Washington Bankruptcy Law: A Comprehensive Guide for Consumers
Washington bankruptcy law provides consumers with several options to manage their debt effectively. If you find yourself struggling with overwhelming financial obligations, understanding the different types of bankruptcy available under Washington state law is crucial.
There are primarily two types of bankruptcy that individual consumers in Washington may file for: Chapter 7 and Chapter 13. Each of these options offers unique benefits and limitations, depending on your financial situation.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals who cannot repay their debts. The main idea behind this type of bankruptcy is to discharge unsecured debts, such as credit card balances and medical bills, allowing the debtor to have a fresh start.
In Washington, the Chapter 7 process typically includes the following steps:
- Means Test: To qualify for Chapter 7, you must pass the means test, which compares your income to the state median income. If your income is below the median, you can file for Chapter 7.
- Credit Counseling: Before filing, you are required to complete a credit counseling course from an approved provider.
- Filing the Petition: Once you have completed the credit counseling, you can file your bankruptcy petition with the court.
- Liquidation of Non-Exempt Assets: A bankruptcy trustee will evaluate your assets. While necessary property is typically exempt, any non-exempt assets may be sold to repay creditors.
It is important to note that Chapter 7 bankruptcy will remain on your credit report for ten years, which can impact your ability to obtain credit in the future.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, known as “reorganization bankruptcy,” is suitable for individuals with a regular income who wish to keep their assets while repaying some or all of their debts over a period of time. This option allows you to propose a repayment plan to make installments to creditors over three to five years.
The process for filing Chapter 13 in Washington includes:
- Creating a Repayment Plan: You must develop a plan detailing how you will repay your debts. This plan will need to meet certain requirements set by the bankruptcy court.
- Filing the Petition: Similar to Chapter 7, you must file your bankruptcy petition and provide a comprehensive list of your debts, income, and expenses.
- Plan Confirmation Hearing: A confirmation hearing will be held where the court will review your repayment plan. If approved, you will begin making monthly payments to a bankruptcy trustee.
Chapter 13 bankruptcy typically remains on your credit report for seven years and can be beneficial for retaining assets, such as a house or car, while making manageable payments to creditors.
Considerations When Filing for Bankruptcy in Washington
Filing for bankruptcy can provide significant relief, but it’s essential to consider the following:
- Impact on Credit Score: Both Chapter 7 and Chapter 13 filings will negatively impact your credit score. However, the impact tends to diminish over time.
- Eligibility Requirements: Ensure you meet the eligibility criteria for the type of bankruptcy you are considering, especially the means test for Chapter 7.
- Exemptions: Familiarize yourself with Washington’s bankruptcy exemptions to protect certain property from being liquidated. Washington has specific laws regarding what assets are exempt from bankruptcy, so it is advisable to consult legal expertise.
Consulting a Bankruptcy Attorney
Understanding Washington bankruptcy law can be complex. It is highly recommended to consult with a bankruptcy attorney who specializes in this area. An experienced attorney can help you navigate the process, ensure that you meet all necessary requirements, and assist in maximizing your benefits while minimizing your liabilities.
In conclusion, Washington bankruptcy law offers consumers viable options to regain control of their financial futures. Whether you choose Chapter 7 or Chapter 13, being informed about your options and seeking legal guidance can lead to effective debt relief and a brighter financial outlook.