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Legislation expected to be signed next week will dramatically increase the amount of the homestead exemption available to homeowners in Washington, which will make certain debts more difficult to collect.
Washington’s homestead exemption currently protects up to $125,000 of a homeowner’s equity in a residence by placing it beyond the reach of creditors in judgment execution sales and other insolvency settings (including bankruptcy). The exemption can also preserve that equity against claims based upon commercial guarantees where a deed of trust encumbers the guarantors’ primary residence.
The Washington Legislature has now passed Engrossed Substitute Senate Bill 5408, which would alter the exemption by setting it at the greater of $125,000 or the median sale price of a single-family home for the preceding calendar year in the county where the residence is located. Based on recent home sale prices, the bill increases the exemption in every county in the state. In King County, the exemption would be increased to $729,600. (Median sale data can be found here.)
The Governor is expected to sign the bill on May 18, 2021, and it will become effective immediately. The increased exemption will make it more difficult for creditors in a variety of settings to recover claims against a debtor’s residential equity, and will make personal residences a more valuable asset for debtors.
Please do not hesitate to contact me or any member of our Insolvency and Bankruptcy team with questions.
Brian Free | brian.free@hcmp.com | 206.470.7642
The information contained in this update is provided for informational purposes only. It is not business, legal, accounting, tax, financial, investment or other advice on any matter and may not be relied upon as such. Please contact your attorney to obtain advice regarding any particular legal matter.