A recent change in the law made filing bankruptcy a possibility for homeowners struggling with debt problems. In the past, Washington residents who had more than $125,000.00 in equity in their homes faced the likelihood of losing their homes if they filed a personal bankruptcy. In May, 2021, the Washington state legislature passed a change in the law that dramatically increases the amount of home equity that is protected, and closed certain other loopholes that put homes at risk.
The new law sets the “homestead exemption,” – the amount of value that a person can keep in bankruptcy– based on the previous year’s data on the median home value in the county where someone lives. Current exemptions include:
Homestead exemption (2021)
King County $729,600.00
Snohomish County $549,400.00
Pierce County $424,300.00
Skagit County $421,800.00
In addition, the new law ensures that a homeowner who files a bankruptcy with a fully exempt homestead does not need to fear losing the property if it increases in value after the bankruptcy is filed.
Asset value is one important piece of the puzzle when determining whether a bankruptcy is the best option to deal with overwhelming debt problems. Income, type of debt, and personal objectives are also important considerations. There’s no doubt that the new homestead law is a game-changer for Washington State homeowners struggling with debt.