Chapter 7 Bankruptcy in Tacoma Washington

Chapter 7 bankruptcy happens to be one of the more commonly used forms of bankruptcy, as it offers an opportunity to eliminate certain types of unsecured debt. If you are considering filing for bankruptcy in Tacoma, Washington, it is essential to gain a thorough understanding of the process and qualifications. You can also seek advice from a skilled Tacoma bankruptcy attorney who can help guide you through the process.

Chapter 7 bankruptcy, also often referred to as a liquidation bankruptcy, involves liquidating (selling) your non-exempt assets to pay off your creditors. Once the process is complete, most of your remaining unsecured debts, such as credit card bills and medical bills, are discharged, meaning you are no longer legally obligated to pay them.

Unlike Chapter 13 bankruptcy, which involves creating a repayment plan to pay off your debts over a set period, Chapter 7 bankruptcy offers a faster and more straightforward solution to your financial problems. However, it's not suitable for everyone, and there are eligibility requirements that must be met.

Before you can even think about filing for bankruptcy in Tacoma, you need to see if you meet certain eligibility criteria.

• To qualify for Chapter 7 bankruptcy in Washington, you must pass the Means Test. This compares your income to the median income in Washington for a household of your size.
• If your income is below the median, you will more than likely qualify for Chapter 7. If your income exceeds the median, you may still qualify, but the court will then have to examine your financial situation even more closely to determine whether you can afford to repay some of your debts.

• 1 person: $5,736
• 2 people: $7,502
• 3 people: $9,267
• 4 people: $11,032

If your household income exceeds the median for your size, a bankruptcy attorney in Tacoma can help evaluate your specific situation to determine eligibility.

• In Chapter 7, non-exempt property is liquidated to repay creditors. However, Washington State law allows for certain exemptions that protect your property from liquidation. These include your home, car, and personal belongings, up to certain value limits.

A Tacoma bankruptcy attorney can guide you through this to ensure that you can keep most, if not all, of your property.

• If you have filed for bankruptcy previously, there may be a waiting period before you can file again. For example, if you filed for Chapter 7 and received a discharge, you cannot file for Chapter 7 again for eight years.

The Chapter 7 bankruptcy process in Tacoma, Pierce County, usually follows these steps:

• Pre-Filing Credit Counseling: Before you file, you need to complete a credit counseling session with an approved agency, which helps you evaluate your finances so you can determine if bankruptcy is the right solution. You have to do this within 6 months of filing.
• File the Petition: Once you’re done with credit counseling, your Tacoma bankruptcy attorney will file your petition with the US Bankruptcy Court for the Western District of Washington. The petition includes detailed financial information, including your debts, incomes, assets, and expenses. You also need to file a Statement of Financial Affairs and other required schedules.
• Automatic Stay: Once you file, an automatic stay (11 U.S. Code § 362) goes into effect, stopping most collection actions against you, including creditor calls, lawsuits, and wage garnishments. It gives you a bit of temporary relief while the bankruptcy is ongoing.
• Meeting of Creditors: This is also known as a 341 Meeting and happens about 20 to 40 days after you file. It is when the bankruptcy trustee will ask you questions about your financial situation and the information you provided in your petition. Your creditors may also ask questions.
• Trustee’s Role: The bankruptcy trustee assigned to your case will review your paperwork and liquidate non-exempt property to pay your creditors if necessary.
• Debt Discharge: Approximately three to six months after filing, the court will issue a discharge of your debts if everything goes as planned. This means that most of your unsecured debts, including credit card bills, medical expenses, and personal loans, will be completely forgiven.

Chapter 7 bankruptcy can offer Tacoma residents a fresh start. Some of the more common debts you can see discharged include:

• Credit card debt
• Medical bills
• Personal loans
• Collection agency debts
• Utility bills (in some cases)

However, some debt is considered non-dischargeable in Chapter 7:

• Child support and alimony
• Most student loans (unless you can prove undue hardship)
• Recent taxes owed
• Debts for personal injury caused by drunk driving
• Court-ordered fines and restitution

Your Tacoma bankruptcy attorney can help you identify which debts you may still be responsible for.

• Homestead Exemption (RCW 6.13.030): This allows you to protect up to $125,000 in home equity. This means that, in most cases, you won’t have to sell your home during Chapter 7 bankruptcy if its value is within this limit.
• Motor Vehicle Exemption (RCW 6.15.010): You can exempt up to $3,000 in equity in a motor vehicle. If you are married and filing jointly, you may be able to exempt up to $5,000 in equity.
• Personal Property Exemption (RCW 6.15.020): Household goods, clothing, and personal belongings can be exempted up to a certain value. This includes items such as furniture, clothing, and electronics that are essential for day-to-day living.
• Tools of the Trade Exemption (RCW 6.15.050): If you are a tradesperson or business owner, you can exempt tools and equipment necessary for your trade or profession. The exemption limit is $2,500 for a single person or up to $5,000 for a couple filing jointly.
• Wages Exemption (RCW 6.27.005): Under Washington State law, up to 75% of your wages may be exempt from garnishment, depending on the circumstances. This helps protect your income while the bankruptcy case is in process.
• Retirement Accounts Exemption (RCW 6.15.050): Retirement accounts, including 401(k) plans and IRAs, are usually exempt.

If you're concerned about losing property, consulting a bankruptcy attorney in Tacoma can help you effectively navigate these exemptions.

Since filing for Chapter 7 can prove to be complex, especially when it comes to which exemptions you can use, means testing, and liquidation, it helps to have a skilled bankruptcy attorney on your side who can help you through the process and protect your assets.

One of our attorneys with years of experience can:

• Help you determine whether Chapter 7 is the right option
• Assist in filing your petition and the necessary documents
• Represent you at the Meeting of Creditors
• Advise you on how to handle non-dischargeable debts

Hiring one of our attorneys helps ensure all procedures are followed, and you maximize the benefits of filing for bankruptcy in Tacoma, Washington.

The entire Chapter 7 process usually lasts just over three months. A Chapter 7 debtor does not have to make any payments to any creditors, but there is a risk property can be taken to pay part of your debt. However, losing property in a Chapter 7 is fairly rare because the kind of property most people have is exempt from the liquidation process.

If you make over the median, or average, income for your household size, you have to go through a means test. If your expenses are not high enough to show you can not pay at least part of your debt, you may have to file a Chapter 13 repayment plan.

Before filing any kind of bankruptcy, you have to take a credit counseling class. This class just takes two hours, is cheap and can be done online. The case starts by filing a petition with several documents attached detailing your income, your budget, your property and your debts. You also have to disclose certain financial details that have occurred in the past two years, such as transfers of property to relatives and business partners, your past two years income and your past addresses.

The second a Chapter 7 is filed all debt collection has to stop. A car company or mortgage company can ask the court to continue a repossession or foreclosure if you are behind on the payments in a Chapter 7. This kind of bankruptcy only provides temporary protection from these “secured” creditors but if you are current with your payments, you can keep the property.

Secured creditors will want you to sign a reaffirmation agreement. For car companies, they can repossess the car if you don’t sign a reaffirmation agreement, even if you are current. However, many car finance companies do not act on this. It is important to consider the reaffirmation agreement carefully because by signing it, you take the debt outside the bankruptcy and you could be liable for it if you default later on. The reaffirmation agreement shifts the risk of default from the secured creditor to you.

There is only one hearing you are likely to have to attend in a Chapter 7. This is called a “meeting of creditors,” though creditors rarely appear at the hearing. It his held one month after you file your case. You and your attorney will meet with a trustee, who will swear you in and ask you questions under oath about the documents you filed. You have to submit pay stubs, bank statements, and your latest tax return to the trustee at least a week before the hearing. In most cases, the trustee does not investigate any further. In some cases the trustee will want more information about transfers of property or property that you own. You have to cooperate with the investigation. In some cases the trustee takes property and sells it to pay creditors.

About two months after the meeting of creditors, you receive a discharge. The discharge wipes out all debt unless there is an exception to the discharge. The most common debt that is not discharged in a bankruptcy include some back taxes, student loans, fines, and back domestic support obligations such a child support or spousal maintenance. Before getting the discharge, you have to take a second two hour online class called a financial responsibility course.

As long as the trustee is not investigating or liquidating assets, the case closes. If the trustee is still looking into assets, you still get the discharge but you may have to continue cooperating with the trustee. Again, this occurs in the minority of cases.

If you have any questions about a Chapter 7 bankruptcy, contact your trusted bankruptcy lawyers in Tacoma, Washington.