Lawmakers in Washington State have just passed a major update to the Washington State bankruptcy homestead exemption. Bankruptcy exemptions allow you to protect some or all of your property from creditors in a bankruptcy. There are exemptions available for all types of assets, from cars, to bank accounts, to household goods and furniture, but the most valuable asset a homeowner wants to protect is usually their home.
The homestead exemption in Washington, which protects the value of your equity in your primary Washington residence, has had a limit of $125,000.00 in Washington State. If you have spoken to a bankruptcy attorney in the past, you might have been told that because you have more than $125,000.00 in equity, you may either have to sell your home or file for a Chapter 13 bankruptcy, which creates a repayment plan for your debt rather than wiping it out. This has prevented many people from obtaining debt relief through bankruptcy at all. Luckily however, thanks to Engrossed Substitute Senate Bill 5408, the homestead exemption limit will be raised significantly. Instead of the $125,000.00 cap, the new exemption will match the median sales price of a single family home in your county from the previous year, which in Whatcom County was $444,400.00 for 2020. You can find the new exemption limit for your county here.
With the new homestead law, a debtor in Whatcom County can have up to $444,400.00 in exempt home equity and still qualify for a Chapter 7 bankruptcy. This is more than 3.5 times the current limit, which was last increased in 2007. The real estate market has obviously skyrocketed in most parts of Washington since 2007, so our current exemption is often not enough to protect a debtor’s home during bankruptcy. This new raise in the limit opens up the option of Chapter 7 to people who may not have qualified for it before because of the amount of home equity they had.
This bill also revises the laws as they relate to the exemption status of appreciation value after the bankruptcy petition is filed and how selling or moving into a new homestead during bankruptcy works. You can find all the specific details of the bill here.
If you would like more information about this new law change or would like to discuss your debt relief options, contact Limitless Law PLLC at (360) 685-0145 for a consultation.