Debt Relief Law in Washington

Failure to pay your debts as promised can lead to a number of financial consequences including lawsuits, auto repossessions, home foreclosures and wage garnishments. Washington state and federal laws enable you and your creditors to negotiate debt relief either privately, through a credit counseling company or through the bankruptcy process.

Debt Management Plans

You can request help in communicating with your creditors through a nonprofit agency such as Consumer Credit Counseling Service of Seattle. Once you give a representative of your local credit counseling company permission, he will negotiate the amount of your debts with your creditors. Some creditors will reduce minimum monthly payments, cease late and over-the-limit fees and even reduce the balances owed. You will pay one monthly payment to your selected credit counseling agency and it will be distributed to your creditors. However, the fact that you settled your obligations under a debt management plan will negatively impact your credit rating for seven years.

The Chapter 7 Option

If you earn less than Washington's annual median income and can't pay your bills as agreed, you can opt to file Chapter 7 bankruptcy. Chapter 7 bankruptcy permanently liquidates your obligations to pay bills like credit cards, most types of loans, medical bills and taxes older than three years old. A single Washington state resident qualifies to file Chapter 7 if he earned no more than $51,344 annually, according to the U.S. Trustee Program. The median income level for a family of four is $82,716. People who earn more money must either prove they cannot repay creditors and care for their families or partially repay creditors in Chapter 13.

The Chapter 13 Option

Chapter 13 plans allow Washington state residents with regular income to partially repay creditors over a three-to-five year time frame. Also, the fact that someone filed Chapter 13 only negatively impacts credit ratings for seven years as opposed to ten years for a Chapter 7 case. In most Chapter 13 cases, Washington residents get to keep most if not all of their assets. Chapter 13 also can help cure mortgage defaults, according to the United States Bankruptcy Court.

Debt Negotiation

Legally you can try to negotiate your debt relief needs with your creditors, but you may not necessarily be successful. But sometimes mortgage companies, credit card issuers, student loan issuers, auto lenders and even the Internal Revenue Service will approve partial debt repayment plans. The success of your mission really depends upon your creditors as well as your bill-paying history before you ran into financial trouble.