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Bankruptcy: Washington

Filing bankruptcy in Washington gives petitioners a chance to potentially recover from serious debt, and gives creditors a chance to recoup some losses based on the value of the debtor’s property or future earnings.  33,599 bankruptcies were filed in Washington in 2010, ranking Washington 22nd in the nation for the number of bankruptcy filings per capita.  79% of Washington’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Washington

Bankruptcy in Washington is governed by federal law and Washington bankruptcy cases are filed in the US Bankruptcy Courts in:

  • Washington Eastern District Court: Ephrata, Richland, Spokane, Yakima
  • Washington Western District Court: Bremerton, Everett, Kelso, Seattle, Tacoma, Vancouver

Although federal courts have exclusive jurisdiction over bankruptcy proceedings, Washington law allows petitioners to choose the exemptions found in either the U.S. bankruptcy code or the exemptions provided under Washington law. The exemption systems cannot be used interchangeably. With the counsel of a bankruptcy attorney Washington petitioners can discover what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Washington

Chapter 7 bankruptcies in Washington make up the majority of the state’s bankruptcy filings. Chapter 7 is well-suited to debtors who do not own substantial assets, such as significant investments or equity in a home, since a Bankruptcy Trustee may liquidate personal property that is not protected by Washington’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Washington’s Chapter 7 bankruptcy law allows petitioners to keep some essential property; the exempt assets cannot be accessed by creditors looking for repayment.

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

Washington Bankruptcy Exemptions

Washington’s state laws list specific property exemptions that let petitioners keep certain personal property and assets so that debtors can successfully recover from bankruptcy and not be driven to financial ruin.  Bankruptcy in Washington allows petitioners to choose exemptions from either the federal or state lists, but not both.

Personal property exemption values may change, so it is suggested that petitioners meet with a Washington bankruptcy attorney to discover how bankruptcy will impact their financial circumstances.  Washington bankruptcy exemptions include:

Washington Homestead Exemption

  • Must record homestead declaration before sale of home if property unimproved or home unoccupied
  • $125,000 total: Real property, manufactured home or mobile home; $15,000  total: unimproved property intended for residence (Husband and wife may not double)

Washington Personal Property Exemption

  • $6,500 total: Appliances, furniture, household goods, home and yard equipment for individual, limit of $750 per item; $13,000 total for community
  • Health aids
  • Food and fuel for comfortable maintenance
  • Family pictures and keepsakes
  • $3,500 total: Books and electronic media
  • $3,500 total: Clothing, furs, jewelry, ornaments
  • $3,250 total: Motor vehicle for individual; $6,500 and two vehicles, for community
  • IRS-qualified or Tuition credits: 529, 530 tuition savings plans
  • $20,000 total: Personal injury recoveries
  • Fire insurance proceeds for lost, stolen or destroyed exempt property
  • Burial ground; Burial plots sold by nonprofit cemetery association

Washington Tools of Trade Exemption

  • $10,000 total: Farmer’s trucks, stock, tools, seed, equipment and supplies
  • $10,000 total: Library, office furniture, office equipment and supplies of physician, surgeon, attorney, clergy or other professional
  • $10,000 total: Tools and materials used in any other trade

Washington Wage Garnishment Exemption

  • 75% of weekly disposable earnings or 30 times the federal minimum hourly wage, whichever is greater (Low-income debtors may qualify for more)

Washington Public Benefits Exemption

  • Child welfare; General assistance; Old-age assistance
  • Industrial insurance (workers’ compensation) and Unemployment compensation
  • Crime victims’ compensation

Washington Insurance Exemption

  • Disability proceeds, avails or benefits
  • $3,000 per month: Annuity contract proceeds
  • Fraternal Benefit Society Benefits
  • Group life insurance policy or proceeds
  • Life insurance proceeds or avails if beneficiary is not the insured

Washington Pensions and Retirement Savings Exemption

  • State, city and public state employees
  • State patrol officers, Police officers, Law enforcement officials, firefighters and Volunteer firefighters
  • Teachers
  • Judges
  • ERISA-qualified benefits, IRAs and Keoghs

Washington Miscellaneous Exemption

  • Child support payments

Washington Wild Card Exemption

  • $3,000 total: Any personal property; limit of $1,500 cash, $500 bank deposits, bonds, stocks and securities; limit of $200 if debt owed to state agency

Chapter 13 Bankruptcy, Washington

In 2010, ­21% of petitioners filed for protection under Chapter 13 bankruptcy laws in Washington.  When a debtor files Chapter 13 bankruptcy in Washington, a court-appointed Trustee assumes responsibility for reorganizing debts and executing a 3-5 year repayment plan, by which creditors are repaid using the debtor’s future earnings.  Chapter 13 petitioners in Washington keep most – or all – of their property.

How to File Bankruptcy in Washington

A key consideration for those petitioning for bankruptcy protection is to determine if the debtor qualifies for essential property exemptions. The ideal outcome of filing for bankruptcy should be for the debtor to keep major assets and for their debts to qualify for discharge.  Because every case is different, an experienced Washington bankruptcy attorney can assess a debtor’s individual circumstances and provide counsel as to whether Chapter 7 or Chapter 13 bankruptcy is a viable option for their financial situation.

Bankruptcy Attorney: Washington

It is important for debtors to know their privileges and obligations as bankruptcy petitioners.  Personal bankruptcy cases can be complex and stressful; as such, a Washington bankruptcy attorney can counsel how the federal laws and state exemptions apply to the financial circumstances of the petitioner and advise debtors how to protect their assets and recover from debt.