)) — up to $2,175.
  • Tools of the trade (§ 703.140(b)(6)) — implements, books, and tools used in your work, up to $10,950.
  • Life insurance loan or cash value (§ 703.140(b)(8)) — up to $19,625.
  • Wildcard (§ 703.140(b)(5)) — $1,950 plus any unused homestead amount, for a potential total around $38,700 if you own no home equity to protect.

Tax-qualified retirement accounts — 401(k)s, IRAs, pensions — are separately protected under federal law, often up to a very high cap (over $1.7 million for IRAs in the current period), regardless of which system you choose.

Key 704 exemption amounts beyond the homestead

The 704 system also protects an array of property besides the home:

  • Motor vehicle (§ 704.010) — up to $8,625 of vehicle equity.
  • Household furnishings and personal effects (§ 704.020) — ordinary items reasonably necessary, with no fixed dollar cap.
  • Jewelry, heirlooms, and art (§ 704.040) — up to $10,950.
  • Tools of the trade (§ 704.060) — up to $10,950 (more for spouses in the same occupation).
  • Wages (§ 704.070) — 75% of wages paid in the 30 days before filing.
  • Public benefits and insurance — Social Security, unemployment, disability, workers’ compensation, and similar benefits are protected under various § 704 provisions.

Notice that the 704 system has no general wildcard, which is why it tends to favor homeowners who can use the large homestead and disfavor renters who have no home equity to protect.

703 vs. 704: how to choose

The choice usually comes down to home equity. If you own a home with significant equity, the 704 homestead almost always protects more, so the 704 system wins. If you rent, or own a home with little or no equity, the 703 wildcard usually protects more of your other property — cash, a car, a tax refund — so the 703 system wins. The math can be close in middle cases, and other assets (a valuable car, a personal-injury claim, a business) can tip the balance. Because spouses generally cannot double most California exemptions, married couples need to look carefully at whose name property is in. This is exactly the kind of analysis a bankruptcy attorney runs as a matter of routine.

What happens to nonexempt property

If you own property that no exemption fully covers, what happens to it depends on the chapter you file. In Chapter 7, the trustee can sell the nonexempt portion and distribute the proceeds to creditors — though in practice many trustees will abandon property that is not worth the cost of selling, and small amounts of nonexempt value are often left alone. In Chapter 13, you keep everything but must pay your unsecured creditors at least the value of the nonexempt property through your repayment plan. This is one reason a homeowner with large nonexempt equity, or anyone with valuable assets the exemptions cannot reach, may prefer Chapter 13. The interplay between exemptions and chapter choice is explored further in our guide to Chapter 7 vs. Chapter 13 in California.

The 730-day residency rule

You cannot simply move to California and immediately claim its generous homestead. Under federal law (11 U.S.C. § 522(b)(3)), to use California’s exemptions you must generally have made California your domicile for at least 730 days — two years — before filing. If you moved here more recently, you may be required to use the exemptions of the state where you lived during an earlier look-back period, and special rules apply if that prior state’s exemptions are unavailable to non-residents. There is also a separate cap on how much of the homestead exemption can be claimed on a home acquired within roughly the last 1,215 days, aimed at preventing people from moving large sums into a homestead on the eve of filing. Newcomers to California should confirm which state’s exemptions apply before filing.

California statutes that govern exemptions

The opt-out itself is authorized by 11 U.S.C. § 522(b). The 704 system is found in the California Code of Civil Procedure beginning at § 704.010, with the homestead in CCP § 704.730. The 703 system is found in CCP § 703.140(b), with the homestead in subdivision (b)(1) and the wildcard in subdivision (b)(5). The Judicial Council republishes the inflation-adjusted dollar amounts — you can verify the current figures on the California Courts website — and the 704 homestead floor and cap are recalculated each year. Because exemption planning can be technical and the amounts shift, confirm current numbers and get advice before filing.

Common exemption mistakes

Exemption errors can cost you property, so a few cautions are worth keeping in mind. First, do not assume you can switch systems midstream — once you commit to the 703 or 704 system, changing it later can be difficult. Second, value your property honestly; the trustee can challenge low-balled values, and overstating exemptions can draw scrutiny. Third, remember that exemptions protect equity, not gross value — a car worth $20,000 with a $15,000 loan has only $5,000 of equity to protect. Fourth, be careful about moving assets or paying favored creditors before filing, which can create separate problems regardless of exemptions. Finally, verify the current dollar figures, because they adjust on a schedule and an out-of-date number can leave property unprotected. When in doubt, a California bankruptcy attorney can confirm that your exemption claims are correct before you file.

Steps to apply California exemptions in your case

  1. Make a complete inventory of everything you own and estimate each item’s value and any loans against it.
  2. Calculate your equity in your home, if any, after the mortgage.
  3. Compare what the 704 system protects against what the 703 system protects for your particular assets.
  4. Choose the single system — 703 or 704 — that shelters the most of what you own.
  5. Confirm you meet the 730-day residency rule for using California exemptions.
  6. List your chosen exemptions on Schedule C with the correct statute citations and current amounts.
  7. Be ready to explain your exemption claims to the trustee at the 341 meeting.

Frequently asked questions

Can I mix the 703 and 704 systems?

No. You must choose one system for your entire case. You cannot combine the 704 homestead with the 703 wildcard, for example. The all-or-nothing choice is one reason the decision deserves careful thought.

Do California spouses get to double the exemptions?

Generally not. With limited exceptions, California does not let married couples double most exemption amounts, unlike some other systems. How property is titled and who owes the debt can affect the analysis, so couples should review the details with counsel.

What is the wildcard exemption worth?

Under the 703 system, the wildcard is a base amount (recently $1,950) plus any unused portion of the homestead exemption, for a potential total of roughly $38,700 if you have no home equity to protect. It can be applied to any property you choose.

Why does the homestead amount keep changing?

CCP § 704.730 ties the homestead to the prior-year county median home price and requires annual inflation adjustments based on the California Consumer Price Index. That is why the floor and cap rise most years and why you must check the current figure.

Are my retirement accounts safe?

Usually, yes. Most tax-qualified retirement accounts are protected under federal law regardless of which California exemption system you choose, often up to very high limits. This is separate from the 703 and 704 property exemptions.

Find a California bankruptcy attorney

Exemptions are where bankruptcy cases are won or lost, and the 703-versus-704 decision is too important to guess at. Our directory connects you with attorneys licensed by the State Bar of California who handle bankruptcy across all 58 counties and all four federal districts — free to browse, with no obligation. For the bigger picture, read our overview of bankruptcy in California, and to see how the two main chapters compare, see Chapter 7 vs. Chapter 13 in California.