Updated: May 29, 2019
When your income isn’t sufficient to pay the bills, filing for bankruptcy in Washington D.C. can be the solution. If you don’t know much about bankruptcy, you’ll want to start by learning about the differences between Chapter 7 and Chapter 13 bankruptcy. Next, you’ll want to know:
- whether your income qualifies for the bankruptcy chapter you’ve chosen, and
- if you can protect your property using bankruptcy exemptions.
Not only will this article explain these concepts, but it will help you find official bankruptcy forms, approved educational courses, your local bankruptcy court, and more.
Qualifying for Bankruptcy in the District of Columbia—Means Testing
In bankruptcy, the means test determines whether you meet the qualification requirements of a particular chapter.
- Chapter 7 bankruptcy. You’ll meet income qualifications if you pass the “means test.” The first step is determining whether your household income is lower than the median income of your state. If it is, you pass and can receive a discharge in a Chapter 7 case. You might still pass the means test after completing the second portion, which involves subtracting allowed expenses from your income. If, after doing so, you don’t have enough discretionary income to make a meaningful payment to creditors, you’ll qualify for Chapter 7.
- Chapter 13 bankruptcy. If your income exceeds the Chapter 7 limits, you can repay some or all of what you owe in a five-year Chapter 13 repayment plan. The tricky part here is that you must have enough income to pay all required debts. To determine your Chapter 13 bankruptcy payment, you’ll do a calculation similar to that in Chapter 7. You’ll pay the greater of your disposable income, the value of your nonexempt property, or the amount of your nondischargeable debt (such as support obligations and tax debt). If you qualify for Chapter 7 but want to file Chapter 13 to take advantage of its unique mechanisms, such as saving a home from foreclosure, you can shorten the plan length to a three-year plan.
The necessary income charts and expense guidelines are on the U.S. Trustee’s website (select “Means Testing Information”).
Protecting Property With District of Columbia Bankruptcy Exemptions
An important part of deciding the best chapter for you is determining whether you’ll lose any property. Don’t worry—you won’t lose everything. In fact, you might not lose anything at all.
Finding out which assets you can protect is as simple as looking at Washington D.C.’s bankruptcy exemption law. A list of federal bankruptcy exemptions exists, too, and Washington D.C. lets residents choose between the two lists. If you use Washington D.C.’s bankruptcy exemptions, you can use the federal nonbankruptcy exemptions if they’re helpful.
Here's what will happen to nonexempt property (assets you can’t protect with an exemption):
- In a Chapter 7 bankruptcy, the trustee appointed to manage your matter will sell any nonexempt property and distribute the proceeds to creditors according to the bankruptcy payment rules.
- By contrast, you can keep all of your property in a Chapter 13 bankruptcy. But, there’s a catch. You must pay the nonexempt property value to your creditors through the three- to five-year Chapter 13 repayment plan.
- Spouses who file together in Washington D.C. can double the exemption amount in each category (except for the homestead) as long as both spouses have an ownership interest in the property.
District of Columbia’s Bankruptcy Exemption List
Here are some of the more common Washington D.C. bankruptcy exemptions. Unless indicated, all references can be found on the Code of the District of Columbia website.
Washington DC Homestead Exemption
The District of Columbia has a generous homestead exemption. You can protect all of the equity in your home or co-op as long as you or your dependents live there. (§ 15-501(1)(14).)
Washington DC Motor Vehicle Exemption
You can protect up to $2,575 of equity in a car, van, truck, SUV, motorcycle, or another motor vehicle. (§ 15-501(a)(1).)
Washington DC Wildcard Exemption
You can protect up to $850 in any property, plus up to an additional $8,075 if you don’t use the homestead exemption. (§ 15-501(a)(3).)
Other Bankruptcy Exemptions in Washington DC
- Personal property. Appliances, books, clothing, household furnishings, goods, musical instruments, and pets, up to $425 per item and $8,625 total; cemetery and burial funds (§ 43-111); co-op holdings to $500 (§ 29-928); food for three months; health aids; higher education tuition savings account (§ 47-4510); condo deposit (§ 42-1904.09); family pictures; family library up to $400; pain and suffering recovery; uninsured motorist benefits (§ 31-2408.01(h)); wrongful death damages (§§ 15-501(a)(11), 16-2703)). (Unless otherwise stated, these exemptions are found in § 15-501(a).)
- Tools of the trade. Library, furniture, tools of a professional or artist to $300; tools of your trade or business to $1,625; mechanic’s tools to $200; notary public’s seal and documents (§ 1-1206). (§ 15-501, unless otherwise noted.)
- Wages. 75% of earned but unpaid wages and pension payments for up to two months; nonwage earnings (including pension and retirement payments) for the head of a family up to $200 per month for two months; if you’re not the head of the family, up to $60 per month for two months; payments for loss of future earnings. (§ 16-572.)
- Pensions. Stock bonus, annuity, pension, or profit-sharing plan (§ 15-501(a)(7)); judges (§ 11-1570(f)); public school teachers (§§ 38-2001.17, 38-2021.17); police, firefighters and teachers retirement benefits (§ 1-911.03); tax-exempt retirement accounts, including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans; IRAS and Roth IRAs to currently allowed amount. Some accounts, such as 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined-benefit plans, are exempt under 11 U.S.C. § 522(b)(3)(C), as well. Learn more about retirement accounts in bankruptcy.
- Public benefits. Aid to the blind, aged, and disabled (§ 4-215.01); crime victims' compensation (§§ 4-507(e), 15-501(a)(11)); general assistance (§ 4-215.01); Social Security (§ 15-501(a)(7)); unemployment compensation (§ 51-118); veteran’s benefits (§ 15-501(a)(7)); workers' compensation (§ 32-1517).
- Insurance. Disability benefits (§§ 15-501(a)(7), 31-4716.01); fraternal benefit society benefits (§ 42-10-4); group life insurance policy or proceeds (§ 31-4717); life insurance payments (§ 15-501(a)(11)); life insurance proceeds if a provision in the contract states that the proceeds cannot be used to pay creditors (§ 31-4719); life insurance proceeds or avails (§ 31-4716); other insurance proceeds up to $200 per month for two months (head of family) and up to $60 per month for two months (non-head of family) (§ 15-503); unmatured life insurance contract, other than credit life insurance (§ 15-501(a)(5)).
- Miscellaneous. Alimony or child support. (§ 15-501(a)(7).)
These figures can change and additional exemptions exist. Be sure to verify exemptions independently or by consulting with a local bankruptcy lawyer.
More Washington DC Bankruptcy Information
You’ll use this information when you’re ready to prepare your paperwork and file your case.
Washington DC Credit Counseling and Debtor Education Information
Individual filers must take two financial courses—one before filing and another before receiving a discharge (debt forgiveness). Approved providers are listed under “Credit Counseling & Debtor Education” on the U.S. Trustee’s website (be sure to scroll down to your district).
Bankruptcy Costs, Filing Fees, and Forms
Most people must pay something to file for bankruptcy, but it’s usually worth the cost. Here’s what you can expect.
- Official bankruptcy forms. Before the Washington D.C. bankruptcy court wipes out qualifying debt, you must disclose all aspects of your financial situation—income, expenses, property, debt, and property transactions—on official bankruptcy forms. These forms are free. After filling out the bankruptcy forms online on the U.S. Bankruptcy Court forms webpage, you’ll file your paperwork in your local bankruptcy court.
- Bankruptcy filing fees or a fee waiver. You’ll pay a filing fee when you file your paperwork with the court unless you qualify for a fee waiver. Find out about both in Bankruptcy Filing Fees and Costs.
- Bankruptcy lawyer fees. The cost to hire a lawyer varies depending on the area. Many people benefit from retaining counsel. Find out the benefits of being represented by an attorney.
District of Columbia Bankruptcy Court Location
The Washington, DC bankruptcy court website has instructions for filing your paperwork and the court’s local rules (click on “Parties Who Have No Attorney”). The U.S. Bankruptcy Court contact information is 333 Constitution Avenue N.W., Room 1225, Washington, DC, 20001, (202) 354-3280.
You’ll need additional information and a thorough understanding of the law to file on your own. For more detailed discussions on common bankruptcy issues, consider buying a self-help book such as How to File Chapter 7 Bankruptcy by Attorney Cara O’Neill and Albin Renauer J.D.