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What are the Washington Bankruptcy Exemptions?

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In a Nutshell

There are federal bankruptcy exemptions and state exemptions that folks can choose from when filing bankruptcy. When Congress enacted the federal law on bankruptcy, they gave the states the discretion to decide if they wanted to use the federal bankruptcy exemptions or the state exemptions. Washington allows you to choose between the federal exemptions and the state exemptions. This means people filing bankruptcy in Washington can choose which set of exemptions is better to protect their assets. Keep in mind that Washington exemptions and the federal exemptions set forth in the Bankruptcy Code can’t be used together. Filers are required to pick one or the other. If you decide to use the state exemptions, you will be able to use the federal nonbankruptcy exemptions to protect certain retirement accounts and disability benefits.

Written by Attorney Karra Kingston.  
Updated July 28, 2020


What Are Washington Bankruptcy Exemptions and Why Are They Important in Chapter 7 Bankruptcy?

If the purpose of filing bankruptcy is to get a fresh start, then it should be safe to assume that not all of your property will be taken away when you file bankruptcy, right? Many people falsely believe otherwise. Some people contemplating bankruptcy wrongly believe that if they file, all of their property will be taken away. As a result, they think it’s best not to disclose the property they have in their bankruptcy petition. Unfortunately, that will have the exact opposite effect and not protect the property. The bankruptcy court understands that you need to meet a basic standard of living, so you can keep some property and still file for bankruptcy without worrying about everything being taken away. Washington bankruptcy exemptions allow you to protect certain items even when you’re seeking debt relief through bankruptcy. When you fill out your bankruptcy forms you will be able to protect your property using the exemptions to ensure that the bankruptcy trustee can’t take your property away to pay your credit card and other debts. 

Does Washington Allow The Use Of Federal Bankruptcy Exemptions?

There are federal bankruptcy exemptions and state exemptions that folks can choose from when filing bankruptcy. When Congress enacted the federal law on bankruptcy, they gave the states the discretion to decide if they wanted to use the federal bankruptcy exemptions or the state exemptions. Washington allows you to choose between the federal exemptions and the state exemptions. This means people filing bankruptcy in Washington can choose which set of exemptions is better to protect their assets. Keep in mind that Washington exemptions and the federal exemptions set forth in the Bankruptcy Code can’t be used together. Filers are required to pick one or the other. If you decide to use the state exemptions, you will be able to use the federal nonbankruptcy exemptions to protect certain retirement accounts and disability benefits. 

To benefit from the Washington bankruptcy exemptions, you must be a Washington resident for at least 730 days (two years) when your bankruptcy case is filed. Congress proposed this law to prevent people from moving to different states just to use more favorable exemptions. With this law in place, people can’t move to another state just to file bankruptcy and get a more generous exemption. 

Married couples filing jointly can each claim the exemptions. Essentially, this means that the market value of the exempt property can be doubled as long as both you and your spouse have an interest in the property. Below, you will find a list of the exemptions that can be used. You can find the Washington State exemptions under the Revised Code of Washington. 

Washington Bankruptcy Exemptions:

Real Property Exemptions: Washington Homestead Exemptions

The Washington homestead exemption allows you to protect the home you are living in from the trustee and your unsecured creditors. If your property has too much equity in it the trustee can sell it to pay off your debt. 

  • The homestead exemption in Washington allows you to exempt up to $125,000 of equity in your home as long as it is your principal place of residence. This can also include a mobile home or a manufactured home. 

  • If you use other property as a home such as a mobile home, then the exemption is reduced to $15,000. 

Personal Property Exemptions: 

Consumers filing bankruptcy can keep their personal property under the Washington bankruptcy exemptions. Below are some of the things you can keep:

Wildcard Exemption:

  • Under the wildcard exemption, you can exempt cash and other personal items that don’t have an exemption or are not fully protected by the existing exemptions. 

  • Washington’s wildcard exemption allows filers to protect up to $3,000 worth of personal property. 

  • There are limits on the amount you can exempt for cash, bank accounts, and money for educational loans:

    • Cash: up to $1,500

    • Money in Bank Account: up to $500 

    • Money Paid towards educational loan: For all private student loan debt, $2,500  can be exempt which may consist of bank accounts, savings and loan accounts, stocks, bonds, or other securities. 

Clothing: RCW § 6.15.010(1)(a)

  • Up to $3,500 for furs, jewelry, and personal ornaments per person 

Family pictures and keepsakes, books and electronic media: RCW § 6.15.010(1)(b)

  • Up to $3,500 per person 

Cell phone, personal computer, and printer: RCW § 6.15.010(1)(c)

  • It can be exempt up to the full value. 

Household goods and furniture: 

  • You can only exempt up to $6,500 per individual or $13,000 per married couple. 

  • No single item can be valued at more than $750 

Professionally prescribed health aids: RCW § 6.15.010(1)(d)(v)

  • There is no limit, you can exempt the full value. 

Burial Plots: 

  • Fully exempt as long as they are sold by a nonprofit association. 

Motor Vehicle Exemption:

  • If you have a car you can exempt up to $3,250 of value. If you file as a married couple each one of you can exempt your vehicle. 

  • Keep in mind that if you have a car loan, you will want to make sure that you can afford to continue making the payments before you decide to keep the vehicle. If you don’t think that you can afford to keep making payments on your car loan you may want to look into surrendering your vehicle.

Tools of Trade: 

  • Up to $1,500 for tools, books, and other necessities for your profession.

Other Washington Exemptions:

Personal injury recovery: RCW § 6.15.010(1)(d)(vi)

  •  Up to $20,000 per individual or loss of future income payments to the extent reasonably necessary. 

Wages:

  • Whichever is greater: 30 times the federal hourly minimum wage or minimum of 75% of disposable earnings. If you are a low-income wage earner, a judge may give you more. 

Retirement Accounts:

Under the non-federal exemptions and Washington law, the following can be exempt: 

  • Tax-exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing, and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans). IRAS and Roth IRAs. ERISA-qualified benefits, including IRAs and Keoghs.

The following pensions can be exempt for:

  • Volunteer firefighters.

  • Law enforcement officials and firefighters.

  • City employees.

  • Teachers.

  • State patrol officers.

Money Benefits: 

Child support: RCW § 6.15.010(1)(d)(iv)

  • There is no limit, you can exempt the full amount. 

Tuition:

  • You can exempt any contributions up to the full value to any qualified tuition program under 26 U.S.C. Sec. 529 of the Internal Revenue Code as long as you contributed to it more than two years prior to the date of a bankruptcy filing or court judgment.

Annuities: RCW § 6.15.020(1)

  • There is no limit

  • Annuity contract benefits up to $3,000 per month. 

Health Savings Account: 

  • Fully Exempt 

Insurance Proceeds for lost or stolen property: 

  • Exempt up to the full value. 

Spendthrift Trusts:

  • Exempt up to the full value. - See In re Findley, 286 B.R. 163 (2002)

Public Assistance:

The following can be exempt up to the full monetary value:

  • Charitable society benefits.

  • Unemployment compensation.

  • Workers' compensation

  • General assistance and public benefits.

 Insurance Proceeds: 

The following can be exempt up to the full value:

  • Disability benefits, proceeds, dividends, interest, loan, cash, or surrender value.

  • Life insurance proceeds, dividends, interest, loan, cash, or surrender value if the insured is not the beneficiary.

  • Group life insurance policy or proceeds.

Filing Chapter 7 Bankruptcy 

Ensuring that you use the right exemptions for your Washington State bankruptcy case is essential to ensuring your case goes smoothly and you get the debt relief you need without losing any property. If you have non-exempt assets in your bankruptcy estate and you file a Chapter 7 bankruptcy, the bankruptcy trustee will sell the property and use that money to pay back your unsecured creditors. If you decide to file a Chapter 13 bankruptcy and you have nonexempt property, you can keep everything you own however, you will have to pay your creditors the value of your nonexempt property. Speaking with a Washington bankruptcy attorney is a good way to get more information about the Washington bankruptcy exemptions and the process in general. Many bankruptcy lawyers provide clients with free consultations at their law firm so you can easily speak with someone at no cost. 

Upsolve is a non-profit organization that provides all the tools you need to file bankruptcy for free. Upsolve’s free web app has helped thousands of people file bankruptcy without using a lawyer. If you have no assets and feel comfortable handling your case on your own, then Upsolve can be a great resource for you. You can learn more about Chapter 7 bankruptcy and Chapter 13 bankruptcy by reading through our website. 



Written By:

Attorney Karra Kingston

LinkedIn

Ms. Kingston began her career as a bankruptcy attorney. She has appeared in front of many federal court judges and has helped numerous debtors obtain a fresh start. Ms. Kingston understands the complex federal rules for discharging debt. While working as a bankruptcy attorney, Ms... read more about Attorney Karra Kingston

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