What Happens to Your Home When Filing Bankruptcy in Washington?
Filing for bankruptcy can be a daunting process, especially when you're worried about what will happen to your home. In Washington, understanding the implications of bankruptcy on your property is crucial to making informed decisions. This article explores the impact of bankruptcy on your home in Washington, the options available to you, and how to protect your assets.
Types of Bankruptcy in Washington
In Washington, individuals primarily file for two types of bankruptcy: Chapter 7 and Chapter 13.
- Chapter 7 Bankruptcy: Often referred to as "liquidation bankruptcy," Chapter 7 allows individuals to discharge most of their unsecured debts. However, this means your non-exempt assets, including your home if it exceeds exemption limits, may be sold to repay creditors.
- Chapter 13 Bankruptcy: Known as "reorganization bankruptcy," Chapter 13 allows individuals to keep their assets while repaying debts over three to five years. This option is often preferred by homeowners who want to avoid losing their homes.
Homestead Exemption in Washington
Washington offers a homestead exemption that protects a portion of your home’s equity from creditors during bankruptcy proceedings. As of 2023, the current exemption limits are:
- $125,000 for a single filer
- $250,000 for married couples filing jointly
- $625,000 for those 65 years and older or disabled, depending on specific conditions
This means that if your home's equity is below these exemption limits, you may be able to keep your home after filing for bankruptcy. It’s important to accurately assess your home's current market value and the amount owed on your mortgage to determine your equity.
What Happens to Your Home in Chapter 7 Bankruptcy?
If you file for Chapter 7 bankruptcy, the fate of your home depends on your equity and the homestead exemption. If your equity is below the exemption limit, you can keep the home. However, if your equity exceeds the exemption, the bankruptcy trustee may sell your property to pay off creditors.
You will need to continue making mortgage payments to avoid foreclosure. If you're behind on payments, filing for Chapter 7 may provide you with relief from unsecured debts, but it won't stop the bank from pursuing foreclosure on your home.
What Happens to Your Home in Chapter 13 Bankruptcy?
In Chapter 13 bankruptcy, you have a better chance of retaining your home. This process allows you to catch up on overdue mortgage payments while repaying other debts over time. Your repayment plan will last three to five years, during which you must make regular monthly mortgage payments.
Even if you are behind on your mortgage, filing for Chapter 13 can halt foreclosure proceedings and provide you with the opportunity to bring your payments current. As long as you adhere to the repayment plan, your home can be protected throughout the bankruptcy process.
Consulting with a Bankruptcy Attorney
Considering bankruptcy? It's advisable to consult with a qualified bankruptcy attorney in Washington. They can provide guidance specific to your situation, help you navigate legal complexities, and ensure you understand your rights and options regarding your home.
Conclusion
Filing for bankruptcy in Washington can significantly impact your home, depending on the type of bankruptcy you file and your home's equity compared to exemption limits. Understanding these factors and seeking professional advice can help you protect your home and secure your financial future.