Chapter 7 Bankruptcy

A Chapter 7 Bankruptcy is known as a “straight” bankruptcy or a “liquidation” bankruptcy. A Chapter 7 Bankruptcy requires the filer to give up property that is not “exempt” under the law, so the property can be sold/liquidated to pay creditors.  However, over 99% of the bankruptcy cases that I have filed over the last 18 years have NOT been "liquidation" cases. My client(s) did not have to sell any of their property to pay back their creditors. The likelihood that you will have to pay creditors anything is quite low. However, if you have property that cannot be claimed exempt by the bankruptcy law exemptions, you may file a Chapter 13 Bankruptcy, which will allow you to keep all your property.

 

If you want to keep property like a home or a car AND you are significantly behind on your mortgage or car payments, a chapter 7 case may not be the right choice for you.  That is because a chapter 7 bankruptcy does not eliminate the right of a mortgage holder or car loan creditor to take your property to cover the debt you owe on the car or home. Mortgage holders and car lenders are considered secured creditors. If you do not make your car payments, your car may be repossessed. If you do not make your home loan payments, your house can be foreclosed. If you need to get caught up on your mortgage payments or if you need to get caught up on your car payments, a Chapter 13 Bankruptcy may be the best choice for you. 

 

If your income is above the median family income in Washington State, you may have to file a chapter 13 case. The annual median family income for a family of four in the state of Washington, as of March 9, 2022 is $113,566. A single person household can make up to $71,060 per year. A household size of two can make up to $86,240 per year. The court looks at all of the gross income (income before taxes and deductions) you received the six (6) months prior to the month you anticipate filing your case to determine your average annual income. If you are above the median, you will most likely have to file a Chapter 13 bankruptcy or wait to file a Chapter 7 bankruptcy depending on your circumstances. The court looks at all income sources, including unemployment compensation, pension, retirement, and even contributions from others to your household living expenses.  

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For more information on Chapter 7 bankruptcy and bankruptcy in general, check out my Bankruptcy Frequently Asked Questions & Answers page on this website.