Medical bills, unemployment, divorce, and other unexpected life events can wreak havoc on an individual’s finances. Businesses can also go bankrupt under the pressure of excessive debt. In these situations, notices and creditor harassment are not uncommon. As efforts are made to collect on unpaid debts, stress can quickly set in as you begin questioning what to do next.
Being in a position of financial distress is frightening and confusing. At Symmes Law Group, our team of bankruptcy professionals simplifies the process and helps accelerate the time it takes to complete the process. We provide you with exceptional service and work to reduce your overwhelm. Our clients are our top priority, and we endeavor to help them get their lives and finances back on track.
The Purpose of Filing for Bankruptcy
Millions of Americans apply for bankruptcy each year. Filing for bankruptcy serves to satisfy creditors, provide relief for a person in debt, and address the value of assets. Bankruptcy is designed to help a person who is insolvent and who can no longer repay their debts due to various circumstances. Bankruptcy also acts as an intermediary when multiple creditors are pursuing repayment, and there are not enough assets to be distributed. Filing for bankruptcy protects the rights of both the debtor and the creditor.
Types of Bankruptcy in Renton, WA
There are a few types of bankruptcy available for both individuals and businesses and are classified according to their chapter in the U.S. Bankruptcy Code. Chapter 7 and Chapter 13 are the most common types of bankruptcy for individuals, and Chapter 11 is often used for businesses, although most small businesses do not need to file bankruptcy themselves. While the overall goal to provide debt relief remains the same, each chapter involves different steps and serves different purposes. Due to the complex nature of each type, it is important to work with Renton bankruptcy attorneys throughout the entire legal process so you can file for the chapter that will provide you the most relief for your situation. A lawyer will also advocate and negotiate for you throughout the proceedings.
An Overview of Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy allows for the liquidation of nonexempt property and assets to pay creditors. Some assets may be protected from being sold to cover debt repayments, while everything else must be forfeited. Sometimes, liens and mortgages for portions of property may be taken as part of the bankruptcy proceedings. Anything that can be discharged to satisfy creditors and provide a fresh start for an individual may be used.
For a person to qualify for bankruptcy under Chapter 7, they must take a means test. This test determines the individual’s financial eligibility and ensures that their application for bankruptcy is not abusing the system in any way. The person must also have attended credit counseling in the last 180 days in order to file for bankruptcy.
When seeking Chapter 7 bankruptcy, a person must file a petition and pay all applicable filing and administrative fees to the court. They must also provide additional documentation of their financial situation to be reviewed by the court. The documents required include the following:
- A list of liabilities and assets
- Current income and expenses
- An account of their financial situation
- A list of contracts and unexpired leases
- Most recent tax return, as well as any other applicable years
- A debt repayment plan
- Certificate of credit counseling
An Overview of Chapter 13 Bankruptcy
Within the parameters of Chapter 13 bankruptcy, a person with a normal income may have adjustments made to their debt. With this situation, a person may also keep property and make a plan to pay off all or part of their debt in a time frame that typically covers a span of three to five years. Generally, those who make below the state median will repay their debt within three years, and those above the state median will have five years to repay their debt.
To be eligible for Chapter 13 bankruptcy, the total of unsecured debts must remain below $465,275,000 and secured debts must below 1,395,875. Additionally, a person must have completed credit counseling within the last 180 days prior to seeking bankruptcy. As part of the filing process, a person applying for Chapter 13 bankruptcy must also file the following along with all filing fees:
- A list of all liabilities and assets
- All income and expenses
- A statement regarding their financial situation
- Any contracts and unexpired leases
- Certificate of credit counseling
- A debt repayment plan
- Documentation of employment/payments
- Tax return
- Documentation of student loan interest
- Most recent tax return, as well as any other applicable years
An Overview of Chapter 11 Bankruptcy
In contrast to filing as an individual under Chapters 7 and 13, Chapter 11 bankruptcy is for businesses or high net worth individuals. When a business files for Chapter 11, the business or partnership is reorganized, and a repayment plan is created to pay creditors gradually while the business continues to operate. While filing for bankruptcy may be voluntary or involuntary, a business filing under Chapter 11 is still able to remain in possession of the business, perform the role of a trustee, and may be able to borrow additional funds with court approval.
Filing for Chapter 11 requires the person seeking relief for the business to have completed credit counseling within the last 180 days. They must also submit a reorganization plan to the court to be reviewed as part of the proceedings. Additionally, when filing for Chapter 11, a business must provide:
- Record of liabilities and assets
- Documentation of income and expenses
- Record of current contracts and leases
- Details of financial situation
Assets That are Considered to be Exempt When Filing for Bankruptcy
When filing for bankruptcy, the majority of assets are protected with exemptions – see here: assets are protected in bankruptcy and may not be liquidated during the proceedings. Federal and state exemptions are available, but a bankruptcy lawyer will assist and advise you on which is the right option for your situation, as only one exemption or the other may be applied.
Federal protections offer greater asset protection in most areas, with the exception of home exemptions. This is especially true in Washington State where a debtor may be able to protect the median value in the county they live in, in total equity. Most of the exempted assets are protected as long as the value stays below the capped amount for each type of allowed item. Some common types of protected assets include:
- Household goods
- Vehicles
- Most retirement accounts
- Wildcard protection
Conversely, protections under Washington State laws allow for greater protection of a home but provide a lesser degree of protection for other exempt items. Under state guidance, the focus is on primary residences that have considerable equity in the home. If a person has lived in their home for more than three years, up to the median value of the home in that location can be considered exempt. If the home has been owned for less time than that, they are subject to a capped exemption amount. In regards to other exemptions, Washington allows for the same type of protections that the federal government provides, but the amounts are capped at a lower value. If a person wants to maintain possession of their home, they may prefer to take the Washington state exemption, as it has the most generous provisions for homes.
How to Determine if You Should File for Bankruptcy
If you are trying to determine whether or not filing for bankruptcy makes sense for your situation, there are a few factors you will want to know about bankruptcy and take into consideration when making your decision. For both Chapters 7 and 13, your income level will play a significant role in deciding which option you can file an application under. For Chapter 7, income must be below the state median level, and for Chapter 13, your median income dictates the duration of your repayment timeline. The means test is also applicable for both Chapters to assess all debts, incomes, assets, and so forth to determine which level of bankruptcy you should file for and what assets may be either protected or sold during the process.
Legal Process When Filing for Bankruptcy in Renton, WA
When filing for bankruptcy, it is important to work with a Renton bankruptcy lawyer to ensure all steps are being properly taken, documents are being filed correctly, and the best strategies are being employed for your situation. A lawyer in Renton, WA, will also be able to simplify the process by providing expert knowledge and the ability to advocate for you and your rights. They will also review all your documents and advise on what steps to take, all before you ever step foot in court.
During the bankruptcy process, your lawyer will begin with a discovery process. They will learn all the details of your situation, as well as gather and review all relevant documents and financial records in your possession. After receiving all documentation, as well as payment for legal fees, they will then pull your credit report and work on drafting and submitting your petition and proposed repayment plan. Once the petition is reviewed, signed, and submitted, a meeting of the creditors will take place in court within 30-45 days of filing for bankruptcy. Following confirmation, debts are discharged within a specified time frame, and in the case of Chapter 13, the repayment plan begins. In the meantime, a second credit counseling course is required.
After all steps in the legal process are completed, you will be able to start fresh. With all applicable debts discharged, you will be relieved from the weight of heavy debts and bills. Implementing financial practices and credit score-rebuilding techniques will further develop forward momentum after bankruptcy.
Non-dischargeable Debts
In some cases, you may still have a few select outstanding debts that you will need to continue paying after completing the bankruptcy process. These are called non-dischargeable debts. According to the United States Courts, these debts can’t be discharged due to public policy that either governs the nature of the debt itself or affects a public safety issue. In general, non-dischargeable debts can include:
- Particular types of tax claims
- Debts not listed on the debt and asset list provided to the court
- Spouse or child support
- Alimony
- Debts for causing property damage or personal injury
- Government penalties/fines
- Student loans
- Other applicable government entities
Expected Time Frame to Complete Bankruptcy Proceedings
The time frame for progressing through all stages of the bankruptcy process can take some time. In a Chapter 7 bankruptcy timeline, it may take up to 100 days from the point of filing for bankruptcy to complete the legal proceedings and receive discharge of debts. Additionally, credit counseling must be completed 180 days before filing for bankruptcy.
In the Chapter 13 bankruptcy timeline, the initial proceedings may also take up to 100 days, plus the time it takes to complete counseling within the 180-day window before filing for bankruptcy. However, after that, the next three to five years are spent repaying debts per the plan created during the bankruptcy process. After the final payment is made, the discharge of any remaining debts can take up to 6 months to be processed.
In the case of Chapter 11 bankruptcy, there can be several options for how to proceed, which may affect the time it takes to complete the process. If you are a business owner, Renton bankruptcy lawyers can evaluate your business structure, financial situation, and more to choose the best strategy and filing method for you.
A Renton Bankruptcy Attorney Can Help You Achieve Financial Relief
Bankruptcy can be a complex process that is affected by many factors and variables. Having a bankruptcy attorney by your side can be invaluable. At Symmes Law Group, our bankruptcy lawyers will guide you through the process and work to resolve your case quickly so you can get the relief you need. We strive to provide you with a fresh start and minimize your stress during a difficult time. Contact us today for a complimentary consultation and learn what options might be right for you.
