Exemptions · Beverly Hills
California Exemptions: System 1 vs System 2
California exemptions come in two systems, System 1 and System 2, and you must pick one when you file. System 1 usually fits homeowners with equity. System 2 usually fits renters and people with little home equity. Call (310) 362-9071 and we will run both systems against what you own.
- California does not let you use the federal exemption list
- You choose System 1 (CCP 704) or System 2 (CCP 703.140), not both
- Married couples use the same system
- Property is valued as of the day you file
At a glance
Why California makes you choose a system
Exemptions are the laws that say what property you keep in bankruptcy. Most states let you pick between the federal list and the state list. California opted out of the federal list. Instead, it gives you two state lists.
System 1 is found in Code of Civil Procedure section 704.010 and the sections that follow it. These are the same exemptions that protect people from judgment creditors outside of bankruptcy. System 2 is found in section 703.140(b). It applies only in bankruptcy.
You must choose one system for all of your property. You cannot take the homestead from System 1 and the wildcard from System 2. That is why the choice matters so much. The right system can protect thousands of dollars that the other one would leave exposed. For an overview of every exemption, see our guide to what you keep in bankruptcy.
Side-by-side: key items in each system
The table shows key items in each system. Dollar amounts are the California amounts effective April 1, 2025, except where noted. The 2026 homestead range is an estimate, explained below the table.
| Property | System 1 (CCP 704) | System 2 (CCP 703.140(b)) |
|---|---|---|
| Home equity | About $372,000 to about $744,000 in 2026 (estimate) | $36,750 |
| Motor vehicle | $8,625 | $8,625 |
| Household goods and clothing | No dollar cap if ordinary and reasonably necessary | $925 per item |
| Jewelry | $10,950 (jewelry, heirlooms and art combined) | $2,175 |
| Tools of the trade | $10,950 | $10,950 |
| Wildcard (any property) | None | $1,950 plus any unused home equity amount, up to $38,700 |
| Bank account | $2,325 per debtor (effective July 1, 2026) | Use the wildcard |
| Personal injury payment | Amount needed for support | $36,750 |
The System 1 homestead is not a fixed number. The state does not publish the adjusted figure each year, so the 2026 range above is an estimate based on the inflation formula in the statute. Los Angeles County homeowners get the top amount, because the county's median home price is far above the cap. Read more on our California homestead exemption page.
A simple rule of thumb
- You own a home with real equity. System 1 usually wins. Its homestead is many times larger than anything System 2 offers.
- You rent, or your home has little equity. System 2 usually wins. The unused home amount flows into the wildcard exemption, which can protect cash, a tax refund, extra car equity or almost anything else.
- You have a valuable car and no home. System 2 often wins. The car exemption is the same in both systems, but the wildcard can cover equity above it. See our page on the California motor vehicle exemption.
- You have expensive jewelry or art. System 1 protects far more jewelry. If you also own a home, that settles it.
These are starting points, not answers. A renter with a large personal injury claim or a homeowner with almost no equity can come out differently. We list everything you own and run both systems before we pick.
Married couples and people who moved here
Married couples. If you file together, you both use the same system. If only one spouse files, that spouse can use System 2 only if both spouses waive System 1 in writing. This rule exists because community property belongs to both of you. We prepare the waiver when System 2 is the better fit.
The domicile rule for people who moved. Federal law decides which state's exemptions you can use. You generally must have lived in California for the 730 days (two years) before you file. If you did not live in one state for that whole time, the state where you lived for most of the 180 days before that two-year window controls. If that state's rules leave you with no exemptions at all, federal law lets you use the federal list.
If you moved to Los Angeles recently, tell us where you lived before. It may change your filing date or your plan.
Common mistakes when choosing a system
- Picking by habit. Some filers assume homeowners always use System 1. A home with no equity gets no benefit from a large homestead.
- Forgetting the filing-day snapshot. Values are measured on the day you file. Cash in the bank that day counts, even if rent is due tomorrow.
- Ignoring a spouse's waiver. A married person filing alone cannot just claim System 2. The written waiver is required.
- Mixing exemptions. Claiming items from both systems is an error the trustee will object to.
What it costs
- Chapter 7: flat attorney fee from $1,200, plus the $338 court filing fee
- Chapter 13: attorney fee quoted in writing, and part of it can be paid through the plan
- Payment plans are available, and the first consultation is free
More on what you keep
- California bankruptcy exemptions: what you keep
- California Exemptions: System 1 vs System 2
- The California Homestead Exemption and How Yours Is Figured
- The California Motor Vehicle Exemption
- The Wildcard Exemption Under CCP 703.140(b)(5)
- Retirement Accounts, 401(k)s and Pensions in Bankruptcy
- The Tools of the Trade Exemption
- Household Goods, Jewelry and Personal Property
- Wages, Tax Refunds and Cash on Filing Day
System 1 vs System 2 questions
Can I use both System 1 and System 2?
No, you cannot use both System 1 and System 2. You pick one system for all of your property. We compare both before filing so you can see what each one protects.
Which system is better for renters?
System 2 is usually better for renters. The unused home equity amount adds to the wildcard, which can protect up to $38,700 of any property (amounts effective April 1, 2025). We still check System 1 in case it fits your property better.
Which system is better for homeowners in Los Angeles County?
System 1 is usually better for homeowners in Los Angeles County with real equity. Its homestead is estimated at about $744,000 in 2026 for the county, compared with $36,750 under System 2. If your equity is small, System 2 may still win.
Does my spouse have to sign anything if only I file?
Yes, your spouse must sign a written waiver if you file alone and want System 2. Both spouses must waive System 1. Without the waiver, System 1 applies.
Can I change systems after I file?
Yes, you can often amend your exemptions after you file, but it can draw objections and delay. It is much safer to choose the right system the first time. Learn how exemptions fit into a Chapter 7 case in Beverly Hills.
Free consultation
Find out which system protects more
Call (310) 362-9071 or send the form. Bring a list of what you own and we will compare both systems with you for free.
Law Offices of John Asuncion9454 Wilshire Blvd., Penthouse Floor
Beverly Hills, CA 90212
(310) 362-9071
Monday to Friday, 9 a.m. to 6 p.m.