Increased Protection for Your Car in Bankruptcy.
Changes that went into effect at the beginning of 2023 increase the vehicle exemption amount available in California. Both Section 703.140 and Section 704.010 were amended to increase the exemptions available for motor vehicles. The amount available for vehicles was increased to $7500 under both sections.
Changes to 703.140 for Motor Vehicles
Prior to the amendments to 703.140 the amount available to protect a debtor’s interest in a motor vehicle was $6375. The changes to section 703.140 allow debtors to protect $7500 in the value of one or more motor vehicles. In addition, to this amount you can also use any unused portion of $29,275 from the homestead exemption and the wildcard of $1550 in any property including vehicles.
The amendment also provides an additional protection for vehicles converted by the debtor, their spouse or a dependent of the debtor who has a disability. The vehicle can be protected as a health aid for vehicle conversion due to a disability. Conversation would include altering the interior, installing steering, a wheelchair lift or motorized steps or modifying the operation of the vehicle.
Changes to 704.010 for Motor Vehicles
Generally, if you have a substantial amount of equity in your home you will select the 704 exemptions when filing bankruptcy in California. Prior to the changes to 704.010 you could protect $3,625 in a motor vehicle. The limited amount of the exemption for motor vehicles created many situations in which Debtors could protect their equity in their homes, but had unprotected equity in their cars. The new law increases the exemption to $7,500 in aggregate equity in motor vehicles. The exemption protects proceeds of an execution sale of a motor vehicle and proceeds of insurance from loss.
The section also alters 704.050 to include as health aids a motor vehicle converted for use by the debtor, the debtor’s spouse or a dependent of the debtor who has a disability. The conversion of the vehicle includes the same alterations stated in 703.140 which includes altering the interior, installing steering, a wheelchair lift, or motorized steps, or modifying the operation of the vehicle.
These increases will help many debtors with protecting the equity in their vehicles. These changes are especially helpful where inflationary pressures have caused used vehicle prices to increase dramatically.
If you would like more information on protecting your vehicles in bankruptcy, please contact our office for a free consultation.