Bankruptcy and Your Personal Possessions in Tacoma Washington

Bankruptcy offers protection for your most personal possessions while giving you an opportunity for a fresh start. The property most people would consider to be basic necessities are protected by bankruptcy exemptions. The exemptions are established by law and divided into several categories like one for homestead (equity in your home), automobile, household goods, retirement plans, child support, personal injury lawsuits and jewelry to name some of them. There is also a “wildcard” exemption that can be used on any kind of property. In Washington, you can choose between state and federal exemptions. You can not use some state and some federal exemptions – either you use all state or all federal. Your choice of exemptions should be a careful one.

The exemptions are fairly similar but one big difference is that Washington allows a $125,000 homestead exemption while the federal homestead exemption is $43,250.  The federal wildcard exemption is up to $11,975 but the state wildcard is only $3,000. You can combine the wildcard with other exemptions. For instance, if you have a car that is worth $10,000, you can combine your car exemption of $3,450 with $6,550 of federal wildcard and exempt the whole thing. Both federal and state exemptions offer 100% protection for retirement plans.

If you have some property that you can not protect with exemptions, you can file a Chapter 13 and pay creditors money through monthly payments rather than giving up the property for sale. For instance, if you had a car worth $15,000 but no exemptions left to cover it, you could pay $250 per month for five years instead.

If you are making payments on a piece of property, you can usually keep it if you continue to make the payments. In a Chapter 7, you just keep making the payments as always. You can sign a reaffirmation agreement or just keep making the payments, though a car company can repossess a car without the reaffirmation even if you are current. If you sign a reaffirmation agreement for a debt, it is no longer included in the bankruptcy.

In a Chapter 13, you can pay a car loan or other secured debt spread out over five years. If you purchased the car over two and a half years ago, you can pay the value of the car only and pennies on the dollar for the rest of the loan. A Chapter 13 allows you to catch up on mortgages as well. In general, a Chapter 13 is more flexible and offers more options to keep more property than a Chapter 7 but a Chapter 13 requires a payment plan and you have to be able to afford it.