If you find yourself in financial distress, there is a way to discharge most of your unsecured debts and start fresh. Chapter 7 bankruptcy or liquidation bankruptcy may be the solution you need.
If you live in Richland, Washington, and are struggling with overwhelming debt, it’s time to get to know the specifics of Chapter 7 under federal and state laws so you can finally get financial relief.
The Basics of a Chapter 7 BankruptcyThe Chapter 7 process is governed by federal law and is outlined under the US Bankruptcy Code. It allows you the opportunity to eliminate certain types of debt you have, like credit card debt, medical bills, and personal loans. In exchange, a court-appointed trustee will liquidate some of your non-exempt assets to get the funds to pay off your creditors.
Chapter 7 eligibility is determined by a means test, which evaluates your income and expenses to ensure you don’t have the means to repay creditors through a Chapter 13 repayment plan instead. We will have more information on this below.
The Key Steps in Filing Chapter 7 Bankruptcy in RichlandCredit Counseling RequirementBefore filing for bankruptcy, you are required to complete a credit counseling course from an approved agency in Washington. This requirement under 11 U.S.C. §109(h) ensures that debtors explore alternatives to bankruptcy before proceeding.
Filing the PetitionThe bankruptcy process starts when you file a petition and all supporting documents you need in the US Bankruptcy Court for the Eastern District of Washington. These documents include:
As of 2024, filing fees are $338, but fee waivers or payment plans may be available for eligible applicants.
The Automatic StayOnce you file for Chapter 7 bankruptcy, the automatic stay under 11 U.S.C. §362 immediately goes into effect, which stops most collection actions against you, including foreclosure proceedings, wage garnishments, and creditor harassment. This gives you some much-needed relief and allows you to focus on the bankruptcy process without all the pressure you have been getting from your creditors.
Understanding Exemptions in WashingtonWashington law provides specific exemptions that allow you to keep certain assets during bankruptcy. These exemptions play a role in determining what property the trustee can liquidate.
While you get to choose between federal and state exemption systems, you can’t take advantage of both as per 11 U.S.C. §522(b)(3).
Common Washington Exemptions:Consult with a bankruptcy attorney in Richland to ensure you maximize your exemptions and keep as much of your property as possible.
The Role of the Bankruptcy TrusteeA trustee is appointed to oversee your Chapter 7 case in Benton County. Their primary responsibilities include reviewing all your financial documents, selling your non-exempt assets to pay off the creditors, and objecting to any claims or discharge requests if any kind of fraud or misconduct is suspected.
For example, under 11 U.S.C. §541, the trustee will assess the bankruptcy estate, which includes all equitable interests in property as of the filing date.
Dischargeable and Non-Dischargeable DebtsDebts That Can Be DischargedChapter 7 eliminates most unsecured debts, including your credit card balances, medical bills, personal loans, and even utility arrears.
Debts That Cannot Be DischargedHowever, there are still some obligations that will, unfortunately, survive bankruptcy. These include student loans, child support, alimony, recent tax debts, and any debt resulting from fraud or willful misconduct. You must understand these distinctions to keep your expectations as realistic as possible.
The Means Test: Are You Eligible?We briefly touched on the means test already, but it is an important part of the process that you must learn more about. Basically, it determines whether you qualify for Chapter 7 based on your income and expenses, as it compares your household income to Washington’s median income.
As of 2024, the median income for a household of four in Washington is approximately $110,000. You likely qualify if your income is below this threshold. For those with higher incomes, allowable expenses, such as housing and medical costs, are deducted to calculate disposable income. Chapter 13 may be a better option if your disposable income is too high.
The 341 Meeting of CreditorsApproximately 20-40 days after filing, you will need to attend a mandatory 341 meeting of creditors. It gives your trustee and creditors the chance to ask you questions about your finances and bankruptcy petition. While creditors rarely attend, honest and accurate disclosure is still important.
Completing the Process and Receiving a Discharge in Richland, WashingtonThe final step in your Chapter 7 bankruptcy process is receiving a discharge, which will usually happen within 3-6 months of filing. Under 11 U.S.C. §727, this discharge releases you from personal liability for most debts and stops your creditors from taking collection actions against you in the future.
Are There Any Alternatives to Chapter 7 Bankruptcy in Benton County?While Chapter 7 does offer a fresh start, it might not be the most suitable for everyone.
Alternatives include:
Yes, but you also need to understand that there are time limits. You will have to wait eight years from the date of a previous Chapter 7 discharge before you can consider filing again. The wait period ensures that you don’t misuse the bankruptcy system.
Will Filing for Chapter 7 Ruin Your Credit Forever?While Chapter 7 bankruptcy remains on your credit report for up to 10 years, many people see an improvement in their credit scores within a few years by managing finances responsibly post-bankruptcy.
What Happens If You Forget to List a Debt In Your Bankruptcy Filing?Forgetting to include a debt can lead to complications. In some cases, the debt may not be discharged. Amending your filings as soon as you notice the mistake can address this issue.
What Happens If There Are Co-Signers on Loans?While your liability may be discharged in the bankruptcy, co-signers remain responsible for the debt unless they also file for bankruptcy.
Can You Run a Business After Filing Chapter 7 Bankruptcy in Richland?Yes, you can still run a business. Filing for Chapter 7 doesn’t prevent you from operating a business, but it may affect access to credit or financing in the short term. So this is something you will want to keep in mind.
What Is the Cost of Filing for Chapter 7 Bankruptcy in Richland?The cost to file Chapter 7 bankruptcy includes court filing fees and attorney fees. The filing fee is approximately $335. However, legal fees vary depending on the specifics and complexity of your case and the Richland attorney you choose to hire. Many bankruptcy attorneys in Benton County and the Tri-Cities area offer payment plans or free consultations.
Can You Keep Retirement Accounts in Chapter 7 Bankruptcy?Yes, retirement accounts like your 401(k)s and IRAs are generally protected from creditors in Chapter 7 bankruptcy. This is true as long as they meet certain legal requirements. However, if you are withdrawing from retirement accounts to pay debts, those withdrawals may not be protected.
How Do You Know If You Should File Chapter 7 or 13?To put it simply, if you have a low income and very few assets, Chapter 7 might be your best option. Chapter 13 bankruptcy may be a better choice if you have a steady income but are behind on secured debts (like a mortgage or car loan). A Richland bankruptcy attorney can help you determine the best route based on your financial situation.
Working With a Bankruptcy Attorney in RichlandMaking your way successfully through the bankruptcy process from start to finish can be complex, especially when dealing with exemptions, means testing, and creditor claims. A local Richland bankruptcy attorney will be able to provide you with invaluable guidance specifically tailored to Richland residents.
Find Your Fresh Start in RichlandFiling for Chapter 7 bankruptcy in Richland, Washington, is a big decision that offers relief from overwhelming and crushing debt. By understanding the process, eligibility requirements, and legal implications, you can make informed choices that best align with your financial goals.
Ready to take a chance for a more secure future? Consult a knowledgeable Richland bankruptcy attorney who can handle your case efficiently and help ensure a successful outcome and financial freedom.