California has finally created a state law exemption for cash in the bank.
Californians filing bankruptcy no longer face loss of all the funds in their bank accounts when they choose California’s generous homestead, thanks to changes in exemption law.
Two exemption statutes , new in 2020 , provide protection for cash in the bank from levy under state law or turnover to a bankruptcy trustee.
The absence of protection for cash other than current wages was a gaping hole in California’s standard exemptions. State exemptions protected significant equity in a home, but next to nothing for the cash necessary to make the next mortgage payment.
That has changed, with the creation of Code of Civil Procedure 704.220 and 704.225, both newly effective in 2020.
Money for basic needs
CCP 704.220 creates an exemption in sum of money equal to a month’s living expenses calculated under a state welfare formula. Currently, that amount is $1788.
The statute reads:
(a) Money in the judgment debtor’s deposit account in an amount equal to or less than the minimum basic standard of adequate care for a family of four for Region 1, established by Section 11452 of the Welfare and Institutions Code and as annually adjusted by the State Department of Social Services pursuant to Section 11453 of the Welfare and Institutions Code, is exempt without making a claim. ….
The exemption has exceptions. In state law, it doesn’t apply to a levy to collect the following:
- wages owed to another
- child support or spousal support
- debts to the state for taxes, unemployment, etc.
We’ll have to see how those exceptions apply in bankruptcy.
Amounts needed for support
The second of the new exemptions , CCP 704.225, appears on its face far broader.
CCP 704.225 Money in a judgment debtor’s deposit account that is not otherwise exempt under this chapter is exempt to the extent necessary for the support of the judgment debtor and the spouse and dependents of the judgment debtor.
This exemption promises the possibility of protecting a sum considerably larger than the formula used to calculate CCP 704.220. But it also opens up opportunities for litigation over support for how long, and at what level of comfort.
Both protect deposit accounts
So, what’s a “deposit account”? This becomes one of the all-too-common treasure hunts through the law, each statute referring you on to another.
CCP 481.081 says “Deposit account” means “deposit account” as defined in paragraph (29) of subdivision (a) of Section 9102 of the Commercial Code.
And the Commercial Code , in subsection 29, provides:
“Deposit account” means a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument.”
You can take it to the bank
So, in creating a California cash exemption, the legislature has finally recognized, and acted on the idea, that it takes both a roof over your head and some money in the bank to have genuine protection from creditors.