If you find yourself buried under mountains of debt in Yakima, Washington, then Chapter 13 bankruptcy might have entered your mind at some point. It may be just what you need to regain some control over your financial future.
Unlike a Chapter 7 bankruptcy, Chapter 13 focuses on restructuring your debts and establishing a manageable repayment plan. Our Yakima bankruptcy attorneys are well-versed in this and can guide you through the process, eligibility requirements, benefits, and other essential aspects of Chapter 13 bankruptcy in Washington state.
What Is Chapter 13 Bankruptcy?Chapter 13 is also commonly referred to as the wage earner’s plan because it allows those with regular income to reorganize debt and repay that debt over a specified amount of time—typically a three-to-five-year span. The goal is to make paying off creditors easier and more sustainable while also offering protection from collection actions like wage garnishments, foreclosures, and repossessions.
In Yakima, Chapter 13 is an ideal option if you are behind on your mortgage or car payments or have a lot of unsecured debt but still want to hold onto your assets. The process is designed to help you repay your creditors based on an amount you can reasonably afford and sidestep the liquidation you would have to experience with a Chapter 7 bankruptcy.
Eligibility for Chapter 13 Bankruptcy in YakimaTo file for Chapter 13 in Yakima, you must meet certain eligibility requirements that include income limitations and the type of debt you owe. Federal law primarily governs the criteria, but certain Washington state-specific provisions can also apply.
Income RequirementsChapter 13 is for those who have a regular and steady income stream coming into the household. This can include wages, salaries, self-employment earnings, and even income you get from rental property. According to the law, you need to demonstrate that you earn enough to successfully support a repayment plan.
If your income exceeds the median income for your household size in Washington, your repayment plan will most likely be set for five years. If you have a lower income, you may have a three-year repayment plan.
Debt LimitsAs of 2023, Washington state adheres to the federal debt limits for Chapter 13 bankruptcy. This means you must have unsecured debts like credit card balances that come out to less than $465,275 and secured debts (like your mortgage and car loan) under $1,395,875. If your debt is over these set limits, you might not be eligible to file for Chapter 13 bankruptcy.
Tax FilingIn Washington, as with other states, you also must be up to date on filing your federal income tax returns for the last four years. Otherwise, you will need to file your taxes before you can move forward with your bankruptcy petition.
The Chapter 13 Bankruptcy Process in YakimaFiling for Chapter 13 bankruptcy 11 US Code § 1301-1330 (Chapter 13 of the Bankruptcy Code) in Yakima involves many steps, with each requiring attention to detail and careful planning. Here’s a basic outline of what you can expect throughout the process:
Pre-Filing Credit CounselingBefore filing for bankruptcy, you must complete a pre-filing credit counseling session with an approved agency. This will help you explore all of your available options and confirm that Chapter 13 is the best route for you to take.
Failure to complete this requirement will result in your bankruptcy case being dismissed. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 imposed stricter rules for Chapter 13 eligibility and pre-filing credit counseling.
Filing the Bankruptcy PetitionThe next step is to file a petition with the US Bankruptcy Court for the Eastern District of Washington (Local Rule 2083-1), which covers Yakima. The petition includes detailed financial information, such as your income, expenses, assets, and debts.
You will also need to submit a proposed repayment plan that outlines how you plan to pay off your creditors over time (Local Rule 1007-1). The court will review your petition to ensure it complies with all legal standards.
Automatic StayOnce your Chapter 13 petition is filed, an automatic stay goes into effect. This is one of the most beneficial aspects of bankruptcy because it immediately stops most collection actions, including foreclosure, wage garnishments, and creditor harassment (RCW 19.16.250). The automatic stay gives you time to work with the court and creditors to finalize a repayment plan you can follow.
Repayment PlanThe biggest part of Chapter 13 bankruptcy is the repayment plan, which details how you will pay off your creditors. Your payments will be based on your disposable income, calculated by deducting necessary living expenses from your income. The plan must also meet the "best interest of creditors" test, meaning creditors must receive at least as much as they would have under a Chapter 7 liquidation.
Confirmation HearingAfter your bankruptcy petition and repayment plan are filed, you will then have to attend a confirmation hearing before a bankruptcy judge in Yakima County. During this hearing, the judge will review your repayment plan and ensure it complies with all Chapter 13 requirements.
The creditors may object to certain aspects of the plan, but most objections can be resolved through negotiations or amendments. If the judge confirms the plan, you can begin making payments.
Payments to the TrusteeAfter confirmation, you will begin making monthly payments to a bankruptcy trustee, who will distribute the funds to your creditors according to the terms of the repayment plan. It's important to keep up with these payments because failure to do so can result in the dismissal of your bankruptcy case.
Completion and DischargeUpon successful completion of the repayment plan, any remaining eligible debts may be discharged. This means you are no longer legally obligated to pay those debts.
The Benefits of Chapter 13 Bankruptcy in Yakima, WashingtonYou will find some great advantages overall when you choose to file for Chapter 13 bankruptcy in Yakima.
As you will soon find out, Washington state law complements federal bankruptcy rules in several important ways. For example, Washington offers exemptions to protect certain assets in a Chapter 13 filing, allowing you to keep a portion of your property, depending on its value and equity.
Washington also uses federal bankruptcy exemptions. However, it's important to discuss all this with an experienced Yakima bankruptcy attorney to ensure you’re getting the most out of each exemption.
Washington Homestead Exemption (RCW 6.13.010–6.13.240)
Exemptions for Personal Property (RCW 6.15.010)
Wage Garnishment Protection (RCW 6.27.150)
Prohibited Debt Collection Practices (RCW 19.16.250)
Your Yakima County bankruptcy attorney can guide you through the Chapter 13 process, protect your assets, create a repayment plan that is specifically tailored to your needs, and ensure it complies with federal and state laws. You don’t have to go through this alone. Let your Yakima bankruptcy attorney lead the way.