How to Qualify for Bankruptcy in Washington State

Filing for bankruptcy can be a complex process, but understanding how to qualify for it in Washington State is crucial for those struggling with debt. Washington offers several types of bankruptcy, mainly Chapter 7 and Chapter 13, each with its own eligibility requirements. This guide will help you navigate the qualifications for each type.

Qualifying for Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as "liquidation bankruptcy," allows individuals to discharge most of their unsecured debts. However, qualifying for Chapter 7 involves meeting specific criteria:

Means Test: The primary qualification for Chapter 7 is passing the means test, which assesses your income relative to the median income for a household of your size in Washington. If your income is below the median, you qualify. If it exceeds the median, you may still qualify by demonstrating that your disposable income is insufficient to pay your debts.
Secured vs. Unsecured Debt: To qualify, your unsecured debts must exceed certain amounts. Washington State allows individuals with less than $383,175 in unsecured debt and less than $1,149,525 in secured debt to file for Chapter 7.
Credit Counseling: You must complete a credit counseling course from an approved agency within six months before filing for bankruptcy.
No Prior Bankruptcy Discharge: If you've received a discharge from a Chapter 7 bankruptcy within the last eight years, you cannot file for Chapter 7 again.

Qualifying for Chapter 13 Bankruptcy

Chapter 13 bankruptcy, or "reorganization bankruptcy," is designed for individuals who have a steady income and want to create a repayment plan for their debts. Here are the qualifications:

Consistent Income: You must demonstrate a reliable source of income, whether from employment, self-employment, or other sources. This income will be used to fund your repayment plan.
Debt Limits: Your unsecured debts must be less than $465,275, and secured debts must be less than $1,395,875. These limits are adjusted periodically, so it's essential to check for the most current figures.
Credit Counseling: Similar to Chapter 7, you must complete a credit counseling course before filing for Chapter 13 bankruptcy.
Feasibility of Repayment Plan: You need to propose a repayment plan that details how you plan to repay your debts over three to five years.

Types of Debts Considered

Understanding the types of debts that qualify for bankruptcy is also essential:

Dischargeable Debts: These include credit card debts, medical bills, personal loans, and certain types of tax debts.
Non-Dischargeable Debts: Certain debts like student loans, child support, alimony, and most tax debts cannot be discharged in either Chapter 7 or Chapter 13 bankruptcy.

Steps to File for Bankruptcy in Washington State

Once you determine which type of bankruptcy you may qualify for, follow these steps to file:

Complete Credit Counseling: Obtain a certificate from an approved credit counseling agency.
Gather Documentation: Prepare financial documents, including income statements, tax returns, and a list of debts.
Fill Out Bankruptcy Forms: Complete required bankruptcy forms and schedules, detailing your finances and debts.
File with the Bankruptcy Court: Attend your court hearing and submit the necessary paperwork. In Washington, you can file with the U.S. Bankruptcy Court for the Western District.
Attend Your Meeting of Creditors: After filing, attend a meeting with your creditors where they can ask questions about your financial situation.

Conclusion

Qualifying for bankruptcy in Washington State requires a thorough understanding of your financial situation and adherence to specific guidelines. Whether you opt for Chapter 7 or Chapter 13, ensuring you meet the eligibility criteria will enhance your chances of achieving a successful discharge of your debts, ultimately leading to a fresh financial start.