Can I Qualify? A Mount Vernon Attorney’s Guide to Filing for Bankruptcy

Small town Mount Vernon offers residents and visitors alike the perfect blend of natural wonder and local flavor. From thriving farmers’ markets to historic downtown strolls, Mount Vernon greatly captures the essence of Pacific Northwest living. However, like with any other area, it isn’t without its challenges for many residents who may be struggling financially.

Have you found yourself asking the question, “Can I qualify?” This is a pressing question for many that can also be overwhelming because the bankruptcy process can often feel like the very last resort. This is why it is so important to understand eligibility requirements and how a qualified Mount Vernon bankruptcy attorney can help.

But first…

Bankruptcy is a legal process designed to help individuals and businesses eliminate or restructure their debts when they cannot repay them. In the US, bankruptcy laws are governed by federal law and fall primarily under Title 11 of the United States Code.

However, state laws, including those in Washington, can affect specific procedures or exemptions available to those who file.

The two most common types of bankruptcy are:

1. Chapter 7 Bankruptcy (Liquidation): This is often referred to as "liquidation" because, in some cases, a bankruptcy trustee may sell a debtor's non-exempt property to repay creditors. However, most debtors can keep their assets by utilizing exemptions provided under Washington state law.
2. Chapter 13 Bankruptcy (Reorganization): This type allows those with a regular income to create a repayment plan to pay off debts over three to five years. Those who don’t qualify for Chapter 7 or have significant assets they want to protect often file this type of bankruptcy.

To qualify for either Chapter 7 or Chapter 13 bankruptcy, there are specific eligibility requirements you must meet. These are determined by federal law, with a few state-specific rules regarding exemptions. If you are interested in filing, familiarize yourself with the following:

For Chapter 7 bankruptcy, one of the biggest requirements is passing the means test. This is what determines if your income is low enough to even qualify for a discharge of your debts.

The means test compares your income to the median income in Washington state for your household size. If your income falls below the median, you automatically qualify for Chapter 7 bankruptcy.

However, if your income is above that, the test will then take a closer look at your disposable income after all of your necessary living expenses have been deducted. You may still qualify if your disposable income is low enough.

The US Trustee Program's website contains info on the most current median income figures, which are updated every year. For example, in 2023, the median income for a family of 1 in Washington was approximately $76,962.

For a family of 4, the median income was around $128,225. An income above these figures means the test will involve additional calculations to determine eligibility.

The bankruptcy court will look at your disposable income to determine if you have enough funds to repay creditors. Certain expenses, such as rent or mortgage payments, utilities, and necessary medical expenses, are deducted to determine this.

In Chapter 7, state laws provide exemptions to help filers protect certain assets, including your home, car, and retirement accounts, up to specific limits.

Washington’s exemptions, defined under RCW 6.15.010 of the Washington State Code, are important in ensuring that your most essential property isn’t sold to pay off your creditors.

Unlike Chapter 7, which focuses mostly on liquidation, Chapter 13 bankruptcy involves a repayment plan. You will need to be able to show the following to qualify for it:

• Regular Income: You must show the court that you have enough income coming in regularly to create a plan to pay back your debts over time. This could include wages, business income, or other forms of regular income.
• Debt Limits: There are limits placed on the amount of unsecured and secured debt you can have. As of 2024, the limit for unsecured debts is $465,275 and $1,395,875 for secured debts. If your debts exceed these amounts, you may not qualify for Chapter 13.

Several other factors might also affect your eligibility for bankruptcy in Washington state. These include:

Have you filed for bankruptcy in the past? If so, there are waiting periods that can affect when you can file again. For Chapter 7, you must wait eight years from the date you filed your previous Chapter 7 case. For Chapter 13, you must wait two years from the date you filed a previous Chapter 13 case.

If you have recently transferred property to someone else or hidden any assets to defraud your creditors, you may be disqualified from filing for bankruptcy. The bankruptcy court will look at any suspicious transfers that occurred within the two years before filing. Washington state statutes on fraudulent conveyances can be found under RCW 19.40.

While a good amount of your debt can be discharged in bankruptcy, you will find that tax liabilities and student loans are more difficult to get rid of. If you are looking into bankruptcy to discharge tax debt or student loans, there may be additional requirements to meet, such as proving undue hardship for student loans. Tax debts may be dischargeable if they meet specific criteria set by the IRS.

Filing for bankruptcy will definitely affect your credit score. However, you can’t forget that it can turn out to be the fresh start you need when you find yourself completely overwhelmed by debt.

The impact on your credit score can vary, but bankruptcy will typically stay on your credit report for up to 10 years for Chapter 7 and seven years for Chapter 13. However, you will find that as you start rebuilding your damaged credit, the financial relief the process provides outweighs the initial hit to your credit score.

Chapter 7 bankruptcy cases in Mount Vernon can typically take between three and six months to finish. On the other hand, Chapter 13 cases can take up to five years to complete due to the repayment plan structure you will enter into.

While you can certainly file for bankruptcy on your own, hiring a Mount Vernon bankruptcy attorney will help ensure that all of your paperwork is accurately completed and filed. Count on them to help you maximize any exemptions you have and increase your chances of a successful filing overall. They can also provide valuable advice on whether bankruptcy even is the best option for your specific situation.

Yes, being unemployed doesn’t disqualify you from filing for bankruptcy. Many choose to file after losing a job. However, your income, or lack thereof, will determine which bankruptcy type you will qualify for.

No, you can’t. When filing, you must list all of your debts, assets, income, and expenses. Omitting any debt you have when filing can result in penalties or even a complete dismissal of your case.

If you discharge a loan through your bankruptcy, your cosigner may still be held liable for the debt. You can protect them by repaying the debt through a Chapter 13 bankruptcy repayment plan.

There are many experienced bankruptcy attorneys in Mount Vernon. Remember, you want to find a licensed attorney with a solid track record in bankruptcy law to help guide you through the process.

The bankruptcy process can definitely feel overwhelming at times. For that reason, you want a skilled attorney on your side. Before you even file, your attorney can review your income, assets, debts, and expenses to determine if bankruptcy is your best option. Keep in mind that it is not a one-size-fits-all solution, and your attorney will guide you in the right direction.

It can also be an emotionally draining experience and your Mount Vernon bankruptcy attorney can offer you peace of mind with their expert guidance through every step of the process. Count on them to be your advocate and ensure your rights are safeguarded.