Bankruptcy in
Washington State, Chapter 7 and Chapter 13.
There are two primary forms of consumer bankruptcy in Washington State, Chapter
7 and Chapter 13.
Bankruptcy is
a legal method of eliminating debt and providing a means for debt-oppressed people
to obtain a "fresh start." In many cases, bankruptcy means the elimination
of the debt that you owe to your creditors. They are two primary forms of bankruptcy,
Chapter 7 and Chapter 13.
Can
I keep my home if I file bankruptcy?
You can protect a certain amount of equity in your residence by claiming
a homestead exemption. For most people, their homestead exemption is sufficient
to protect the available equity and allowing the debtor to keep their home. If
there is too much equity in the property, the property may indeed be in jeopardy
of liquidation in a Chapter 7 proceeding. Contact the Law Office of Timothy Wilson
to discuss your options.
What
impact will my filing bankruptcy have upon my credit report and credit score?
A
bankruptcy filing generally remains on your credit for ten years following a Chapter
7 filing, and seven years following a Chapter 13 filing. A bankruptcy filing will
of course negatively impact your credit score, but if you are significantly behind
making timely payments to creditors your credit rating may already be adversely
affected. Given that the bankruptcy eliminates some or all of your debts, you
may be in a better financial situation to pay your bills and improve your credit.
If
I file a bankruptcy petition, will I ever be able to obtain credit again so that
I can buy a home or a car?
While
a bankruptcy filing damages your credit, it is by no means going to prevent you
from ever borrowing again. When a lender is deciding whether to lend to a borrower
in an asset-based purchase context, the lender is typically taking three things
into consideration: the proposed loan-to-value ratio (i.e., the amount and percentage
the borrower proposes to put down toward the purchase price), the proposed income
ratio (i.e., the percentage of the borrower's monthly income that the new loan
obligation will consume), and the borrower's credit. The higher the borrower's
down payment and the higher the borrower's income, the less the lender will depend
upon the borrower's credit. Admittedly, some lenders will reject a loan application
based solely on the presence of a recent bankruptcy filing. Other lenders will
consider the loan but will demand a higher rate of interest to compensate it for
the perceived increased risk.
How
can I expedite the process or rehabilitating my credit after bankruptcy?
The
best way to begin the process of rehabilitating your credit after bankruptcy is
to avoid suffering further credit reversals, such as foreclosures, judgments,
tax liens, etc. Another way is with a secured credit card. Most of the major financial
institutions offer such accounts, whereby you deposit a certain sum, such as $500,
and the institution gives you a $500 credit line. If you fail to pay, the institution
is at no risk, as it is already holding your money as its protection. If you are
making your payments each month and the institution sees that you are a worthy
credit risk, it will likely eventually return the deposit to you and make the
account a true credit card, or will increase your credit limit without demanding
additional deposit funds.
Am
I going to have to appear in Court, and if so, how many times?
In
the overwhelming majority of cases, you will only have to appear once at a proceeding
called a meeting a creditors to meet with the trustee and any creditors who are
present at the meeting (pursuant to Bankruptcy Code Section 341(a)). The meeting
of creditors gives your bankruptcy trustee an opportunity to ask questions of
you about your assets and other issues while you are under oath.
Will
my bankruptcy discharge all of my obligations?
Not
necessarily. There are certain types of obligations which are automatically nondischargeable
in a bankruptcy case, such as recent income taxes; fiduciary taxes; past, present
and future alimony and child support; most student loans; liability created in
a driving under the influence; and fines and penalties. There are other obligations
which are potentially nondischargeable as a result of the debtor's conduct, such
as incurring debt, often credit card charges, without the intent to repay it;
actual fraud; embezzlement; breach of a fiduciary obligation; and willful and
malicious injury to others.
Will
creditors stop calling me and demanding payment once I file bankruptcy?
Creditors
are required by the operation of the automatic stay provisions of Bankruptcy Code
Section 362(a) to immediately cease attempting to collect on all obligations once
a bankruptcy petition is filed. The creditor may not discover the bankruptcy filing
right away, but once the creditor is informed of the bankruptcy filing and provided
with the basic information about the case, such as the chapter filed, the date
filed, and the case number, it must take no further action, unless it obtains
Bankruptcy Court authority to proceed with its collection efforts, and such authority
will only be granted under limited circumstances. Creditors holding nondischargeable
obligations, such as taxing entities, must also cease their collection efforts
against assets of the bankruptcy estate, at least until the date of discharge,
which in most Chapter 7 cases is approximately four months after the bankruptcy
petition is filed.
Contact
the Law Offices of Timothy J. Wilson at:
(206) 381-3210 or (253) 874-5826.
