Washington Debt Relief

There has been a lot of talk about debt settlement, debt management or debt negotiation as the better options to bankruptcy for Washington debt relief. In general, it is better to try to meet your obligations than to just cut line and run. But there are circumstances which may not leave you with much of a choice.

Conditions that Favor Bankruptcy

washington debt reliefThese circumstances may include a sudden or debilitating sickness, permanent disability, illness in the family, or loss of employment. Your financial bugbear could be one, or a combination of any of these that result in your inability to meet your debts.

If you satisfy any of the following conditions, you may be eligible for bankruptcy as your only debt relief option:

  • You are several months behind in all your bills and loan payments
  • You have no means of income, or your income falls below the state’s median wage
  • You are in imminent danger of foreclosure
  • You have no equity in your home, or no qualified asset for a loan or mortgage
  • You are unable to find employment
  • You have a permanent disability that precludes you from seeking gainful employment

Debt settlement or debt management presupposes that there is some money available that can be used as leverage to negotiate with creditors, and to eventually pay them with. These options also take time, and you may not have that luxury. If you have neither the time or money to consider any other option, then bankruptcy it will have to be.

Basics of Bankruptcy

The bankruptcy laws in Washington require that a debtor be a resident for at least two years and file at either The Western District in Seattle or Tacoma, or the Eastern District in Spokane or Yakima. You can file either for Chapter 7 (liquidation) or Chapter 13 (reorganization). Based on the scenario, you will most likely need to file for Chapter 7 bankruptcy for debt relief in Washington.

A major qualification for Chapter 7 bankruptcy is your income. If your monthly income falls below the median income in Washington, you will qualify. Under Chapter 7, you will have to liquidate all your assets and property that are not included in the list of exemptions. Exemptions are those that the federal or state government allows a debtor to keep, within certain limits. In Washington, a debtor can choose to follow the federal exemptions or the state exemptions, but not mix and match.

These exemptions cover the home, clothing and other personal property, social security and other public benefits, wages, proceeds from insurance and retirement funds. The exemptions have a fixed monetary value for each category, and if the value of the property exceeds the exemption, the debtor will have to sell the property and turn over the excess to the courts to be included in the payments to creditors.

Consequences of Bankruptcy

If you qualify for bankruptcy, you can no longer be dunned by creditors in any way. The court will decide which creditors will be paid and what amount based on whatever funds accrue from the sale of a debtor’s unexempted property. However, a successful filing for bankruptcy will reflect badly on your credit score, and will stay there for seven years or more. On the upside, you can start fresh within a short period from this type of Washington debt relief.

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