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5 Myths About Bankruptcy in Washington State

Uncover the Facts: Bankruptcy Myths Debunked

Bankruptcy myths often cause confusion and fear. Many people in Washington State avoid filing due to common misconceptions. This can lead to unnecessary stress and financial trouble. Bankruptcy attorneys in Washington are here to help guide you through the process and dispel these myths.  

Knowing the truth about bankruptcy can help you make better choices. Let’s get started on clearing up the confusion and setting the record straight.

Quick Summary

Below is an overview of the key points of this blog article.

  • Bankruptcy is a legal process where people or companies who can’t pay their debts get help. The court handles this, often because the person or company asked for it.
  • Chapter 7 and Chapter 13 are the two most common types of bankruptcy cases in Washington. Chapter 7 involves liquidating non-protected assets, though most people keep what they own, while Chapter 13 sets up a payment plan to repay some debts over time-based on income and other factors.
  • In Washington state, bankruptcy might seem scary, but there are laws to protect your belongings. It’s not about being bad with money – unexpected events can hit anyone. Even though bankruptcy affects your credit, you can rebuild it with smart money management. And bankruptcy isn’t just for low-income folks – anyone facing financial struggles might need it, no matter their income level.
  • Bankruptcy might be your best option if other efforts to repay your debts have failed. If you owe much more than you earn and can’t make your monthly payments, bankruptcy may be necessary to manage your financial situation.

What is Bankruptcy?

Bankruptcy is a legal way for folks or companies who can’t pay back what they owe to ask for help with some or all of their debts. Usually, a court makes this happen, usually because the person or company asked for it.

What Are the Most Common Bankruptcy Cases in Washington?

There are two most common bankruptcy cases, Chapter 7 Bankruptcy cases and Chapter 13 Bankruptcy cases.

Chapter 7 Bankruptcy Cases

Chapter 7 bankruptcy cases are often called “liquidation” cases. But we believe this term can be confusing. Some individuals think it means the bankruptcy court will sell all their stuff, like a giant yard sale. 

That’s not true. Unless you have valuable assets that can’t be protected, most clients keep everything they own.

Chapter 13 Bankruptcy Cases

Chapter 13 bankruptcy cases mean paying back some of what you owe over time. How much you pay depends on things like your income and what you owe to certain creditors. Some folks choose Chapter 13 because they have to – they earn too much for Chapter 7. 

Also, if you’ve fallen behind on your mortgage but can still afford your monthly payments after stopping payments to other creditors, Chapter 13 lets you catch up by making manageable monthly payments. 

This is the main idea behind a Chapter 13 plan – it’s like a payment plan for your debts during bankruptcy.

What Are the 5 Myths About Bankruptcy in Washington State?

When you’re in Washington state and thinking about bankruptcy because of big debt, it can feel stressful and lonely. But don’t worry – lots of people have questions and worries about it. Sometimes, these worries come from false ideas about how bankruptcy works.

Here are some of the biggest myths about bankruptcy in Washington State. Knowing the truth can help you make smart choices about your money. You might find that bankruptcy is simpler and less scary than you thought, depending on your situation.

Filing for Bankruptcy Means I Will Lose Everything I Own

In Washington State, some laws help keep your important stuff safe when you file for bankruptcy. These laws protect things like your car, household items, and a good part of your home’s value. 

Bankruptcy attorneys in Washington can tell you which rules apply to you and help make sure your belongings are protected. In Washington, you can pick either Federal or State bankruptcy rules, but not both.

Bankruptcy Shows I Am Bad With Money

Sometimes life hits you with surprises. Things like sudden medical bills, losing a job, or unexpected events can make money tough, even for folks who usually handle things well. 

Bankruptcy is a way to start fresh legally – it’s not about punishing you for things that happened before.

Filing for Bankruptcy is Morally Bad

Bankruptcy is a legal option stated in the United States Constitution. It’s usually a last resort, but it’s not morally bad. Anyone, whether they’re rich or poor, can use bankruptcy laws for protection in the country. 

Despite what you might hear in the media, most bankruptcies aren’t because of reckless spending. They often happen because of unexpected life events like losing a job, getting seriously sick, or going through a divorce.

I Can’t Get Credit Again After Bankruptcy

Even though bankruptcy stays on your credit report for 7 to 10 years, it doesn’t mean you can’t get credit ever again. If you manage your money well after bankruptcy, your credit score can get better. Lots of people fix their credit within a few years after bankruptcy.

People With Low Income Can Only File for Bankruptcy

People from different backgrounds, even those who seem to earn well, might end up needing bankruptcy. Losing a job, having medical bills, or facing sudden costs can strain finances, no matter how much you make. 

For instance, in Washington state in 2024, a single person can earn over $83,136 per year, and a family of four can make nearly $134,300 and still qualify for Chapter 7 bankruptcy to clear debts without a payment plan.

Should I File for Bankruptcy?

Sometimes, bankruptcy might be your best or only option in certain situations.

You Have Already Tried to Work Out a Deal

Imagine you’ve tried to talk to your big creditors about paying them back gradually as professionals suggest. But they won’t agree. They want all their money now, and you can’t do that. In this situation, you might not have many choices except to file for bankruptcy.

You Owe Much More Money Than You Make or Own

Another big reason people file for bankruptcy is because they can’t afford to pay their debts. Even just covering the debt – like making the monthly payments – costs more than what they earn each month. 

For example, imagine someone owes $500,000 to a bank and has to pay $4,000 for their mortgage every month. If they only make $2,000 a month and have $25,000 in savings, they might have no choice but to file for bankruptcy. 

Otherwise, they’ll use up all their savings in about a year and won’t be able to make that $4,000 payment anymore.

Your Fresh Start Begins Here

Facing bankruptcy can feel overwhelming and stressful. It’s important to know that you don’t have to go through it alone. McBurney Law understands the fears and myths surrounding bankruptcy in Washington State. Our legal team is dedicated to providing clear, supportive guidance to help you overcome financial challenges. 

We believe that everyone deserves a fresh start, and we’re here to help you achieve it. At McBurney Law, our bankruptcy attorneys in Washington are committed to debunking common myths and helping you make informed decisions. We offer compassionate and professional support every step of the way. 

Call McBurney Law today to get the right legal help you need. Let us guide you toward a brighter financial future with confidence and peace of mind. Our law firm can also represent you in Criminal Defense and Estate Planning.