Chapter 13 Bankruptcy in Mount Vernon, Washington: What You Need to Know and What to Expect

Mount Vernon boasts not only a beautiful community but also a supportive one, making it the ideal place to start restructuring your financial future.

Are you drowning in debt and actively looking for some financial relief? Do you need help out of the deep water you have been treading alone? Chapter 13 bankruptcy offers you the opportunity to reorganize your debts and create a more manageable payment plan. This bankruptcy chapter is especially useful if you have a regular income but are overwhelmed by debt and need time to breathe and pay it off.

If you are considering Chapter 13 bankruptcy in Washington state, it’s essential to understand how it works. Let’s cover the basics and show you what a Mount Vernon bankruptcy attorney can do if you decide to get the help you need.

Chapter 13 bankruptcy is also known as the Wage Earner’s Plan, this allows you to propose a repayment plan to your creditors, which will generally last between three and five years. This type of bankruptcy is designed for people who have a stable income but need help restructuring their debts.

Unlike Chapter 7 bankruptcy, which involves asset liquidation, Chapter 13 allows you to keep your property while making payments under the terms of a court-approved plan.

To put it simply, Chapter 13 gives you a great opportunity to catch up on all of your overdue payments while potentially reducing the total amount you owe. Sounds appealing, doesn’t it? If you are behind on your mortgage, car loan, or other secured debts, this may just be the answer you have been searching for.

• Repayment Plan: At the very heart of any Chapter 13 bankruptcy is the repayment plan. This plan outlines how you will pay your debts over the life of the plan, depending on your income level.
• Automatic Stay: Once you file for Chapter 13, an automatic stay goes into effect, which stops creditors from proceeding with foreclosures, repossessions, wage garnishments, and collection lawsuits for your debt. This immediate relief gives you time to pause, breathe, and begin to organize your repayment plan.
• Debt Discharge: Any remaining unsecured debts that have not been paid in full can be discharged at the end of the repayment plan. However, this doesn’t include certain debts like student loans, child support, alimony, or most taxes. So, keep this in mind when considering this option. Ask yourself what kind of debt you need help with and if it would qualify and make sense under a Chapter 13 bankruptcy.
• Asset Protection: Chapter 13 does allow you to keep your property, including your home and car, as long as you adhere to the repayment plan. Who doesn’t want that? Having said that, this is definitely a huge advantage over Chapter 7, where all of your assets can be liquidated to pay off your creditors.
• Eligibility: To qualify for Chapter 13, you must demonstrate you have a regular income, meet certain debt limits, and can afford the monthly payments. A bankruptcy court in Skagit County will review your financial situation and approve a payment plan based on your income and expenses, so be honest.

The Chapter 13 bankruptcy process involves several steps. Below is an overview of what you can typically expect if you choose to take this path to financial stability:

1. Pre-Filing Considerations
   • Before you even think about filing for Chapter 13 bankruptcy, you need to determine if this is the right option for your particular situation. Washington state law doesn’t provide automatic eligibility for Chapter 13. You must meet certain criteria, and your debts should fall within the state’s threshold for Chapter 13 eligibility.
     • Income: Again, to file under Chapter 13, you must have a regular income source, whether from employment or other means. You must also demonstrate your ability to make monthly payments toward your debt. Do you have a steady job with a regular paycheck, for example?
     • Debt Limits: As of 2024, Washington state adheres to federal debt limits for Chapter 13 bankruptcy. These limits are subject to change and are adjusted periodically for inflation. For Chapter 13, your unsecured debts (such as credit card debt) must be less than $465,275, and secured debts (such as mortgages or car loans) must be under $1,395,875.
2. Filing the Petition
   • The process begins when you file a petition with the US Bankruptcy Court. The petition will include detailed information about your income, expenses, assets, debts, and recent financial transactions.
   • Also included are a list of your creditors, a statement of financial affairs, and schedules outlining your monthly income and expenses. Additionally, you must complete a mandatory credit counseling course before filing for bankruptcy under Chapter 13.
3. Creation of the Repayment Plan
   • One of the biggest aspects of Chapter 13 is the repayment plan. After filing, you have 14 days to submit a proposed repayment plan to the court, outlining how you are going to pay your creditors over the next several years. Once this is done, the court needs to approve the plan, and your creditors can review and oppose it.
   • Plan Payments: Your monthly payment amount is determined based on your income, living expenses, and debt obligations. The bankruptcy trustee will distribute the payments to creditors according to the terms outlined in the repayment plan.
     • Priority Debts: Priority debts, such as alimony, child support, and some tax debts, must be paid in full before other debts are considered for discharge.
     • Secured Debts: If you owe money on secured debts—such as your mortgage or car loan—you will continue to pay these during your repayment period.
     • Unsecured Debts: Unsecured debts, like credit cards and medical bills, can be paid in part or can be reduced. It all depends on your ability to pay.
4. Confirmation Hearing
   • Once your repayment plan has been submitted, a confirmation hearing will be scheduled usually within a 30- to 45-day timeframe. The bankruptcy court will review the plan at this hearing to ensure it complies with the law and makes sense for your situation. Creditors are also allowed to attend and raise objections when they see fit. However, you don’t typically see much opposition in these proceedings.
5. Making Payments and Completing the Plan
   • You will start making regular payments to the bankruptcy trustee once your repayment plan is confirmed. These payments are usually made on a month-to-month basis. The trustee receives the money and then distributes the funds to the creditors. During the plan period, you must comply with all bankruptcy laws, including filing tax returns on time and not incurring additional debt without court approval.
6. Discharge of Remaining Debts
   • Any remaining unsecured debts are eligible for discharge once you complete the repayment plan. However, certain debts, such as tax debts or student loans, may not be dischargeable.

A typical Chapter 13 plan lasts between three and five years, depending on your income and the debt amount you owe.

Yes, as long as you continue to make the required payments under your Chapter 13 repayment plan.

You can qualify for this type of bankruptcy as long as your unsecured debts do not exceed the federal debt limits for Chapter 13.

While your credit score will likely decrease after filing for Chapter 13, it is possible to rebuild it over time by making timely payments under the repayment plan.

Bankruptcy will definitely have an impact on your credit score, and the filing will remain on your credit report for 7 to 10 years. However, it can put a stop to creditor harassment and help you begin rebuilding your credit after everything is said and done.

If you are unfamiliar with the legal and financial ingredients involved in a Chapter 13 bankruptcy, you must seek help from an experienced and skilled Mount Vernon bankruptcy attorney. They will get to know your specific financial situation, provide you with expert legal guidance, and help you file your bankruptcy petition and all necessary documentation.

You will find that your Mount Vernon attorney will prove invaluable. So, if you find yourself struggling with debt in Mount Vernon or anywhere else in Washington state, don’t hesitate to consult an experienced bankruptcy attorney who can provide the expert advice and support you need to regain control of your finances and move forward in a positive direction.