Washington State Bankruptcy Attorneys

Your personal property and assets.

What happens to them in a Washington State bankruptcy?

What happens to my real and personal property when I file a Washington State bankruptcy?

Is everything sold when I file a WA State bankruptcy?

When you file a Washington State bankruptcy, everything you own becomes property of the bankruptcy estate. The US Bankruptcy Court controls what happens with that estate.  The Court also protects you from your creditors, and discharges most of your debts.  That’s the trade-off.  But it’s not as scary as it sounds.

There are two basic kinds of bankruptcy:  Liquidation or restructuring payment plans.

For most people, a bankruptcy is a liquidation bankruptcy, or a Chapter 7.  For those with disposable income left each month, there are chapters 11, 12, or 13 to reorganize the debt and make a court-approved payment plan.

Most people file chapter 7’s or 13’s , because chapter 12’s are for family farmers and fishermen, and chapter 11’s are usually business cases.

When you file a Washington State bankruptcy, however, you are not put out on the street.  Each state and the federal government have created “exemptions” that protect your real and personal property.  No one would benefit if you were put you out on the street.  As a result, you are allowed to keep a certain dollar amount in valuables, especially the kind that make you able to continue to live and be productive, like furniture, clothing, and vehicles.

There are exemptions of up to $125,000 to protect the equity on your house, up to $2,500 (Washington) and $3,500 (Federal) in value in one vehicle per person, and exemptions to protect jewelry, clothing, furniture, computers, I-pods and other items. There is even a federal “Wild Card” of about $11,000 that you can use on anything!

For most people, this means that they will be able to keep everything they own, because the exemptions are pretty generous.

However there are assets, such as too much value in a home, a business, a vehicle or other asset, which may make filing a bankruptcy a risky option. If you file a chapter 7 bankruptcy, it is the job of the bankruptcy trustee to find and liquidate your assets that are not protected by an exemption to pay back your creditors. If you fail to disclose an asset, you may be committing a federal felony.

If you try to get rid of the property before you file your case, the trustee can go after the person you gave it to or sold it to too cheaply, and make them give it back.  Then you lose any exemption you might have had. If you fail to disclose that you sold or transferred something, you, again, may be committing a federal felony.

But don’t despair: In many cases, we can create a chapter 13 plan where you are able to keep items otherwise over the exemption limits.  In return, over 3 to 5 years, you pay the amount a chapter 7 trustee would have been able to get for your unsecured creditors. (We do this by creating an imaginary chapter 7, and doing the math—the amount left after claiming exemptions and expenses goes to your unsecured creditors.)

Since many clients that file chapter 13 cases often owe taxes, which are an unsecured debt that they have to pay anyway, this is often a great situation: you are protected from the IRS by the Court while you pay the IRS back, and you get to keep all your stuff in the bargain!

If you have questions about what will happen to you property in a Washington State bankruptcy, we encourage you to call and talk to one of our experienced Washington State bankruptcy attorneys.  We can help you determine whether you have assets that can be protected, and whether a chapter 13 can be an option.  We can also advise you how to protect your assets in our pre-bankruptcy planning.