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Chapter 7 & 13 Bankruptcy Facts

Questions? Our Tacoma bankruptcy attorneys can help.

Our bankruptcy attorneys in Tacoma, WA providing you facts and answers.

Talk to Tacoma bankruptcy lawyer, Erin M. Lane.

When considering filing for bankruptcy to get out from underneath your debt, there are sure to be many questions and uncertainties that arise. Is bankruptcy right for you? Can you qualify? What are the types of property that you can keep? Erin M. Lane and the experienced legal team that works with her are here to answer your questions. Call us for your FREE initial case consultation today!

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Our bankruptcy attorneys in Tacoma, WA providing you facts and answers.

Below are some answers to common questions that we frequently get asked about bankruptcy. Please contact one of the Tacoma bankruptcy attorneys from our team if you are considering filing in Washington and have your own questions that need answers. The following should provide some helpful information regarding bankruptcy facts.

What types of debts will I be able to discharge in bankruptcy?

In either Chapter 7 or Chapter 13, you can discharge (wipe out) most, if not all, of your unsecured debts (these are debts that have no collateral attached to them). These debts include credit card charges, medical bills, pay day loans, income taxes over 3 years old if your tax returns were also filed at least three years ago, unsecured guarantees, personal loans and notes, most judgments as well as garnishments, repossession debts, debts from broken leases, evictions, past utility bills, etc. You may also be able to discharge your home mortgages and car loans so long as you will be surrendering these properties.

Is there is debt limit to filing for bankruptcy in Washington State?

No, not for Chapter 7 cases. For Chapter 7 cases, you can qualify for bankruptcy regardless of how much or little debt you owe, and all of your unsecured debts will be discharged in a successful Chapter 7 bankruptcy.

That being said, you cannot file for Chapter 13 bankruptcy if you happen to owe over $336,900 of unsecured debts (ie. credit cards and medical bills) or over $1,010,650 of secured debts (ie. mortgages and car loans) even if you intend to remain current on your secured debts and keep the properties.

Can I keep my house in bankruptcy?

If you do not have equity greater than $125,000, you can keep your house in bankruptcy. Washington State allows generous protection to keep one’s house. However, in most cases, it is required that you are able to cover your regular mortgage payment in order to keep your house. The laws of bankruptcy disallow you to be able to lower mortgage payments with Chapter 7 and Chapter 13 proceedings.

Can I get rid of my second mortgage and still keep my house?

Yes, in some cases. If your second and any succeeding mortgages no longer have any secured value based upon the current fair market value of your home, you can discharge your second and any additional successive mortgages through Chapter 13 bankruptcy proceedings.

If you qualify under these circumstances, one of our experienced Tacoma bankruptcy attorneys can guide and represent you through this process to get rid of one or more mortgages on your house (other than your first mortgage). In today’s declined real estate market, more and more homeowners are able to discharge their second mortgages through Chapter 13 bankruptcy proceedings because the sale of the house will not even pay off the entire balance of their first mortgage.

What is equity?

Equity is the net value of house. It is the current fair market value of your home minus the amount of outstanding mortgages on your home.

Can I keep a vacation or rental home in bankruptcy?

It is more difficult to keep a vacation or rental home in Chapter 7 or Chapter 13 bankruptcy. If the house has no equity, then you can keep the home. However, in the case that the home does have equity (after subtracting roughly 8 percent of the FMV, fair market value, for costs of the sale), you possibly may have to surrender possession of it. If this is the case, the court would claim possession and give your creditors the proceeds of the sale – unless the difference can be paid by you to the court.

Can I keep my cars in bankruptcy?

Typically yes. Most people keep their cars in bankruptcy unless you have a very large amount of equity in them that you will not be able to protect in bankruptcy proceedings. If you have a car loan, as with keeping a home in bankruptcy, it is a must that you are able to cover your regular monthly car payment to keep your car.

What does filing for bankruptcy do to your credit?

In most cases, bankruptcy filers see an improvement in their credit scores due to the drop in debt-to-income ratios and because outstanding debts are wiped out. Most individuals report an improvement in their credit scores typically within a 6-month period after they have filed bankruptcy.

Will I ever be able to buy a house after filing for bankruptcy?

Our knowledgeable team of bankruptcy attorneys in Tacoma, WA are often asked about home ownership in the future if they file. For the most part, the answer is yes. Filing for bankruptcy will not preclude you from obtaining financing for a home in the future. But there are many variables to this question. The simple truth, however, is that many homeowners have filed for bankruptcy prior to owning their home. Many mortgage lenders can qualify you for a mortgage within two or three years after you have filed for bankruptcy. The real key is that you must have a good credit history since your filing, and you must also have the income necessary to support the mortgage you are seeking.

Can I finance a car after filing for bankruptcy?

Many car lenders can qualify you for a car loan almost immediately after you have filed bankruptcy. It can be easier to qualify for a car loan afterwards because, as stated above, there is a drop in debt-to-income ratios and outstanding debts are wiped out. Therefore, you have more income available to afford a new car loan.

Can my creditors contact me after filing for bankruptcy?

In most cases, the answer is no. Immediately when your bankruptcy case is filed, an automatic stay is created. An automatic stay prevents creditors from taking further collection again against you. This includes telephone calls to work or home, or cell phone, collections letters, etc. However, if you are behind on your home or car loans and intend to surrender that property, the corresponding creditor will typically file a motion to the bankruptcy court for “Relief from Stay” to move forward to repossess that property. This process takes at least 30 days from the date a bankruptcy petition is filed.

Can I keep my furniture and other personal property if I file for bankruptcy in Pierce County?

The Federal and Washington State bankruptcy laws allow for filers to keep a generous amount of personal property. Most people keep their furniture, clothes, cars and other personal property after they have filed for bankruptcy.

What are the benefits to filing Chapter 7 bankruptcy over Chapter 13 bankruptcy?

A successful Chapter 7 bankruptcy case gets rid of all of your unsecured debts – debts such as credit card and medical bills, unsecured personal loans, deficiency judgments on repossessed vehicles and a foreclosed home, etc. In a Chapter 7 bankruptcy, you will not need to repay any of unsecured debts.

You should file a Chapter 7 bankruptcy instead of a Chapter 13 bankruptcy if:

  • You do not need to catch up on a home or car loan.
  • All of your property is exempted (protected) by the bankruptcy code.
  • You do not have any disposable income.
  • You have no income taxes or student loans to repay that you cannot afford.
  • You have not filed a Chapter 7 bankruptcy in the past 8 years.
  • Your household income qualifies you to file for Chapter 7 bankruptcy.

Still have questions? Please call for your FREE initial consultation today!

Do you have your own questions about bankruptcy facts? Our Tacoma bankruptcy attorneys have answers! Please don’t hesitate to call our team of bankruptcy attorneys in Tacoma, WA – we are here to help you get back on track, and can provide you with affordable low flat fees and flexible payment plans to fit your budget.

(253) 444-5869

Contact Tacoma, WA Bankruptcy Attorney, Erin M. Lane

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(253) 444-5869
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