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valuable assetsIf you are thinking that you have valuable assets and want to file for bankruptcy you should consult with a Washington State bankruptcy lawyer first.  Failure to educate yourself on what you can and cannot keep or “exempt” in a bankruptcy case can result in a bankruptcy trustee selling your assets to pay your creditors.  This is most likely to happen in a chapter 7 bankruptcy case, however most chapter 7 bankruptcies end up being no-asset cases which means that the debtor gets to keep all of their personal belongings. In a no asset case there are no assets for a bankruptcy trustee to administer and distribute to creditors. Your bankruptcy attorney can advise you if your case is likely to be a no asset case.

In Washington state, debtors may choose to use Federal or Washington State bankruptcy exemptions to protect their assets. Depending on what assets a debtor can protect will depend on which set of exemptions are used. The Washington State and Federal exemptions may not be combined so debtors need to choose one set or the other. Debtors who file for bankruptcy and have assets valued above the exemption limit may be at risk of having their assets sold by a bankruptcy trustee. The most common asset that may be subject to liquidation is a debtors home or rental property.  Over the last decade, real estate prices have soared in the Seattle metro area creating significant equity in real estate.  With that said, many debtors with equity in their homes are unable to access it short of selling their homes because they don’t have good credit or an ability to repay a second mortgage as well as a first mortgage.

Most debtors filing bankruptcy in Washington State who own a home with significant equity will choose the Washington State bankruptcy exemptions.  Currently the Washington state bankruptcy exemptions allow for the protection of $125,000 of equity in a primary residence located in the state of Washington, however at this time there is a push to increase the homestead exemption in Washington State.  Currently If you have more than $125,000 of equity in your home, a bankruptcy trustee could sell your home to pay your debts in chapter 7 bankruptcy.  The Federal bankruptcy exemptions allow less protection than the Washington state bankruptcy exemptions, so if you own a home with equity in Washington State, debtors should choose the Washington State bankruptcy exemptions.

Often times, bankruptcy trustees will be willing to make a deal with debtors who agree to make payments or pay a lump sum to a bankruptcy trustee in exchange for the debtor being allowed to keep an asset. Some debtors are tempted to hide or transfer assets prior to filing for bankruptcy, but this would be a mistake as hiding assets may result in you not receiving a discharge due to committing bankruptcy fraud or acting in bad faith.

If you believe you have assets that are valued above the allowed exemptions you are allowed to exempt, you may want to consider filing for chapter 13 bankruptcy instead of chapter 7 bankruptcy.  In chapter 13 bankruptcy no assets are taken and sold, however you do need to make payments to creditors based on your household size, household income and the liquidation value above the allowed exemption amounts to your creditors.  If you cannot afford to pay at least the liquidation value to your creditors over a period of 5 years, then chapter 13 bankruptcy may not be a viable long term debt solution for you either.  If that is the case you may want to pursue selling your home to negotiate settlements with creditors with the equity that you receive from the sale. You could also take no action, which may result in a judgment against you and a judgment lien being placed on your home which will accrue interest.  A judgment can last for 10 years and be renewed for another 10 years but they typically cannot foreclose on a home.  Also if you are not working then you don’t have to worry about wages being garnished.  This is not ideal as the equity in your home would erode over time as judgment liens need to be paid at closing when a home is sold if they are still valid liens.

What you should do with assets such as cash depends on your personal situation and what type of bankruptcy you may be filing and whether you are below exemption limits or not. There are different types of debts, each treated in a different way, some of which may be worth paying prior to filing if you are going to be above allowed exemption limits. Debts worth paying are called priority debts and are not discharged in a bankruptcy filing.  These debts include things such as taxes incurred in the last 3 years, debts owed to city or government agencies, child support or or debts from criminal activity.  With that said it is never a good idea to pay a significant amount to creditors or transfer assets right before filing for bankruptcy and you should plan out your strategy over several months or years if necessary to avoid any complications if you are considering filing a bankruptcy case.

If you have valuable assets and want to file for bankruptcy, give Symmes Law Group a call or contact us today to discuss your options and see if bankruptcy or other alternatives may be an option for you in the future.

  • Richard Symmes

    Hi, Richard here

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