What a Mount Vernon Bankruptcy Attorney Can Tell You About Chapter 7

Mount Vernon is a community that thrives on resilience and renewal––values that align with the purpose of a Chapter 7 bankruptcy.

Did you know that Chapter 7 bankruptcy is one of the most common forms of bankruptcy filed within the United States? It is often referred to as liquidation bankruptcy and can provide a fresh start by discharging your unsecured debts.

Let’s see what our skilled and knowledgeable Mount Vernon bankruptcy attorneys have to say about the process, your rights, and what you can expect.

Chapter 7 is a type of bankruptcy that allows you to discharge most of your unsecured debts, which are those that aren’t tied to any asset. These include credit card bills, medical bills, and personal loans.

In Chapter 7 bankruptcy, a court-appointed trustee is responsible for selling any non-exempt assets to pay creditors. However, many find that they have little or no non-exempt assets, which means debts can be discharged without losing any valuable property.

Filing for Chapter 7 bankruptcy offers many advantages:

1. Debt Discharge: Most unsecured debts are wiped out, giving you a fresh financial start.
2. Legal Protection: Once you file, creditors must stop all collection actions, including lawsuits, garnishments, and phone calls.
3. Quick Process: Chapter 7 is usually completed within three to six months.
4. No Repayment Plan: Unlike Chapter 13 bankruptcy, which requires a repayment plan, Chapter 7 does not involve repaying most debts.

It is important to know that not everyone is qualified to file for Chapter 7 bankruptcy. In Washington state, as in other states, you must meet certain criteria to be eligible. These include the following:

The means test evaluates your income and expenses to determine whether you can afford to pay back a portion of your debts. If your income is on the higher side, you may not qualify for Chapter 7 and may have to consider Chapter 13 bankruptcy instead.

In Washington state, the median income for a household depends on the size of the household. For example, as of 2024, the median income for a household of one is approximately $60,000, while a household of four has a median income of around $100,000. The means test compares your income to the median and determines eligibility based on a specific formula.

If you have previously filed for bankruptcy, there are time restrictions that must pass before you can file for Chapter 7 again. For example, if you received a Chapter 7 discharge, you must wait eight years before filing again.

You must have lived in Washington for at least 90 days before filing for Chapter 7 bankruptcy. If you meet the eligibility requirements, you can proceed to the next steps, which are outlined below.

Filing for Chapter 7 bankruptcy in Washington follows a step-by-step process. Below is a breakdown of what to expect:

Before filing for Chapter 7 bankruptcy, you must complete a credit counseling session with an approved agency. This is required under federal law and is designed to help you understand your options before deciding on bankruptcy. You will need to get this done within 180 days before filing.

Once you have completed credit counseling, the next step is to file the bankruptcy petition, which includes detailed information about your assets, debts, income, expenses, and financial history.

You will also need to send in a list of all of your creditors, a statement of your finances, schedules listing your assets and liabilities, proof of income, and any other documents the court requests. The petition must be filed with the Western District of Washington Bankruptcy Court, where you’ll be asked to pay a filing fee that costs approximately $335 (subject to change).

Once you file your bankruptcy petition, the court will appoint a trustee to manage your case. The trustee's role is to review your financial situation, examine your assets and liabilities, and determine if any non-exempt assets can be liquidated to pay creditors.

An automatic stay goes into effect after filing. This means creditors must stop all collection activities, including phone calls, lawsuits, and wage garnishments.

About a month after filing, you will attend a 341 meeting—also known as the Meeting of Creditors. The trustee and your creditors will ask questions about your finances and the bankruptcy paperwork you submitted. Don’t worry, though; this is a routine part of the bankruptcy process, and there aren’t usually any complications.

Washington state allows residents to exempt certain property from liquidation in a Chapter 7 bankruptcy case. These include:

• Homestead exemption (up to $125,000 in equity in your primary residence)
• Personal property, such as clothing, household goods, and a car
• Tools of your trade, such as business equipment

Washington is one of the few remaining community property states in the country. This means if you’re married, your spouse’s property can also be considered in your bankruptcy case. You can find the complete list of Washington’s exemptions in the Washington State Revised Code Title 6.

If everything goes smoothly and as expected, the bankruptcy court will issue a discharge of your eligible debts. This typically happens three to six months after filing. The discharge releases you from any personal liability regarding most of your unsecured debts, giving you a much-needed fresh start.

Once the discharge is granted and the trustee has sold or liquidated any non-exempt property, your Chapter 7 bankruptcy case is considered complete.

You may have heard many misconceptions swirling around when researching your bankruptcy options. Here are a few that our expert Mount Vernon bankruptcy attorneys debunk:

• Myth: You will lose all of your property.
• Fact: Many people who choose to file Chapter 7 don’t lose any property at all because of all the state exemptions available to them.
• Myth: Bankruptcy will tarnish your credit score forever.
• Fact: While bankruptcy will affect your credit score, it isn’t going to be a permanent mark. Most who file for Chapter 7 can start rebuilding their credit within a few years after discharge.
• Myth: I’ll never get credit again.
• Fact: It can take some time to regain credit, but you will still qualify for it after bankruptcy. Some find they can get secured credit cards or even small loans shortly after their case is discharged.

Technically, yes, you can file for Chapter 7 bankruptcy on your own. This is called filing pro se. However, bankruptcy law can be complicated, and paperwork errors or missed deadlines can result in your case being dismissed. There could also be delays in receiving a discharge.

For these reasons, it’s highly recommended to hire an experienced bankruptcy attorney in Mount Vernon to guide you through the process and ensure that everything is done correctly.

In Washington, a community property state, a Chapter 7 filing may affect your spouse’s debts if they are considered community debts. These can include debts incurred during your marriage.

However, if your spouse isn’t filing for bankruptcy, only your debts will be discharged. It’s important to consult with a bankruptcy attorney to understand how your spouse’s financial situation may ultimately impact your case.

Retirement accounts like your 401(k)s, IRAs, and pensions are typically exempt under both federal and state law. Washington state, for example, offers strong protection for retirement savings. This means that most retirement funds are protected from creditors during bankruptcy. However, you should always verify your specific situation with your bankruptcy attorney to ensure your retirement assets are fully protected.

Filing for bankruptcy can be a hard-to-navigate legal process, which is why it’s important to have an experienced bankruptcy attorney by your side to be your compass and show you the way.

A Mount Vernon bankruptcy attorney can help ensure that you meet the eligibility requirements, complete all necessary paperwork, and represent your interests throughout the entire process, from start to finish. 

As you can see by now, Chapter 7 bankruptcy can prove to be a valuable tool if you are struggling with debt in Washington. Discharging unsecured debts can give you the fresh start you need to get out of financial distress.

Make sure you understand the eligibility requirements, the bankruptcy process, and the types of debts that can be discharged before taking any legal action. Consulting with an experienced Mount Vernon attorney can be your first big step toward rebuilding your financial security.