Christopher S. Mulvaney,

Attorney and Counselor-at-Law

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THIS WEBSITE INCLUDES GENERAL INFORMATION & THE OPINIONS OF CHRISTOPHER S. MULVANEY. IT IS INTENDED TO STIMULATE A BASIS FOR QUESTIONS RELATED TO YOUR PARTICULAR FACTUAL CIRCUMSTANCES — BEFORE YOU ACT.  THIS WEBSITE DOES NOT CONSTITUTE LEGAL ADVICE. IF YOU WANT LEGAL ADVICE, PLEASE MAKE A ZOOM APPOINTMENT TO SPEAK WITH ME.

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The use of email or this form for communication with MULVANEY LAW OFFICE, PLLC does not establish an Attorney-Client Relationship. If you don’t think I have responded, please check your spam folder. Time-sensitive information should not be sent through this Form or through email. Sensitive information can be uploaded to an encrypted Dropbox folder in your client file. Google Review Link Yelp Review Link

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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”.  The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.

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Bankruptcy Exemptions are the types and amount of property you get to keep because those assets are exempt from collection by creditors.

The Bankruptcy Exemptions that apply to most people are:

(1) 75% of your net wages (meaning that a Judgment Creditor can take 25% of your net pay) for 60 days with a Writ of Garnishment, which can be renewed indefinitely as long a a balance remains on the Judgment. This causes most people to seek Bankruptcy protection.

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(2) A Writ of Attachment of a bank account allows a creditor to seize up to the amount of the Judgment plus costs of collection, penalties, and interest. This also causes most people to seek Bankruptcy protection. Judgments are valid for 10 years and can be renewed for another 10 years. So, if a Creditor waits until near the end of the 6-year statute of limitations, the Creditor can have almost 26 years to collect.

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(3) Foreclosure of real property is another major Bankruptcy protection trigger. The amount varies by County. In King County the Washington State Homestead Exemption is about $729,600. Debtors can choose either the Washington or Federal Exemptions. The Federal Exemption for a married couple is about $50,300. Personal property exemptions are much more generous under the Federal Exemptions, so most filers in Washington use them. For those with home equity significantly above $50,000, balances in bank accounts must be kept very low before filing and some personal property forfeiture is much more likely than when using the Federal Exemptions. In other words, Debtors get punished for having a lot of home equity.

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(4) An IRS Tax Lien is a Bankruptcy protection Trigger. Exemptions do not generally apply to tax debt the way they do for other creditors. So, often a Chapter 13 repayment plan of taxes over 5 years is an appropriate option for a Debtor looking to avoid the consequences of the tax lien which would interfere with refinancing or selling real property. For example, if a Debtor owed $30,000 to the IRS, then payments of $500 per month for 60 months would pay off the IRS debt and release the lien. Be sure to file your tax returns and pay your taxes on time every year. If you do not, then the 3-year clock for Dischargeability of tax debt never starts. Adjust your withholding so that you will receive a refund to apply to any arrears and make some payment each and every month, even if it is only $100. Regular monthly payments, coupled with proper withholding, and on-time filing shows good faith and decreases the chances of a Tax Lien being filed.

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(5) Repossession of a vehicle (car, boat, motorcycle or RV) can also cause Debtors to seek bankruptcy protection, but at that point it is too late to get the car back without paying the debt in full which is often more than the value of the car. The unsecured balance after the car is sold would be Discharged in Bankruptcy.

Those are the major Bankruptcy protection triggers.

Most (about 99%) of Bankruptcy filers keep everything. Only about 1% of filers must surrender items of significant value to the Trustee because they are so far over the Exemption amounts and cannot do the Exemption planning that is allowed under the Bankruptcy Code including taking care of the health of yourself and your family, as well as doing necessary maintenance on a home or vehicle or funding retirement accounts as allowed. These things cost money, but do not add value for purposes of Bankruptcy Exemptions.

Here are links to Bankruptcy Exemptions which are either Federal or State.

IRA’s and Roth IRA’s are Exempt up to $1,512,350, so don’t borrow or cash out to pay creditors.

Above is a chart to assist clients in visualizing the different ways property and debt may be held and what the differences result based upon these distinctions.  Property in Washington state may be held by the marital community or by each spouse separately, or a combination of the two.  Single people may hold property as joint tenants with right of survivorship or otherwise jointly own assets, but there is no presumption of community property that applies no matter how property is titled as there is with community property.

In a Trust or Not in a Trust

Property may be held in a Community Property Revocable Living Trust or a Separate Property Revocable Living Trust.  Doing so makes the property a non-probate asset, meaning that a Personal Representative does not need to be appointed by the Court to transfer the property; the Successor Trustee may do so.  Holding property in a Separate Trust as a married person with a prenuptial or postnuptial agreement clearly identifies the property as separate and sets out the limits of contributions to separate property while married.  The purpose of doing so is to rebut the presumption of community property clearly and in writing to protect against the other spouse’s claims as well as the separate creditors of the other spouse.

Burdened by a Lien or Not

Property itself has potential liability for debts either in addition to or instead of the potential personal liability of the individual(s) owning the property.  This liability is referred to as a security interest, the right to repossess or foreclose for default on payments.  Personal bankruptcy discharges personal liability, but does not affect liens except under limited circumstances in Chapter 13 (See Lien Stripping & Cramdown entries in this Blog).  That is why a creditor may take back a car or boat, but may not sue you for the deficiency if you have obtained a bankruptcy discharge.

Dischargeable versus Non-Dischargeable

Knowing whether a debt may be discharged in bankruptcy is important in determining negotiating leverage and planning which debts to pay first.  Always pay non-dischargeable debt first.  For example, student loans are not dischargeable in bankruptcy.  So, paying credit card debt while not paying student loans when eligible for a Chapter 7 discharge makes no financial sense.

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Washington State residents can meet with me in Zoom/DocuSign from anywhere in the world, and I can notarize their electronic signatures because I am a remote online notary.  Just email me an image of your photo ID.

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