What happens to my property in a WA bankruptcy?
What happens to my property in a Washington bankruptcy? If I file a WA State bankruptcy, do I lose all my property? In most cases, no. In fact, many of our Washington bankruptcy clients wipe out 100% of their debts and keep 100% of their property.
If you have questions about whether or not you can qualify for a Washington bankruptcy and what might happens to you property if you do file, we invite you to call our offices for an initial consultation. One of our Washington bankruptcy attorneys can review your finances and your assets and then help you to understand your legal rights and options.
The overwhelming majority of our Washington bankruptcy clients keep all of their property.
The majority of people who file for bankruptcy are able to keep all of the property that they own. The law allows you to keep enough property to give you a real fresh financial start. If the law allows you to keep property, it is considered “exempt” from being sold to pay part of your debt. The bankruptcy “exemptions” cover various types of property.
There are different exemptions for different types of property. Examples include home equity, vehicles, rights to receive money in a law suit and retirement plans to name a few. It is important to hire a skilled attorney who can help you list all your property – including types of property you might not think of – and maximize the amount of property you can keep.
Protecting as much property as possible is most important in a Washington Chapter 7, because that is a “liquidation” bankruptcy, meaning a bankruptcy trustee can sell unexempt property, turn it into cash, and pay your creditors as much as possible. If, however, you have some unexempt property you don’t want to lose in a Chapter 7, sometimes you can protect this property in a Chapter 13.
The rule is you must pay your creditors as much as they would get in a Washington Chapter 7 liquidation through a payment plan instead. For instance, if you owned some property worth $20,000 that you couldn’t exempt, you could pay the $20,000 spread out over three to five years and not have to give it up. This amount would be in addition to what secured creditors, such as mortgages and car loans, would get.
Sometimes you can file a Washington Chapter 7 and preserve unexempt assets by offering to that the trustee the amount that would be received by creditors in a liquidation. Often you can negotiate a lower amount because paying cash shaves the work involved in liquidating assets.
Though most people who file for bankruptcy do not have to turn over assets to the trustee, it is important that you be advised by an experienced bankruptcy attorney to be sure. If there is a chance that you will have to turn over property, it is even more important to discuss this possibility with an experienced bankruptcy attorney.
What kind of property can you keep in bankruptcy?
Part of your meaningful fresh start in a bankruptcy involves keeping the property you need to go forward in life. The law recognizes this fact with the“exemptions” allowed in a bankruptcy proceeding, meaning a lot of your property is “exempt” from being taken to pay your creditors. In Washington, we can use either federal or state exemptions. Washington has a very generous home equity exemption of $125,000. If you don’t need a large homestead exemption, you can use a federal “wildcard” exemption which could allow you over $11,000 to apply to any property you have.
There are other specific exemptions – retirement plans are totally exempt, for instance. You should consult an attorney to review your property and see if you have anything that might be at risk. You should also talk to an attorney about what kind of property you have, which isn’t always obvious. For instance, if you have the right to sue someone, even if you haven’t talked to an attorney yet, your control over the potential lawsuit is property of you bankruptcy estate and you could lose that control to the bankruptcy trustee.
If you are making payments on a car, a house or other big ticket items, you can usually keep this property as long as you keep making the payments. You can pay for them inside a Chapter 13 plan, or just keep paying directly in a Chapter 7. There are ways to reduce the amount you pay in both Chapter 13 or Chapter 7, though in a Chapter 7 you may want to“reaffirm” one of these debts, which also carries the risk of getting back into trouble if you can’t make the payments.
If you have some property that can’t be protected by exemptions in a Chapter 7, you can keep it if you can propose a Chapter 13 plan that pays your creditors as much as they would get in Chapter 7. In a Chapter 7, if you can’t protect all of your property with an exemption, you still get to keep the cash amount of the exemption after the property is sold.
