Bankruptcy exemptions are rules that exempt certain types and amounts of property from being sold or used to satisfy the claims of debtors in your bankruptcy case. Each state has a set of bankruptcy exemptions that you can use to protect your property while going through bankruptcy.

Federal law also provides a set of bankruptcy exemptions. Your state’s law will determine whether you can choose the federal bankruptcy exemptions, or if you must use your state’s bankruptcy exemptions. But if your state’s law allows you to choose between the two sets of bankruptcy exemptions, you must choose one or the other, and cannot choose exemptions from both your state and the federal exemptions.

In California, bankruptcy exemptions play a crucial role in protecting certain assets of individuals filing for bankruptcy. California has its own set of bankruptcy exemptions and does not allow debtors to use the federal bankruptcy exemptions. Instead, California offers two different sets of state exemptions: System 1 and System 2, also known as the 704 and 703 series of exemptions, respectively. Debtors must choose one of these systems and cannot mix and match exemptions from both. System 1 is generally more favorable for protecting equity in a home, while System 2 provides a larger 'wildcard' exemption that can be applied to any property. These exemptions are designed to help debtors retain a basic standard of living and rebuild their financial life post-bankruptcy. The specific types and amounts of property that can be exempted are detailed in the California Code of Civil Procedure. It is important for individuals considering bankruptcy to consult with an attorney to understand which set of exemptions best suits their situation and to navigate the complexities of the bankruptcy process.