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Tacoma, WA 98402

Bankruptcy FAQ | Tacoma Bankruptcy Attorneys

December 7th, 2016 Bankruptcy Law

With more than 16 years of experiencing practicing in the area of bankruptcy law, Law Offices of David Smith is your dedicated resource for information on bankruptcy. We strive to educate both our current and prospective clients, and help them make appropriate, smart decisions given their unique legal issue. Filing for bankruptcy can be a long and complicated journey for many debtors. With so much at stake, some may feel overwhelmed with questions and concerns regarding the process. Having an experienced and compassionate bankruptcy lawyer on your side is crucial for both legal and moral support.

Our team at Law Offices of David Smith have comprised a list of frequently asked questions regarding bankruptcy that we often hear from our clients. If you have any additional questions, don’t hesitate to contact us for a complimentary consultation. We are happy to address any questions you may have and get you on the right path towards financial freedom.


1. Should I file for bankruptcy?

Unfortunately, there is no easy answer since every financial situation is unique. For many, filing for bankruptcy can provide a way out of debt and the opportunity to start over. The decision to file bankruptcy must be based off of carefully evaluating your options and understanding what bankruptcy can do for you. We recommend carefully accessing your financial situation and taking an inventory of your liquid assets. This includes: real estate, retirement funds, stocks and bonds, college savings accounts, and other non-bank account funds. Take a close look at your bills and current debt. If the value of your assets is less than the amount of debt you owe, declaring bankruptcy may be viable option for you.

Deciding to declare bankruptcy is no easy matter. To help you determine if you qualify for bankruptcy, consult a financial advisor and your trusted Tacoma bankruptcy lawyer at the Law Offices of David Smith.


2. Do I need an WA lawyer to file for bankruptcy?

While it is possible for individuals to file for bankruptcy without an attorney, known as filing pro se, it is not recommended. Navigating the complex bankruptcy process can be difficult, time-consuming, and not to mention stressful without legal guidance. Misfiling forms or inaccurately managing the bankruptcy process can set back your case and further jeopardize your financial situation. An experienced and knowledgeable Washington bankruptcy lawyer will help protect your rights as a debtor and help guide you step-by-step through the process. For more information, take a look at our recent blog post which explains the benefits of hiring a bankruptcy lawyer.


3. What are the differences between each chapter?

Chapter 7 bankruptcy is commonly known as the “fresh start” type of bankruptcy. Creditors are paid through the liquidation or sale of assets of a debtor’s nonexempt property. The net proceeds of the liquidation are then distributed to creditors. Washington bankruptcy exemptions protect certain amounts of your property from sale, such as your home or car.

Chapter 13 bankruptcy allows debtors with regular income to develop a repayment plan to pay all or part of their debt over a course of 3-5 years. Chapter 13 bankruptcy protects debtors from foreclosure or repossession of valuable property.

Chapter 11 bankruptcy is usually filed by businesses or corporations, or individuals with significant assets. The debtor is permitted to continue day-to-day operations of the business under an approved plan of reorganization by the court. Chapter 11 bankruptcy allows the debtor to either restructure the operating business or liquidate under better circumstances than Chapter 7.

For information on which chapter to file, given your unique legal situation, schedule an free consultation with Law Offices of David Smith for guidance.


4. How will bankruptcy affect my credit?

The answer depends on where your credit score started prior to filing for bankruptcy. If your credit score is very low due to missed payments and other accounts, your score will decrease but it won’t take a huge plunge. On the other hand, if your credit score is good before filing, you can expect your score to take a significant dip. Chapter 7 bankruptcy will remain on your credit report for ten years. However, you may begin to rebuild your credit immediately after filing by obtaining a secured credit card and establishing good financial habits. For information on life after bankruptcy, check out our recent blog post, where we discuss methods to financially recover from bankruptcy.


5. Am I cleared of all debt after bankruptcy in Washington?

Filing for bankruptcy will wipe out most of your debt or substantially reduce it, with some exceptions. Debt such as taxes, child support, alimony, restitution, criminal fines, and student loans are not dischargeable with bankruptcy in most cases.


6. If I file bankruptcy in Washington, can I buy a home?

The short answer: Yes. It’s entirely possible to purchase a home after receiving a bankruptcy discharge. Although it will take time until you’re able to recover financially, having a bankruptcy discharge on your financial record doesn’t bar you from buying a home. In order to purchase a home, many Americans will need to obtain a mortgage. The willingness of a mortgage lender to lend you money depends on your ability to rebuild your creditworthiness.

Another option is getting a loan through the Federal Housing Administration (FHA). The FHA specializes in insuring loans for qualified borrowers, who may not qualify for traditional loan programs, such as by having poor credit histories. For Chapter 7 bankruptcy, the FHA will insure mortgages two years after discharge date, but you must establish a credit history in those two years and it cannot contain any late payments, collections judgments or other blemishes. For Chapter 13 bankruptcy, the FHA only requires a 12-month wait follow the date you began making payments, with permission from the state of Washington court. Payments must be made on time and according to agreement.