Chapter 13 bankruptcy is a way for an individual to propose a three to five year repayment plan to pay off all or a portion of their debts from their future income. Filing for Chapter 13 Bankruptcy can prevent events such as a foreclosure and car repossession. It can also serve as a tool to help an individual get a fresh start financially. Hundreds of people file for Chapter 13 Bankruptcy in Washington every month. Those who owe less than $394,725 total in unsecured debts and $1,184,200 in secure debts are eligible to receive a discharge in Chapter 13 bankruptcy.
What is Chapter 13 Bankruptcy in Washington?
Chapter 13 Bankruptcy in Washington is typically a reorganization of a person’s debt. Chapter 13 is typically the type of bankruptcy chosen by individuals wishing to keep secured assets, like their home or vehicle, especially when they have more equity in them than they would be able to protect with Washington bankruptcy exemptions.
Washington state residents can choose to file for bankruptcy on their own, but many choose to seek the help of a bankruptcy attorney. Especially in the case of those who’ve moved to the state recently or those filing jointly, an attorney can help a debtor better understand the long-term effects of bankruptcy and help them construct a plan that best suits the debtor’s unique situation.
During the Chapter 13 bankruptcy process in Washington, a resident files and creates a repayment plan illustrating how they will pay off the past-due debts and current financial obligations over the following three to five years. The amount paid every month in the majority of repayment plans is as much as regular payments plus additional money to catch up on any past due amounts.
Filing Chapter 13 Bankruptcy in Washington
In Washington, the average Chapter 13 bankruptcy process from filing to discharge takes between three and six years, depending on creditor negotiations and repayment plan terms.
Normally, the process starts with an individual consulting a bankruptcy attorney who guides the individual through the options available to them and instructs them on the filing process. Before filing, the individual’s income sources, major transactions, living expenses, debts, and possessions are documented and itemized. Next, the attorney and debtor gather the information and documents that they will need to file for bankruptcy. During this same time the debtor attends a mandatory credit counseling course.
Once the paperwork is complete, the debtor, with help from their attorney, determines which of the debtor’s belongings and property are exempt from seizure during the bankruptcy process based on Washington exemptions.
Developing The Repayment Plan
This plan looks at how much disposable income the debtor has, after paying for necessary reasonable monthly expenses. The plan will then determine how the remaining money will apply to the sum of the total debt. Items due to the government, including back due federal and state taxes and child support, as well as student loans are to be paid in full. Unsecured debt, such as credit card and medical bills, are often paid in part.
The Washington Means Test, officially determines how much of the debtor’s income he/she will need for reasonable monthly expenses.
Official Filing
This takes place when all the forms are filed at the appropriate court location. Washington has two filing locations, Seattle and Tacoma. Those living in Clallam, Island, Jefferson, King, Kitsap, San Juan, Skagit, Snohomish and Whatcom counties must file in Seattle. Those living in Clark, Cowlitz, Grays Harbor, Lewis, Mason, Pacific, Pierce, Skamania, Thurston and Wahkiakum counties must file in Tacoma.
Around a month after the filing, the court ordered trustee of the case will call a meeting. Called a 341 Meeting of Creditors, the debtor is required to attend. Here creditors are given a chance to review and negotiate the terms of the repayment plan.
Washington Chapter 13 Bankruptcy Forms
Chapter 13 bankruptcy cases in Washington are the responsibility of the Western District of Washington’s U.S. Bankruptcy Court. Several of the forms required to file are available on the court’s website. The forms are available in the form of an editable PDF.
The state of Washington requires those filing for Chapter 13 bankruptcy to complete credit counseling, and financial management courses before their case can be officially discharged. The Credit Counseling course must be completed in the 180 days before filing. After filing, the individual filing must attend a financial management course. These courses must be provided by an approved agency. Married individuals filing jointly must each take both courses and obtain their own certificates of completion.
When filing to forms, the debtor must pay the $310 filing fee to the court in the form of cash, money order or cashier’s check. The Western District of Washington Court does not accept debit cards or credit cards.
In the event a filing lacks all the proper forms, the court will send a Notice of Deficient Filing. This notice includes a list of the missing documents, as well as the the date when you must complete their filling. If a debtor fails to file the missing documents in time, the case may be dismissed without further notice.
The Western District of Washington Court provides resources to those who do not have an attorney to educate themselves via the court’s “Don’t Have an Attorney” page. However, while the court’s website contains many of the forms needed and guidance on filing, an attorney is the best source of information about the complex legal process of filing for bankruptcy.
Washington Chapter 13 Bankruptcy Exemptions
The rules governing exemptions are what determine what someone gets to keep when filing. Versus, what must be must be liquidated to pay for debts. In Chapter 7 bankruptcy, more assets are typically liquidated. While the repayment plan built into Chapter 13 bankruptcy, allows individuals to keep many assets. While simultaneously making payments to creditors, as a part of their payment plan.
Washington is one of the few states that allows individuals to choose between federal bankruptcy exemption standards or Washington exemption standards when filing. This allows a debtor, often with help from an attorney, to choose the exemptions that best protect their assets.
In Washington, a debtor can typically exempt 75% of disposable earnings. Or up to $3,250 towards a vehicle and up to $125,000 of their home.
Among Washington’s other exemptions include Building materials, Cemeteries, child support payments, insurance benefits, pension/retirement benefits, trade tools and implements.
Washington Chapter 13 Bankruptcy Rules
The Western District of Washington Bankruptcy Court provides the rules and requirements for filing a Chapter 13 case. You can find these requirements online on the court’s website.
The person filing “debtors”, is first required to complete a court approved credit counseling course within 180 days before filing for bankruptcy. At this point the debtor will receive a certificate of completion which will later be provided with the filing.
During the initial filing, the debtor must provide a collection of forms, and the filing fee. Official Form 101, and Official Form 121 must be properly filled out. You must also pay the court fee in full for the case to progress. However a complete filing includes all 16 items in the packet, for the case to progress.
New residents must wait until they have lived there for 91 days before they can file in Washington. Those who’ve lived in Washington for less than two years should use the state exemptions from where they lived the majority of the time in the 180 days immediately prior to the two years before moving.
Unsecured Debt in Washington Chapter 13 Cases
In a case of Chapter 13 Bankruptcy in Washington, here are the 3 categories of debt.
- Secured Debt
- Priority Unsecured Debt
- General Unsecured Debt
Secured debt is debt that is backed by ownership of an item with value, like a home or vehicle. Unsecured debt is without collateral. Priority unsecured debt typically is debt owed to the Government. Or debt that the Government or Courts require an individual to pay. Such as state and federal taxes and back due child support.
For the most part creditors settle an amount for a fraction for what the the total amount was. This settlement can sometimes be as low as ten cents to the dollar. After an individual completes the final payment of their bankruptcy plan, the case can go through discharge.
Reverse Mortgages in Chapter 13 Bankruptcy in Washington
A reverse mortgage is a loan available to individuals who are over the age of 62. They must also own a home that’s either paid off, or owned with only a small amount of mortgage debt. In a reverse mortgage, a bank makes payments to a homeowner based on equity in the home. In exchange for relinquishing ownership once the owner is passes away.
Washington’s Chapter 13 exemptions allow for a protection of the equity in the home. Depending on the results of the Washington Means Test, property and ability to collect reverse mortgage payments may or may not be exempt under Chapter 13. Meaning, payments received through a reverse mortgage will count towards the income considered for repayment plan calculations. This can make repayment plans higher. Because of this, some choose to wait until reverse mortgage payments have reduced the amount of equity in the home.
Some reverse mortgage loans consider filing for bankruptcy a breach of contract. Before filing bankruptcy it is best to have an attorney check for any clauses in the reverse mortgage. In order to identify an issue that may trigger a foreclosure.
Choosing a Trusted Mortgage after Chapter 13 Bankruptcy Company in Washington
Filing Chapter 13 Bankruptcy in Washington, is an opportunity to create a fresh start financially. Repayment plans offer people a chance to catch up and get back on their feet. Our team can help Chapter 13 filers purchase a home in as little as 1 year after filing for their bankruptcy. Sometimes we can help filers as quickly as, one day after discharge. While other lenders make you wait several years. Peoples Bank Mortgage is here to guide those who have filed bankruptcy through the home loan process. Our specialists can walk your through the process to get a home loan that meets your personal needs.
Reach out today to learn about all your home ownership options.
Published (April 27th, 2018)
Author: Peoples Bank Mortgage
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