Washington Bankruptcy Laws: What are the Laws Regarding Bankruptcy in the State of Washington?
When residents of Washington find that they are no longer able to continue with their debt payment, they can file for bankruptcy. Since federal laws govern filing for bankruptcy, the procedure and the rules and regulations are more or less the same in all states, except for a few details such as exempted properties and the median income.
That being said, here, we will discuss the laws and other important details that are related to bankruptcies in the state of Washington.
Filing for bankruptcy in Washington
It is not an uncommon occurrence to have your debts control you rather than the other way around. In such cases, debtors in Washington can file for bankruptcy so they may regain their financial footing. First, you need to determine the which type of bankruptcy you will be filing for – Chapter 7 or Chapter 13. This determines the kind of paperwork you will require, as well as the procedure of clearing your debts.
For most, Chapter 7 is the preferred solution. This is because you get to clear your debts in just four to five months without technically paying using your money. Designed for people with low-income, Chapter 7 involves a trustee collecting your non-exempt assets and liquidating them so that the net proceeds can be used to pay your creditors. Any amount exempted then goes to you, the debtor.
To qualify to file for Chapter 7 bankruptcy in Washington, you need to take a means test, where you will compare your income to the median income of a household your size in the state of Washington. If your income is lower than the median, then you can go ahead with your Chapter 7 filing. If your income is higher, then you can file for Chapter 13. Chapter 13 is also an option for people with debts that are non-dischargeable in a Chapter 7 filing.
If you file for Chapter 13 bankruptcy in Washington, then you must come up with a three to a five-year repayment plan, which will enable you to pay off your debts using your future income. This means that to be eligible for Chapter 13, you must have a regular source of income and some disposable income to pay off your debts as per your payment plan within the stipulated time. On top of this, the total amount paid to creditors must be at least as much as the amount that the creditors would have received if the debtor filed for Chapter 7.
Chapter 13 is a great solution for debtors who wish to prevent a house foreclosure, keep the valuable non-exempt property, pay back taxes, make up for a missed mortgage or car payments, stop interest from piling up on your tax debt, whether local, state or federal, and many more.
Washington Bankruptcy Exemption
For residents of Washington, you have the option of choosing between either the state exemption list or the federal bankruptcy exemption list, whether you are filing for Chapter 7 or Chapter 13.
In Washington, an exemption limit applies to any equity a debtor may have in their property. Equity means that difference between the actual value of a property and the debt owed on that particular property. If the property is a non-exempt property, then you may liquidate it through a trustee and use the proceeds to pay your creditors. It is important to note that since Washington is a community property state, any debt that your spouse may have will automatically be considered your responsibility.