Qualifying for Bankruptcy

Bankruptcy can give you a fresh start when you find yourself completely overwhelmed by debt. If you are struggling to pay your bills, are facing wage garnishments, or are dealing with creditor harassment, filing for bankruptcy might be an option.

Our Seattle bankruptcy attorneys have years of experience and can help determine the best path forward for you based on your financial situation.

Chapter 7 vs Chapter 13 Bankruptcy

When determining if you qualify, you will see that there are two main bankruptcy types:

• Chapter 7 Bankruptcy: This is also known as liquidation bankruptcy and is for those with little to no disposable income. It can eliminate most unsecured debt, such as credit card and medical bills.
• Chapter 13 Bankruptcy: This is a repayment plan type of bankruptcy that is good for those with regular income. It lets you reorganize your debt and pay it off over a three to five-year period.

Do You Qualify for Bankruptcy in Seattle?

To determine if you qualify for bankruptcy, there are a few key requirements to keep in mind.

Chapter 7 Income Limitations for Chapter 7

You have to pass the means test. This compares your income to the median income for Washington State. If you find that your income exceeds the median, you may still qualify based on expenses like your mortgage, childcare, and medical costs.

• 1-Person Household: $83,033
• 2-Person Household: $99,852
• 3-Person Household: $121,292
• 4-Person Household: $141,177

You will also have to add $9,900 for every other household member in excess of four.

Chapter 13Debt Requirements for Chapter 13

• Unsecured debts like credit cards and medical bills need to fall below $465,275
• Secured debts like your mortgage or car loan must be below $1,398,875
• You also must have regular income coming into the home to make your monthly payments

If you can’t make the payments for a Chapter 13 bankruptcy, King County Court will most likely not approve your case.

Basic Bankruptcy QualificationsResidency and Filing

• You must have lived in Washington for at least 91 days before you can file
• If you want to use Washington’s exemptions to protect your property, you need to have lived in the state for at least two years, according to RCW 6.13.010.

Previous Bankruptcy Filings

• If you filed for Chapter 7 bankruptcy before, you will need to wait 8 years to file again
• If you filed for Chapter 13 bankruptcy before, you will need to wait 2 years to refile

Mandatory Credit Counseling

Before you can file for bankruptcy in Washington, you need to complete a credit counseling course from an approved provider. It has to be done within 180 days before filing.

Non-Dischargeable Debts

There are certain debts you can’t discharge in bankruptcy:

• Child support and alimony (RCW 26.18.050)
• Most student loans, unless you can prove undue hardship
• Recent tax debts (RCW 82.32.050)
• Court-ordered fines and criminal restitution

Property Exemptions Under Washington Law

Washington State allows you to protect certain assets when you file for bankruptcy:

• Homestead Exemption (RCW 6.13.030): Up to $125,000 in home equity
• Vehicle Exemption: Up to $3,250 in equity per vehicle
• Personal Property: Includes household items, clothing, and some retirement accounts
• Wages and Public Benefits: Some wages and benefits like Social Security are protected

Suppose you own non-exempt property like a second home, expensive jewelry or valuable collectibles. In that case, the bankruptcy trustee assigned to you might have to sell those assets to repay your creditors.

Frequently Asked Questions About Qualifying for Bankruptcy in Seattle
Why You Need an Experienced Seattle Bankruptcy Attorney

Filing for bankruptcy is a huge decision that can significantly impact different facets of your life. So, while you can file on your own, you will find that bankruptcy laws are complex, and even a small mistake can cost you some assets or even risk getting your case dismissed altogether.

For these reasons, you want to work closely with an experienced Seattle bankruptcy attorney. They can help you determine if bankruptcy is the right choice for you and can help you learn more about alternative options like debt settlement, debt consolidation, and creditor negotiations. They will also ensure you meet Washington’s bankruptcy eligibility requirements. Without proper guidance, you might miscalculate your eligibility or even file under the wrong bankruptcy chapter.

If you are struggling with debt and wondering if you qualify for bankruptcy, consult with a Seattle bankruptcy attorney today so they can determine if you qualify, guide you through the entire process, and lead you toward that fresh financial start you need.

Qualifying for some kind of bankruptcy is easy. The real question is what kind of bankruptcy is appropriate for you. There is no “one-size-fits-all” answer to this question, and it is important to discuss your situation with an experienced attorney.

Any person or business under the jurisdiction of the United States can file bankruptcy. Bankruptcy is even available to people who do not have a valid social security number.

Of course, there are limits to how often you can file bankruptcy. You can only file one Chapter 7 every eight years. If you have filed a Chapter 7 in the last four years, you cannot get a discharge in a Chapter 13 case.

What people who ask whether they qualify for bankruptcy probably really want to know is whether they can go through a Chapter 7 bankruptcy without abusing the bankruptcy system. A bankruptcy court can dismiss a Chapter 7 or convert it to a Chapter 13 repayment plan if abuse is found. Chapter 7 is more attractive to a lot of people because it allows people to walk away from most of their debt without losing property or making payments in as little as three months.

In 2005, Congress reformed the bankruptcy laws to require people who file bankruptcy to go through a means test. The means test only looks at the last six months of income. If that income is more than the state average for the debtor’s household size, they must go through a means test to determine whether they can pay at least some percentage of that debt. The means test subtracts monthly expenses from the average income to see what, if anything, is available for a payment. Mortgage payments, car payments, day care, child support, back and current taxes, and health insurance are examples of actual expenses that are deducted. Examples of fixed allowed expenses are food, rent, clothes, recreation, and transportation.

Even if you “fail” the means test, you can argue special circumstance and overcome the presumption that you are abusing the bankruptcy system. For instance, you can argue that your means test is thrown off by a big bonus that is unlikely to be repeated. You can also argue that you have necessary expenses that are not included in the means test or are expecting a child soon.

Chapter 13 is easier to qualify for because you are making payments to some creditors and naturally, creditors and the court will not object to that. However, you must be able to make your plan payments. There are limits to how much debt you can have in a Chapter 13 as well. The limits change, but if you have over a million dollars of secured debt or $350,000 of unsecured debt, you may be forced to file a Chapter 11 if you cannot file a Chapter 7. Chapter 11 is usually reserved for businesses and is fairly complex and expensive.

The best way to find out if bankruptcy is right for you–and if you qualify–is to talk to an experienced bankruptcy lawyer.

At Washington State Attorneys, we have years of experience helping people like you get rid of their debts and make a new financial start. Call us today for a free consultation with a knowledgeable, understanding Seattle, WA bankruptcy attorney.