When considering bankruptcy, debtors in Washington have to choices to consider. Most people file Chapter 7 straight bankruptcy, to wipe out irresolvable debt and get a fresh start. For the debtors hoping to retain all of their assets, Chapter 13 can provide many with payment restructuring.
Washington Bankruptcy Topics
- Personal Bankruptcy Options
- Keep Your Home: Bankruptcy and Foreclosure
- Washington Bankruptcy Exemptions
- Options for Filing Bankruptcy
- Local Bankruptcy Courts and Trustees
All states follow the U.S. Bankruptcy Code, under Title 11. Therefore, residents in the state of Washington file under Chapter 7 or Chapter 13 for debt relief.
Chapter 7 Bankruptcy
During Chapter 7 bankruptcy, the court trustee will sell all applicable assets and distributed the proceeds evenly between the creditors. But, before taking the case, the debtor must pass a means test to determine qualification for debt relief. In the state of Washington, the average single wage earner makes $50,656; a two-person household brings in $63,521; and a family of three has an average income of $69,577. After liquidation, the remaining debts are expunged, except for those exempt from bankruptcy like child support and student loans.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is for the debtor hoping to keep the house and family car. Some debtors even have small businesses they hope to save. The court negotiates with creditors to forgive fines, fees, and some of the interest, in order to bring the payment down. The court will set up a repayment schedule, and the debtor will send the payments to the trustee. The amount is distributed among the creditors. If the debtor keeps all payments current, the assets are retained and the debt is resolved within 3-5 years. (See more on Filing Chapter 13 in Washington State).
Waiting until foreclosure proceedings are initiated, to file bankruptcy, is a big mistake. If the debtor hopes to retain the property, seeking the advice of a bankruptcy lawyer after two payments are late is advisable. Legal counsel can provide information, if any, enabling the debtor to stay in the home. Even though filing bankruptcy stops the demands for money, the lien hold can petition the court to lift the stay on property in the foreclosure process, for the purpose of resale.
In the state of Washington, debtors can claim certain assets exempt from bankruptcy proceeding. The following chart contains some of those items:
Type of Asset(s)
Details on Applicable Exemption(s)
Property or mobile home worth $40,000 or less-the limit is lifted, if the debtor has failed to pay state income tax; file homestead before selling
Fire proceeds for destroyed exemption, monthly annuity $250, disability, group life, life insurance if exempt from beneficiary debts, fraternal and society benefits
Business property partnership
ERISA, IRAs; city and public employees; volunteer firefighters and state patrol officers;
Appliances, furniture, and household items up to $2700; clothing to a limit of $1000 in accessories; $1500 in books; food and fuel; personal items; 1 vehicle worth $2500-2 worth $5000 if married; injury or loss of future earnings payments
Child welfare and support; worker’s and unemployment compensation; elderly and general assistance; compensation for crime victims
Minimum of 75% of unpaid wages
Use a Bankruptcy Lawyer
Debtors should acquire the services of a bankruptcy lawyer. No one can learn all the details of bankruptcy law, before a court appearance. A lawyer knows all required documents are filed, court questions are answered, and all applicable exemptions are taken. In addition, the lawyer is great moral support, during the stressful processes of bankruptcy.
Use a Filing Service
A filing service is not recommended. The service provides no legal counsel or representation in court, even if they make a mistake. Not always adhering to court requirements, the debtor may have the bankruptcy thrown out of court and potentially face charges of fraud, if monetary amounts are incorrect. (See also Washington Petition Preparer Guidelines).
File “Pro Se”
Although the court allows debtors to file pro se, if legal counsel is unaffordable, it is strongly discouraged. It is better to borrow the lawyer fees, and know all of the applicable assets are exempt and the necessary documents are filed. Hiring a lawyer will save a lot of headaches and possible finances.
Washington Eastern District Court Main Office
Thomas S. Foley United States
Courthouse, Suite 840
920 West Riverside Avenue
Spokane, WA 99201-1010
Washington Western District Court Main Office
United States Courthouse,
700 Stewart Street
Seattle, WA 98101-1271