Can I Qualify for Bankruptcy in Yakima, Washington?

If you are at the end of your rope, bankruptcy can prove to be a financial lifeline to help pull you out of overwhelming debt. Understanding the qualifications and legal processes involved in Yakima, Washington, is essential if you’re considering this option.

Our experienced Yakima bankruptcy attorneys can help you determine whether bankruptcy is the best solution for your financial situation.

There are two common bankruptcy types you will find in Yakima, Washington.

Often called "liquidation bankruptcy," this allows you to discharge most unsecured debt, such as credit card bills and medical expenses. To qualify, your income has to meet specific thresholds under the means test, a process you will find codified under 11 U.S.C. § 707(b).

Also known as "reorganization bankruptcy," this type of bankruptcy in Yakima requires a repayment plan to pay off your debts over three to five years. It's ideal if you have a regular income and want to keep important assets like your home or car. Eligibility for this bankruptcy type is determined by 11 U.S.C. § 109(e), which outlines specific debt limits for secured and unsecured obligations.

While federal laws govern bankruptcy, Washington state laws also significantly influence the process through exemptions. These exemptions, codified in RCW 6.13.030 and related statutes, determine what property you can protect during bankruptcy proceedings.

For example, Washington’s homestead exemption lets you protect up to $125,000 of equity in your primary residence. Other state exemptions you want to take note of when considering filing include protections for personal property under RCW 6.15.010 and motor vehicles, with equity up to $3,250 shielded from creditors.

Washington also permits you to choose between state and federal exemptions, depending on which offers greater asset protection. However, you can’t mix and match.

The first step in determining your eligibility for Chapter 7 bankruptcy is completing the means test. This test assesses whether your income is low enough to even justify liquidating assets to satisfy your creditors and debt obligations. To get the income threshold, they will compare your earnings to the median income for households in Washington.

For example, if you are a single filer in Washington, the median income is approximately $76,000 as of 2024. If your income falls below this level, you most likely qualify. However, if your income ends up going over this threshold, further calculations are necessary to determine your disposable income after allowable expenses.

These expenses, dictated by 11 U.S.C. § 1325(b)(3), include housing, utilities, transportation, and medical costs. You also should keep in mind that failing the means test doesn’t entirely stop you from filing for bankruptcy. It may just be an indication that Chapter 13 is a more suitable option for your circumstances because it allows you to restructure all of your debts instead of eliminating them.

Eligibility for Chapter 13 bankruptcy is based on specific debt limits. Secured debts, like your mortgage and car loan, can’t exceed $1,596,675. On the other hand, unsecured debts, including credit card balances, are capped at $479,975. Additionally, you must prove you have a regular income that is enough to fund a court-approved repayment plan.

One of the most significant benefits of Chapter 13 bankruptcy is the ability to catch up on missed mortgage payments through a structured repayment plan. This is why Yakima residents who wish to save their homes from foreclosure take this route.

Before filing for bankruptcy, you must complete a credit counseling course from an agency approved by the US Trustee Program. This requirement ensures that you take the time to explore alternatives to bankruptcy.

You must attend the counseling session within 180 days of filing, which typically lasts about 90 minutes. After completing the session, you’ll receive a certificate that you will then have to file with your bankruptcy petition.

Although bankruptcy provides some much-needed relief from financial hardship and uncertainty, there are still some factors that can prevent you from actually qualifying.

For instance, if you’ve filed for Chapter 7 bankruptcy in the past eight years or Chapter 13 in the past six years, you may be deemed ineligible. Similarly, fraudulent behavior, like concealing assets or incurring debt with no intention of repaying, can also result in disqualification.

Failing to provide complete and accurate financial documentation may also lead to your case being dismissed altogether. Filing for bankruptcy requires a great deal of transparency, and any discrepancies in your paperwork can undermine your claim and cause delays or other problems down the road.

If you don’t meet the qualifications for bankruptcy or want to avoid it altogether, there are other options available to you. Debt settlement or consolidation may be worth exploring, depending on your situation.

The former involves negotiating with creditors to pay less than the full amount owed, while the latter entails combining multiple debts into a single payment with a lower interest rate.

However, these options might not be able to provide you with the same legal protections as bankruptcy, like the automatic stay.

Filing for bankruptcy in Yakima involves submitting your case to the US Bankruptcy Court for the Eastern District of Washington. During this process, you will prepare detailed schedules of your assets, liabilities, income, and expenses. You will also have to attend a meeting with creditors where your financial situation will be reviewed.

Consulting with an experienced Yakima bankruptcy attorney is recommended to make sure you comply with all federal and state laws when filing. They can help you navigate exemptions, complete the necessary paperwork, advocate for you, and negotiate on your behalf.

Still have questions? Let our knowledgeable Yakima County bankruptcy attorneys help.

No, you can file individually, even if you’re married. However, if you share debts with your spouse, your creditors may pursue your spouse for repayment if they aren’t included in the bankruptcy filing. Joint filing may prove to be the more beneficial option if most debts are shared. However, consulting a Yakima County attorney knowledgeable of the process is advised to determine the best approach for your situation.

If you’ve recently relocated to Yakima, residency requirements do apply. To file in Washington, you must have lived in the state for at least 91 of the past 180 days. Additionally, to use Washington’s exemptions, you must have resided in the state for at least two years. Otherwise, exemptions from your previous state may apply.

You can qualify for bankruptcy even if you are self-employed, but documenting income and expenses is important. This is because you may need to provide tax returns, profit and loss statements, and bank records to give the court a clear vision of your financial situation. The means test and debt limits apply to self-employed individuals just as they do to salaried workers.

If you receive any kind of inheritance before filing, you must report it because it is considered a part of your bankruptcy estate. Depending on the timing and type of inheritance you receive, it may also be subject to liquidation in Chapter 7 or included in your Chapter 13 repayment plan.

Certain tax debts can be discharged in bankruptcy if they meet the following conditions:

• The taxes are income taxes.
• The tax return was due at least three years ago.
• The return was filed at least two years ago.
• The tax assessment occurred at least 240 days before the filing.

If you owe taxes that don’t meet these criteria, they may need to be repaid through a Chapter 13 plan.

Government fines and criminal restitution orders are usually not dischargeable and must be repaid.

While bankruptcy can be beneficial for achieving financial stability, understanding whether you qualify requires a thoughtful and careful analysis of your income, debts, and assets. In Yakima, Washington, federal guidelines and state-specific statutes ensure that you have access to fair debt relief options.

If you’re considering bankruptcy, consulting a qualified Yakima attorney and thoroughly reviewing your financial circumstances are the important first steps you need to take. With the right guidance and advice, you can determine whether this legal process is the right solution for your needs and start rebuilding your financial future.