Washington State Updated Homestead Exemptions and Bankruptcy
The Washington State legislature has passed significant changes to the Washington homestead statute. The new law provides for an increase in homestead exemptions based on “the county median sale price of a single-family home in the preceding year.” The Engrossed Substitute Senate Bill 5408 became effective on May 12, 2021, when it was signed by Governor Inslee.
What Is the New Washington State Homestead Rule?
Washington’s updated homestead rule has an impact on bankruptcy cases where the debtor is forced to sell their home. The Homestead Statue defines a forced sale to include any sale of the homestead property in a bankruptcy proceeding.
- SB 5408 significantly increased the amount of a homestead exemption to $125,000 or “the county median sale price of a single-family home in the preceding calendar year,” whichever is greater.
- SB 5408 removes the separate exemption limits for real and personal property; both are now subject to the same limit.
Washington State Bankruptcy Exemptions to Protect Your Property
In a bankruptcy case, the debtor’s homestead exemption is determined on the date the bankruptcy petition is filed.
- If the value of your home is at least $125,000, if you file for bankruptcy in Washington you can keep your home and still discharge your other qualifying unsecured debts.
- Washington homestead exemptions only apply to your primary residence: they do not apply to vacation homes, cars or other personal property. You may also qualify for other exemptions for your car or personal property when you file for bankruptcy.
Previously, if your home had more than $125,000.00 in equity, you may have been advised to either sell your home or file for a Chapter 13 bankruptcy because you could not qualify for Chapter 7 bankruptcy. The value of real estate has increased significantly in the state of Washington since the Homestead Statue was last revised in 2007. Under the new homestead rules, a debtor may have 3-4 times or even more than the previous $125,000 exempt home equity and qualify for a Chapter 7 bankruptcy.
In Washing, if you file a joint bankruptcy with your spouse, you and your spouse cannot each qualify to claim the homestead exemption.
Seattle Bankruptcy Attorneys
If you would like more information about Washington’s new homestead laws or would like to discuss your debt relief options, contact the experienced Seattle bankruptcy and business law attorneys at Wenokur Riordan PLLC today at (206) 724-0846 to discuss your situation.