Tacoma Chapter 7 Bankruptcy Lawyer

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Chapter 7 Bankruptcy in Washington State

Chapter 7 bankruptcy discharges (wipes out) virtually all of your unsecured debt: credit cards, medical bills, collections, negative equity in a motor vehicle or house (many times after a repossession), and any other debts that do not have collateral attached to them. By discharging these debts in a Chapter 7 bankruptcy, your are able to get a fresh start and begin rebuilding your financial independence.

There are a few exceptions to discharging unsecured debts in a Chapter 7 Bankruptcy. The most common exceptions are unpaid taxes, court fines, and student loans.

        

Stop creditors dead in their tracks.

The Automatic Stay

Filing a Chapter 7 Bankruptcy petition triggers what is commonly known as an "automatic stay."  An automatic stay is a very powerful and important protection that prohibits creditors from taking any further collection activity.  In fact, it prevents them from having any contact with the debtor/filers.

If also stops any lawsuits, garnishments or foreclosure proceedings.  Any further action by your creditors must be done filing a court motion and obtaining approval of the bankruptcy judge.  The rarely happens except in very unusual circumstances. 

If you have a unique situation involving an asset or a creditor, our experienced Tacoma bankruptcy lawyers can assist you learning about your legal rights and what will likely happen if you file a Pierce County bankruptcy petition.

The New Bankruptcy Laws enacted in late 2005 prohibit some filers with higher incomes from qualifying for Chapter 7 Bankruptcy. In our experience, however, most people will still be able to file and discharge 100% of their qualifying debts.

Discharge your debts and keep your property.

A Chapter 7 bankruptcy filing is the fastest way to obtain a fresh financial start.

A Chapter 7 Bankruptcy filing discharges (wipes out), most, if not all, of your unsecured debts---credit card charges, medical bills, pay day loans, income taxes over 3 years old if your tax returns where also filed at least three years ago, unsecured guarantees, personal loans and notes, most judgments and garnishments, repossession debts, eviction or broken lease debts; past utilities, etc.

A Chapter 7 does not discharge certain taxes such as income taxes for years less than three years-old and trust fund taxes, alimony, child support, student loans and most credit charges within sixty days of filing bankruptcy for luxury goods and services, most cash advances on credit cards with 70 days of filing bankruptcy.

If you file for Chapter 7 Bankruptcy and wish to keep your home or car, you must be current on your house and car payments or risk them taken by the creditors by foreclosure proceedings or repossession soon after you file for Chapter 7 Bankruptcy.

The bankruptcy allows your to keep a generous amount of property in Chapter 7 Bankruptcy . In Washington State Chapter 7 protects your house so long as you have no more than $125,000 of equity. In most cases your vehicles, furniture, wages, retirement plans and life-insurance-cash value also protected from creditors. Depending upon the value, stocks, bonds, and mutual funds may also be protected in a Chapter 7 Bankruptcy.

A Chapter 7 bankruptcy filing also cancels a pending foreclosure sale. The filing actually cancels the scheduled foreclosure action date and requires the mortgage lender to filing a motion with this court to permit a new date. In many cases, it will take the mortgage lender several months to schedule a new foreclosure date. This gives homeowners more time to remain in their house, even if they are no longer able to make the mortgage payments. It can also give homeowners more time to catch up on their mortgage payments if they are trying to catch up and stay in their house.

Do I Qualify for Chapter 7 Bankruptcy?

There are several criteria for Qualifying for Chapter 7 Bankruptcy:

1. You must not have filed a previous Chapter 7 Bankruptcy in the past 8 years.

You must not show any disposable income at the time you file your Chapter 7 Bankruptcy petition. This means after subtracting your current net monthly income from your reasonable monthly living expenses (excluding the debts you wish to discharge in Chapter 7 Bankruptcy, you have no income left over at the end of the month to pay any of your unsecured debts you wish to discharge. Our experienced Tacoma bankruptcy lawyers can advise you over permissible monthly expenses in your case to help determine your disposable income.

If you have any disposable income, the bankruptcy court will make you file a Chapter 13 bankruptcy and repay at least a portion of your debts, usually over a period of 36 or 60 months.

2. You must also qualify for Chapter 7 Bankruptcy under the Means Test. The Means Test is a new requirement created under the 2005 Bankruptcy Reform Act that requires, among other factors, an analysis of your average gross income (before deductions) over the past 6 months prior to filing for Chapter 7 Bankruptcy.

Under the Means test, any income you earn from Social Security or Social Security Disability is not disclosed and calculated in determining yior gross monthly income.

If you are below the state median income based upon your family size, you will qualify for Chapter 7 Bankruptcy, you will qualify for Chapter 7 Bankruptcy so long as you have no disposable income (see number 2 above).

The Washington State median income Means Test is adjusted periodically.  To learn more about the current income thresholds, please call our offices for a free phone consultation.

Although your are required to disclosure your year to date income and your income for the previous 2 tax years in your Chapter 7 Bankruptcy petition, it is your last 6 months of income that determines whether you can qualify for Chapter 7 bankruptcy under the Means Test.

3. If you are above the state median income for your family size, you can still qualify for Chapter 7 bankruptcy based upon your current monthly expenses including the following: mortgage or rent expense, heath insurance premiums, monthly out of pocket, health care expenses, monthly tax deductions, domestic support obligations (alimony or child support), mandatory deductions from your pay check, monthly phone and internet expenses. Our experienced Tacoma bankruptcy lawyers can do an in depth analysis on your case and financial issues to determine if you qualify for Chapter 7 bankruptcy under the Means test.

How High is Your Income?

The New Bankruptcy Laws enacted in late 2005 prohibit some filers with higher incomes from qualifying for Chapter 7 Bankruptcy. however, most people will still qualify.

Under the new rules, the first step in figuring out whether you can file for Chapter 7 is to measure your "current monthly income" against the median income for a family of your size in Washington state.

Your "current monthly income" is not your income at the time you file, however: It is your average income over the last six months before you file.

If your income is less than or equal to the median, you can file for Chapter 7. If it is more than the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for Chapter 7. The Means Test changes frequently. For up to date information about the current means test income thresholds and whether or not you qualify, please call us for a free consultation about your case.

The Means Test

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to pay back a portion of your debt.

To find out whether you pass the means test, you start with your "current monthly income," calculated as described above. From that amount, you subtract both of the following:

Certain allowed expenses, in amounts set by the IRS. Generally, you cannot subtract what you actually spend for things like transportation, food, clothing, and so on; instead, you have to use the limits the IRS imposes, which may be lower than the cost of living in your area.

Monthly payments you will have to make on secured and priority unsecured debts. Secured debts are those for which the creditor is entitled to seize property if you don't pay (such as a mortgage or car loan). As mention above, priority unsecured debts are obligations that the law deems to be so important that they are entitled to jump to the head of the repayment line. Typical priority debts include child support, alimony, tax debts, and wages owed to employees.

If your total monthly disposable income after subtracting these amounts is less than $100, you pass the means test, and will be allowed to file for Chapter 7. If your total remaining monthly disposable income is more than $166.66, you have flunked the means test, and will be prohibited from using Chapter 7.

So what about those in the middle? They have to do some more math. If your remaining monthly disposable income is between $100 and $166.66, you must figure out whether what you have left over is enough to pay more than 25% of your unsecured, nonpriority debts (such as credit card bills, student loans, medical bills, and so on) over a five-year period. If so, you flunk the means test, and Chapter 7 won't be available to you. If not, you pass the means test, and Chapter 7 remains an option.

In almost all cases, we are able to qualify people for Chapter 7 bankruptcy if their incomes fall below the state median. This is because almost all filiers whose income are below the state income can rather easily show less than $100 per month of disposible income---or even no disposible income at all---when taking into account their reasonably monthly living expenses.

Property Must Be Valued at Replacement Cost

Most filers can keep all of their personal property in a Chapter 7 Bankruptcy. Such property is considered exempt property and cannot be taken by the creditors or the bankruptcy court---you are entitled to keep it.

Under the old law, Chapter 7 filers could value their property at what they could sell it for in a "fire sale" or auction. This meant that used furniture, hobby items, cars, heirlooms, and other property a debtor might want to keep were typically assumed to have little value -- and, therefore, that it often fell well within the "exempt property" categories offered by most states.

Under the new law, you must value your property at what it would cost to replace it from a retail vendor, taking into account the property's age and condition. This requirement is sure to increase the value of property, which means more debtors stand to have their property taken and sold by the trustee.

How Long Will My Case Last?

In general, the Chapter 7 Bankruptcy process is relatively short and typically lasts approximately three to four months from filing to discharge. Additionally, it is rare for motions to be filed by anyone in a Chapter 7 case. With the recent changes to the bankruptcy laws, however, the process is much more involved and complicated than it used to be. As a result, there are many pitfalls for those not experienced with the bankruptcy process and it is all the more important to hire an experienced bankruptcy attorney.