Chapter 7 Bankruptcy

Chapter 7 Bankruptcy in Washington State

Hardly a week goes by in the news without a story on a business filing for bankruptcy. As layoffs and business closures, continue, it's likely that the number Chapter 7 bankruptcy in Washington state will also increase. Chapter 7 is the most common bankruptcy in Washington state, but that doesn't make it any less stressful if you have questions. What is Chapter 7 bankruptcy? How does it work? Can someone make too much money to file for bankruptcy? Can you keep any of your belongings or will you lose everything? Can you afford to file bankruptcy? Here's what you need to know about Chapter 7 bankruptcy in Washington state.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy is a legal process that provides a person, a married couple, or even a business with the ability to get a clean start with their finances. A bankruptcy petition and the associated schedules and other proof are filed. An automatic stay is issued to protect the debtor (the person filing for bankruptcy) from collection efforts.

Creditors are allowed a certain amount of time to file claims. A Meeting of the Creditors is scheduled. Also known as a 341 Meeting, this is a court hearing that allows the creditors who filed a claim with the opportunity to ask questions about the bankruptcy filing as well as the debtor's situation. The debtor may attend along with their bankruptcy attorney. The Trustee is also in attendance. The Trustee is the person who is appointed by the bankruptcy court to oversee the administration of the estate.

It is the Trustee's job to determine whether the bankruptcy has any assets that may be sold to benefit the creditors. Debt is broken down into several categories:

  • Priority debts. These include taxes that may be owed as well as spousal support or child support obligations.
  • Secured debts. Secured debts are debts that involve some type of security. A common example is a car being financed. If payments aren't made on the car, the finance company has the right to repossess the car. During a Chapter 7 bankruptcy, certain secured debts may be reaffirmed. This means that the debtor may be able to sign a new contract to keep paying on the contract.
  • Unsecured debts. Unsecured debts are debts that are owed, but no security exists. Medical bills are the most common unsecured debts involved in bankruptcy in Washington state.

If there are assets that are non-exempt, the money received is then split between the creditors. The creditors generally aren't paid in full. Priority debts are paid first (and are not discharged). Secured and unsecured debts may receive a small portion of the estate.

Many Chapter 7 bankruptcies are considered no-asset cases. The creditors do not receive any money from the bankruptcy. Once the bankruptcy is concluded, the debtor receives a discharge. With the exception of a few certain types of debts, the debtor gets a new shot at a better financial future.  

Chapter 7 Bankruptcy Washington State Means Test

To file for Chapter 7 bankruptcy, you must meet the income guidelines. These guidelines are found in the Means Test. The Means Test is a way to measure your income to determine if you're eligible to file for Chapter 7 bankruptcy in Washington state. You may be eligible to file Chapter 7 Bankruptcy if you meet the following household size and income limits:

  • With a single-person household, your monthly income may not exceed $5,625.92 and your annual income may not exceed $67,511.00.
  • With a two-person household, your monthly income may not exceed $6,687.58 and your annual income may not exceed $80,251.00.
  • With a three-person household, your monthly income may not exceed $7,714.00 and your annual income may not exceed $92,568.00.
  • With a four-person household, your monthly income may not exceed $8,956.75 and your annual income may not exceed $107,481.00.

Washington State Bankruptcy Exemptions

Remember that you learned certain assets can be taken by the Trustee and sold in a Chapter 7 to benefit creditors. The good news is that there are Washington state bankruptcy exemptions as well. Exempting property gives you a way to protect certain assets from creditors, provided that it is at or under the listed dollar amount. In addition to Washington state bankruptcy exemptions, there are also federal exemptions. You have the right to choose between using state or federal exemptions. If you chose to use the state exemptions you will be able to also use the federal exemptions as well.

How Much Does It Cost to File Bankruptcy in Washington State?

What you must pay to file bankruptcy in Washington state depends on whether you decide to try and file your own bankruptcy or hire a bankruptcy attorney. If you file your own bankruptcy, you'll pay the filing fee. For Chapter 7, the current cost in Washington state is $335. You can also apply to pay your filing fee in installments or to have the fee waived.

Hiring a bankruptcy attorney does increase the cost, but there are also a lot of benefits:

  • You have someone looking out for you who understands bankruptcy code, Washington state exemptions, and the entire bankruptcy process.
  • You have someone who prepares your bankruptcy petition and schedules for you as well as ensures proper filing with the court. There's no guesswork for you.
  • You have someone who can go with you to the Meeting of the Creditors.
  • You have someone who can answer your questions and give you legal advice. While the clerks at the bankruptcy court do their best to be helpful, they are not allowed to give you legal advice.

You are also required to complete a credit counseling class before filing and a financial management class prior to discharge. The cost of the classes varies among court-approved providers

Learn More about Washington State Bankruptcies

Are you looking for a clean start with your finances? The Law Offices of Alesha Struthers provides free consultations because we want you to be able to make an educated decision about Washington state bankruptcies. To learn more about Chapter 7 and how you can get the collection calls to stop, schedule your consultation now!