Can I Get Bankruptcy?

Can I qualify and get the life-changing "debt discharge" provided under the code?

Federal bankruptcy laws provide for a "means test" which will determine whether you are eligible to file of Chapter 7 Bankruptcy. If your income is below the median income for families in Washington based on Census Bureau statistics, you are usually eligible. If you earn more than the median income for families in Washington based upon the average of your last 6 months of income, the amount of your mortgage, car payments, back taxes, child support due, daycare expenses and children's school expenses are considered to determine whether you qualify for Chapter 7 Bankruptcy.

You won't be eligible for a Chapter 7 Bankruptcy if, after deducting these amounts, and the living expenses provided in the Internal Revenue Service's national collection standards, you can still pay at least $6,000 ($100/month) to unsecured creditors over five years.

If you don't qualify for a Chapter 7 bankruptcy, your other option is to file a Chapter 13 Bankruptcy petition and pay back a portion of your unsecured debts over a period of 3-5 years. The U.S. Trustee Program applies the following median family income data to all cases filed on or after November 1, 2009. This median family income data will be adjusted again after the Census Bureau updates the data.

Median income in Washington State as of November 1, 2009:

	Single wage earner: $51,344
	Family of 2: $64,158
	Family of 3: $72,533
	Family of 4: $82,716
	*Add $6,900 for each individual in excess of 4.

If your income is below the state median income for your family size, you will probably qualify for Chapter 7 Bankruptcy. However, even if you are below the state median income, you will not qualify for Chapter 7 Bankruptcy if your monthly reasonable and necessary household expenses (expenses determined by an IRS standard by county, both state and nation wide) are lower than average and without paying the unsecured debts you wish to discharge in Chapter 7 Bankruptcy, you have over $100 per month of disposable income to pay back part of your debts to unsecured creditors. Those situations usually occur in cases where a family is below the state median income, but they have a lower than average rent or mortgage payments, and little or no car payments.

In those cases, as well as cases where your family is above the state median income with lower than average household expenses, you will typically have to file a Chapter 13 Bankruptcy petition and pay back part of the debt to your unsecured creditors over a 3-5 year period.

Please call us to help you determine what would be most appropriate for your circumstances:

Seattle: (206) 686-6054  
Everett: (425) 953-4364