1. Reveiw BK Basics - http://missionparalegal.com/bkbasics.pdf

Erie case on federal vs. state law - http://classes.lls.edu/archive/manheimk/fedcts/echarts/erie-t.htm

Erie case - http://en.wikipedia.org/wiki/Erie_Railroad_Co._v._Tompkins

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2. Look at Exemptions -   703 vs. 704 - http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=ccp&codebody=&hits=20

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current - see course documents - http://bklaw.pbworks.com/f/CA%20Exemptions.pdf

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Opt out states - http://www.realworldlaw.com/stateoptout.html

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3. Why opt out - http://findarticles.com/p/articles/mi_qa3843/is_199804/ai_n8800915/

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California opted out of Federal Exemptions - http://www.goainc.com/fraley/bankruptcyexemptionlaw.html

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What are exemptions in bankruptcy?

Exemptions are "protections" for value in certain assets that you own or have an interest in.   If an asset is exempt (or if a specified value in an asset is exempt) then your creditors cannot take that asset (unless it is worth more than the exemption amount) pursuant to a judgment lien or other legal process.  (there are exceptions to this for some creditors, such as the Internal Revenue Service, to whom exemptions for some reason don't seem to apply).

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Exemptions are created by State Law.  There are also federal bankruptcy exemptions, but depending on which state's exemption laws apply when your case is filed, you may or may not be able to use the federal exemptions.   Different states have very different exemption allowances.

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How do you figure out which State's laws apply in your case?  This is not easy, but here is the basic answer:

The exemption laws that apply is the State or local law applicable as of the date the bankruptcy case is filed in which the debtor's domicile has been located for the 2 years (730 days) immediately preceding the filing of the case.   If the debtor(s) have lived in more than one State during that 730-day period, then it is the State where the debtor lived for the greater part of the 180-day period PRIOR TO the 730 days.

Confusing?  This was added by Congress under the new bankruptcy laws.

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4. IRA - protection see CCP 704.150 and http://www.bankruptcylawnetwork.com/2007/03/02/california-expands-ira-protection/

new BAPCA 1 Million exemption for IRA's

IRAs

Until the effective date of BAPCPA, the matter of whether Traditional, Roth, SEP or SIMPLE IRA assets were excluded from a debtor's bankruptcy estate was settled according to the laws of the debtor's state of residence. Under BAPCPA, the following exclusion rules now apply on a federal level:

Traditional and Roth IRAs

Traditional and Roth IRA assets are excluded up to a limit of $1 million. This amount is set to be reviewed every three years to determine whether the $1-million threshold should be increased based on the Consumer Price Index (CPI). This limit does not include amounts rolled over from SEP IRAs, SIMPLE IRAs and other employer-sponsored retirement plans, including qualified plans.

SEP and SIMPLE IRAs

SEP and SIMPLE IRA assets are excluded from the debtor's bankruptcy estate for unlimited amounts - unlike Traditional and Roth IRAs, which are limited to $1 million.

http://www.theworkplace.biz/BAPCA_article.html

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 Protection of tax-favored funds for individuals in bankruptcy

BAPCPA protection is available for retirement funds which are exempt from taxation under

Sections 401, 403, 408, 408A, 414, 457, 501(a) and for tax favored education programs

under Sections 529 and 530 of the Internal Revenue Code of 1986 (“Code”). Regardless of

selection of federal or state exemptions in bankruptcy, the protection is unlimited, except as

follows:

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"Non-rollover" assets in IRA’s limited to $1,000,000

Protection for regular contributions in IRA’s is limited to $1,000,000, but that amount may

be increased “if the interests of justice so require.” In determining the $1,000,000 amount,

rollovers from other tax-favored plans are disregarded. For example, an IRA which has

$1,000,000 of investments from regular contributions, and an additional $10,000,000 from

a qualified plan rollover, is fully exempt under BAPCA.

Note:   

It is a rare IRA account that will have accumulated $1,000,000 from the modest

contributions permitted to IRA’s, so this is an unlimited exemption for all practical purposes.

Note:

In calculating the $1,000,000 IRA exemption, rollovers from all 401 qualified plans and 403

(a) and (b) vehicles are not counted. This protection extends to direct rollovers and to

those rollovers which were the result of sixty day transfers after a taxable distribution. The

need to retain indefinitely the record of rollover transactions is obvious.

Note: 

Simplified employee pensions (SEP IRA’s) under section 408(k) and simple retirement

accounts (SIMPLE IRA’s) under section 408(p) also get unlimited protection and are not

counted towards the $1,000,000 IRA limit. This $1,000,000 limit also does not apply to

similar types of individual accounts which have been voluntarily funded under 403(b) or

457(b).

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Deposits within 720 days of bankruptcy to 529 Plans and to 530 Coverdell Accounts

Subject to reasonable exceptions, Section 529 plans and 530 (Coverdell) education savings

accounts are protected. The beneficiary must have been a child, stepchild, grandchild, or

stepgrandchild (sic) in the taxable year for which the funds were contributed. The

contributions cannot have exceeded IRS limits.

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Deposits within 365 days of filing, regardless of amount, are not protected, under the

theory that recent deposits are a type of preference better devoted to creditors. Deposits

within 720 days of filing, which exceed $5,000 for any one beneficiary, are also not

protected.