The standard procedures for filing bankruptcy in the state of Washington are similar to those across the country, since bankruptcy is a federal process. However, as with certain other states, Washington does have its own local rules that you must follow as well. Failure to follow all applicable rules can cost you some of your possessions or even get your case tossed out of court.
Washington Bankruptcy Districts
The first step in getting your case underway is to file your petition in the proper bankruptcy court. Washington is divided into two bankruptcy districts: the Western District and the Eastern District. The Eastern District Court has offices in Spokane and Yakima, with Spokane being the main location, while the Western District Court is located in Seattle and Tacoma, with the headquarters in Seattle. Typically, you'll file in the closest court, but this isn't always the case. Districts are divided by zip code, so you'll have to locate the appropriate court for your residence either by searching the court websites or visiting an office in person.
All bankruptcy filers must complete the means test as part of the bankruptcy petition. The means test is a method the court uses to determine if you should be allowed to file Chapter 7 bankruptcy or if you could instead afford to file Chapter 13. The main difference between the chapters is that Chapter 7 allows for a quick discharge, in just a few months, with little or nothing usually distributed to creditors. Chapter 13, on the other hand, requires up to five years of payments to the court for the benefit of creditors.
If you file a bankruptcy petition and are
- for a one-person household, $53,234
- for a two-person household, $66,869
- for a three-person household, $75,635
- for a four-person household, $86,161
For means-test purposes, households above four persons should add $8,100 for each additional individual.
Calculating your income using the means test is notoriously difficult. Because it can have major ramifications on your bankruptcy case, consider working with an attorney or at least having one review your calculations before you file.
Bankruptcy exemptions are what you're allowed to keep when you file Chapter 7 bankruptcy. They also play a role in your payment plan if you file Chapter 13.
Exemptions can be one of the most important portions of your entire bankruptcy petition, as errors here could result in the loss of property that you should legally be able to keep.
Under Chapter 7, you're entitled to keep all the property you can exempt using allowable exemptions. Anything you can't protect you might have to surrender to the trustee for liquidation on behalf of your creditors.
Washington is unusual in that it allows debtors to choose between federal bankruptcy exemptions or Washington state exemptions. The set of exemptions you choose should be based on how they best preserve your property. The most important exemption for Washington homeowners is the homestead exemption, which allows you to exempt up to $125,000 of your home or other property. This is a net equity figure, so if you have a home valued at $1million and you owe $900,000 on your mortgage, your net equity of $100,000 will be covered by the $125,000 exemption. This compares favorably with the federal homestead exemption, which is only $22,975.
Under Chapter 13 bankruptcy, you're required to pay your creditors at least as much as the value of your non-exempt property. While you don't lose that property in Chapter 13, the amount you can't cover using your bankruptcy exemptions becomes a floor for the amount of payments you must make.
John Csiszar earned a Certified Financial Planner designation and served for 18 years as an investment counselor before becoming a writing and editing contractor for various private clients. In addition to writing thousands of articles for various online publications, he has published five educational books for young adults.