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Bankruptcy: District of Columbia

Filing bankruptcy in DC provides honest debtors an opportunity to get relief from crippling debt, and at the same time enables creditors to receive some repayments based on the value of the debtor’s property or reliability of earnings.  1,282 bankruptcies were filed in DC in 2010, ranking District of Columbia 49th in the nation for the number of bankruptcy filings per capita.  68% of District of Columbia’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in District of Columbia

Bankruptcy in DC is governed by federal law and all bankruptcy cases are initiated in the US Bankruptcy Courts in Washington. Although federal courts have exclusive jurisdiction over bankruptcy proceedings, DC law permits petitioners to choose the exemptions found in the U.S. bankruptcy code or the exemptions provided under District of Columbia law. The exemption systems cannot be used interchangeably. With the guidance of a bankruptcy attorney District of Columbia petitioners can gain a full understanding of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, District of Columbia

Chapter 7 bankruptcies in District of Columbia are the most common bankruptcy filing. Chapter 7 is preferable for petitioners who do not have a significant amount of assets, such as investments and substantial equity in a home. This is because a Bankruptcy Trustee may liquidate personal property that isn’t protected by DC’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. DC’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets are strictly off-limits to creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

 

District of Columbia Bankruptcy Exemptions

DC’s state laws assign clear property exemptions that allow debtors to keep certain personal property and assets so they can move forward and be productive members of society. Bankruptcy in District of Columbia permits debtors to choose the most beneficial exemptions from either the state or federal lists.

Property exemption amounts are subject to, so it is wise to consult a District of Columbia bankruptcy attorney before making the decision for or against filing bankruptcy.  District of Columbia bankruptcy exemptions include:

District of Columbia Homestead Exemption

  • Any property used as a residence or co-op that debtor or debtor’s dependent uses as a residence

District of Columbia Tenancy by Entirety Exemption

  • Property held as tenancy by the entirety may be exempt against debts owed by only one spouse

District of Columbia Personal Property Exemption

  • $400 total: Family pictures; and all the family library
  • $8,625 total: Appliances, books, clothing, household furnishings and musical instruments
  • $425 total: Pets
  • $2,575 total: Motor vehicle
  • Food for 3 months
  • $50 total: Cooperative association holdings
  • Residential condominium deposit
  • Higher education tuition savings account
  • Health aids
  • Uninsured motorist benefits
  • Wrongful death damages; Payment including pain and suffering for loss of debtor or person depended on
  • Cemetery and burial funds

District of Columbia Tools of Trade Exemption

  • $300 total: Library, furniture, tools of professional, or artist
  • $200 total: Mechanic’s tools
  • $1,625 total: Tools of trade or business
  • Seal and documents of notary public

District of Columbia Wage Garnishment Exemption

  • 75% of earned but unpaid wages, pension payments (low-income debtors may be authorized for more)
  • $200/mo Non-wage earnings (including pension and retirement) for head of family; $60/mo for a maximum of two months
  • Payment for loss of future earnings

District of Columbia Public Benefits Exemption

  • Social Security, general assistance and Aid to blind, aged, disabled
  • Workers’ and Unemployment compensation
  • Veterans’ benefits
  • Crime victims’ compensation

District of Columbia Insurance Exemption

  • Disability benefits
  • Fraternal benefit society benefits
  • Group life insurance policy or proceeds
  • Unmatured life insurance contract other than credit life insurance
  • Life insurance payments
  • Life insurance proceeds or avails; Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors
  • $200 per month, maximum 2 months: Other insurance proceeds for head of family; else $60 per month

District of Columbia Pensions and Retirement Savings Exemption

  • Judges and Public school teachers
  • Any stock bonus, annuity, pension, or profit-sharing plan
  • ERISA-qualified benefits, IRAs, Keoghs, to maximum deductible contribution

District of Columbia Miscellaneous Exemption

  • Alimony or child support

District of Columbia Wild Card Exemption

  • $850 total: in any property, plus up to $8,075 of unused homestead exemption

Chapter 13 Bankruptcy, District of Columbia

In 2010, ­32% of debtors petitioned for protection under Chapter 13 bankruptcy laws in DC.  When a petitioner files Chapter 13 bankruptcy in District of Columbia, a court-appointed Trustee will work on behalf of the petitioner to reorganize debts and develop a 3-5 year repayment plan, by which creditors are repaid using the debtor’s future earnings.  Chapter 13 petitioners keep most – or all – of their property.

How to File Bankruptcy in District of Columbia

Eligibility for property exemptions should play a role in deciding whether to file for bankruptcy. The goal is to find a solution that will allow you to keep your major assets and qualify your debts for discharge.  Every case is unique, and a District of Columbia bankruptcy attorney can help debtors review their financial facts and decide whether Chapter 7 or Chapter 13 bankruptcy is the best option in their situation.

Bankruptcy Attorney: District of Columbia

It is the debtor’s responsibility to know their rights and obligations as bankruptcy petitioners.  A DC bankruptcy attorney can break down and explain the federal laws and state exemptions for those considering bankruptcy protection.  Because personal bankruptcy cases can be incredibly complex and worrying, the bankruptcy assistance and counsel of a District of Columbia bankruptcy attorney should be considered an asset, not an expense.