Can I Qualify for Bankruptcy

Filing for bankruptcy can seem like a complicated and overdrawn process, but it can give you a fresh start when your financial pressures overwhelm you. Determining whether you qualify for bankruptcy in Tacoma, Washington, is the first step toward regaining financial control.

Because bankruptcy law is complex, you must know how your income, assets, debts, and expenses are all evaluated. There are specific eligibility criteria depending on the type of bankruptcy you file.

A Tacoma bankruptcy attorney can help you navigate this process and ensure you understand your rights and options. With proper legal guidance, you can make more informed decisions and determine the right path forward for you.

Types of Bankruptcy and Qualifications in Tacoma

There are two main types of bankruptcy you will encounter: Chapter 7 and Chapter 13. Each of these has its own set of qualifications and requirements.

Chapter 7 Bankruptcy Eligibility

Chapter 7 can wipe out most unsecured debts. In return, you might have to liquidate some of your non-exempt assets to pay your creditors. However, the process can be fast and efficient.

To qualify for Chapter 7 bankruptcy in Tacoma, you need to meet these requirements:

• Pass the Means Test: To qualify for Chapter 7, you must pass the Means Test, which checks if your income falls below the median income for your state based on the size of your household.
• Previous Bankruptcy Discharges: If you have already filed for Chapter 7 in the past, you will have to wait eight years before you can file again. However, if you have previously filed for Chapter 13, the waiting period for filing Chapter 7 is only four years.
• Honest Financial Reporting: The court can deny your bankruptcy discharge if you attempt to hide assets or commit fraud. This is why you need to be transparent with your Tacoma bankruptcy attorney about your financial situation.

Chapter 13 Bankruptcy Eligibility

Chapter 13 is designed for individuals with a steady and regular income who want to retain their property but still require assistance in reorganizing their debt. This bankruptcy option involves a repayment plan of over three to five years. To qualify for Chapter 13 bankruptcy, you must:

• Have A Regular Income: You need to have a regular, reliable income that allows you to make monthly payments on your debt. This includes wages, self-employment income, or other sources of consistent income.
• Meet Debt Limits (11 U.S.C. §109(e)): There are debt limits you can’t exceed. Your secured debt, such as your mortgage or car loan, must be less than $2,750,000, and your unsecured debt, including credit card debt and medical bills, must be less than $465,275. These limits are updated periodically, so you want to always make sure to confirm these numbers. Your attorney can help with this.
• Not Have Filed For Bankruptcy Recently: If you’ve previously filed for bankruptcy, you must wait a certain amount of time before filing again under Chapter 13. The waiting period for Chapter 13 is two years after receiving a Chapter 13 discharge and four years for Chapter 7.

Washington State Laws Impacting Bankruptcy

Washington State has unique laws that can affect how your bankruptcy is handled. The following exemptions let you keep certain property like your home, car, and personal items when you file for bankruptcy in Pierce County:

• Homestead Exemption (RCW 6.13.030): One of the biggest and most important exemptions is the homestead exemption, which allows you to protect up to $125,000 of home equity. So, if you’re a homeowner in Pierce County, this helps ensure that you don’t lose your property during the bankruptcy proceedings.
• Personal Property Exemptions (RCW 6.15.010): Washington also offers exemptions for personal property, including household goods, clothing, and tools necessary for your trade. You can exempt household goods up to $6,500 and motor vehicles up to $3,250.
• Wages and Income (RCW 6.27.150): There are also protections against wage garnishments. If your wages are being garnished, up to 75% of disposable earnings can be protected from creditor actions.

All of these exemptions are important for protecting your assets. Your Tacoma bankruptcy attorney can help you understand which applies to your case.

FAQs About Bankruptcy Qualifications in Tacoma
How a Tacoma Bankruptcy Attorney Can Help

A Tacoma bankruptcy attorney plays a big role in helping you navigate the bankruptcy process. Filing for bankruptcy is already a huge decision, so you want to be absolutely sure you are making the right choice based on your circumstances.

Our bankruptcy attorneys have years of experience and can help you determine which type to file for, ensure you take advantage of all possible exemptions, represent you in court to protect your rights, and handle the paperwork and filing to avoid any mistakes that could delay your case. We can also offer guidance on rebuilding your financial life after bankruptcy.

With the guidance of our skilled attorneys in Tacoma, you can streamline the bankruptcy process and avoid costly errors and headaches along the way.

If you ever file for bankruptcy, hopefully it will only be once in your life. However, you can qualify for a Chapter 7 bankruptcy 8 years after you filed a previous Chapter 7. You can file a Chapter 13 and get a discharge four years after filing a Chapter 7. You can actually file a Chapter 13 sooner, but you will not get a discharge. Some people may want to do this to keep creditors from collecting because the automatic stay is in effect during the Chapter 13 plan even though you can not get a discharge.

In general, anybody can file a bankruptcy. You do not even have to be a legal resident of the United States to file a bankruptcy. You do have to take a credit counseling class in order to qualify.

If you file a Chapter 7 bankruptcy and you have a higher income, your case could be dismissed for abuse of the bankruptcy process. After filing a Chapter 7, the court will examine your income going back six months. If this income is higher than the median income for your household size, you must submit to a means test. In Washington, the yearly median income figures are $51,655 for a household of one, $63,803 for a household of two, $69,844 for a household of three and $81,582 for a household of four. Add $7,500 for every household member after that.

The means test takes an average of the last six months income and deducts expenses for it, such as mortgage payments, car payments, day care, spousal maintenance, child support, health insurance among other actual expenses. Some expenses with limits imposed by IRS regulations, such as food, clothes, utilities and transportation, are deducted too. If there is money left over after the deductions, there is a “presumption of abuse”. You can still overcome the presumption of abuse by claiming special circumstances. The United States Trustee has to file a motion to show abuse and the final decision is made by a bankruptcy judge. You have the option to convert your case to a Chapter 13 instead of letting it be dismissed.

There are limits to who can file a Chapter 13. You have to have enough income to fund a plan for three to five years. There are limits to how much debt you can have as well. There are no debt limits in a Chapter 7. However, if you need a Chapter 13 because of income, or some other reason, you can not have more than $1,081,400 in secured debt or $360,475 in unsecured debt. If you have over this debt limit and can not do a Chapter 7, you have to file a Chapter 11, which is very complex and usually reserved for businesses.

If you have questions about bankruptcy, or want to explore your options, contact the experienced bankruptcy lawyers in Tacoma, Washington.