What Are the Washington Bankruptcy Exemptions?

Why Are Exemptions Important in Chapter 7 Bankruptcy in Washington?

Bankruptcy exemptions are important because they allow you to protect your property through the bankruptcy process. If you don’t claim exemptions, the bankruptcy trustee is allowed to take your property and sell it for the benefit of your creditors. Luckily, this very rarely happens. If you apply the exemptions correctly and you don’t own any expensive or luxury items, you’re likely to keep everything you own while getting a financial fresh start.

Does Washington Allow Filers To Use Federal Bankruptcy Exemptions?

Yes. Washington residents get to choose between the state’s exemptions and federal bankruptcy exemptions.

If you decide to use the state exemptions, you will be able to use the federal non-bankruptcy 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 a different state for more favorable exemptions. 

Which Are Better: Washington’s Exemptions or Federal Exemptions?

The answer to this question will depend on your personal circumstances. That said, Washington’s state exemptions are much more generous than the federal exemptions for two of the most valuable types of personal property: a home and a car. 

Washington also has a generous wildcard exemption, which can help you protect any property that isn’t covered by an exemption or whose exemption isn’t large enough to cover the value of what you own. If you’re using federal exemption and you don’t use the homestead exemption, you get access to an even more generous wildcard exemption.

Here’s a quick comparison of some of the most common exemptions:

What Are the Washington Bankruptcy Exemptions?

Washington bankruptcy exemptions protect three categories of property:

• Real property such as your home

• Personal property such as your car and home goods

• Intangible property and money benefits such as retirement accounts and government assistance

You can find the Washington state exemptions under the Revised Code of Washington. 

Real Property Exemptions: Washington Homestead Exemption

The Washington homestead exemption is generous. It allows you to protect up to $125,000 of equity in your home or the county’s median home price. Unlike some other exemptions, you can’t double this exemption amount if you’re married.

To figure out the equity you have in your home, you’ll need to know your home’s current fair market value. Subtract what you still owe on your mortgage from the fair market value to get your equity. For example, if your home is valued at $450,000 and you still owe $350,000 on it, you have $100,000 in equity. In this case, your home should be fully protected by the state homestead exemption.

However, it would not be protected if you chose to use the federal bankruptcy exemptions instead. The federal homestead exemption is only $27,900 for single filers, or double that for married people who are filing jointly and co-own the home.

Source: RCW § 6.13.030 and 11 U.S.C. § 522(d)(1)

Personal Property Exemptions 

Personal property exemptions help individuals filing bankruptcy protect several different kinds of items, including the following:

• Clothing is fully exempt, though furs, jewelry, and personal ornaments are only exempt up to $3,500 per person

• Family pictures/keepsakes, books, and electronic media are exempt up to $3,500 per person

• Cellphones, personal computers, and printers are exempt up to their full value

• Household goods and furniture are exempt up to $6,500 per individual, though no single item can be valued at more than $750

• Professionally prescribed health aids are fully exempt

• Burial plots are fully exempt

• Tools of the trade are exempt up to $1,500 

Source: RCW §§ 6.15.010(1)(a), 6.15.010(1)(b), 6.15.010(1)(c), RCW § 6.15.010(1)(d)(v)

Washington’s Motor Vehicle Exemption

The Washington motor vehicle exemption is a generous $15,000 for a single vehicle. If you file as a married couple, each person can exempt one vehicle up to that amount.

The $15,000 exemption applies to equity you have in your car. To calculate your equity, you’ll need to know your car’s current fair market value from a site like Kelley Blue Book. If you own the car outright, your equity is equal to the current market value. If you’re financing the car, your equity is equal to the market value minus what you still owe on the loan. If you want to keep your financed car, you'll need to be up to date on payments and reaffirm the vehicle in the bankruptcy.

Source: RCW § 6.15.010(1)(d)(iii)

Washington’s Wildcard Exemption

The wildcard exemption is an important one as it can help you protect property that isn’t otherwise covered by an exemption. In Washington, the wildcard exemption is $10,000 with some limitations on cash and money in your bank account. See the state statute to learn more. 

Source: RCW § 6.15.010(1)(d)(ii)

Money Benefit Exemptions

Not all property is tangible. Washington exemptions can also help you protect intangible assets such as retirement accounts, government assistance, and other money benefits as indicated below.

Wages, Income, and Tuition Protection

• Personal injury recovery: up to $20,000 per individual or loss of future income payments 

• Wages: equal to 30 times the federal hourly minimum wage or a minimum of 75% of disposable earnings, whichever is greater

• Tuition contributions: exempt for qualified tuition programs under 26 U.S.C. Sec. 529 if contributions were made more than two years prior to a bankruptcy filing

Source: RCW §§ 6.15.010(1)(d)(vi), 6.15.010(1)(f), 11 USC § 522(d)(11)(D)

Retirement and Pension Exemptions

• Pensions:fully exempt for volunteer firefighters, law enforcement officials, city employees, teachers, and state patrol officers

• Retirement Accounts: tax-exempt retirement accounts, including 401(k)s, 403(b)s, SEP and SIMPLE IRAs, Roth IRAs, and ERISA-qualified benefits, up to $1,512,350

• Annuities: up to $3,000 per month

Source: RCW §§ 6.15.020(1), 41.26.053, 41.20.180, 41.24.240, 43.43.310, 41.32.590, 41.32.052, 41.32.055, 41.44.240, 41.28.200 and 11 USC 522(b)(3)(C); (n)

Child Support and Public Assistance

• Child support: fully exempt

• Public assistance: fully exempt for unemployment compensation, workers' compensation, general assistance, and other public benefits

• Charitable society benefits: fully exempt

Source: RCW §§ 6.15.010(1)(d)(iv), 74.04.280, 74.08.210, 40.020, 51.32.040

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