Recently the State Legislature and Governor Inslee enacted the most significant change in the history of Washington’s 120-year-old statutory homestead exemption. Washington’s homestead exemption is codified at RCW 6.13.030. The homestead is the amount of equity in one’s home that may be shielded from judgment collection. For decades in Washington, it has been the same amount regardless of where a defendant resided in the state – $125,000. However, in reaction to two local 2018 bankruptcy cases: Wilson v. Rigby, 909 F.3d 306 (2018) (value of exemption set as of petition date) and In re Good, 588 B.R. 573 (Bankr. W.D. Wash. 2018)(bankruptcy sale of homestead property is a forced sale and proceeds are subject to exemption) the Legislature chose to make a seismic shift in the future value of the homestead exemption.
In direct response to these cases the Legislature and Governor made a broad sweeping change to the homestead amount. Instead of a uniform $125,000, the homestead exemption in future years will be calculated on a county-by-county basis and will essentially be the median home value in the applicable county the preceding year. By way of example, the median home value in King County in 2020 equaled: $747,1000. This is the homestead exemption amount for King County. Under the new law, a judgment debtor could protect over $600,000 more than over the prior scheme.
The new limits of the law will impact both judgment debtors and their creditors. The debtors now have the ability to preserve their family’s nest egg through a bankruptcy and stabilize their home situations as they embark on a fresh start. For creditors it will further shrink those non-exempt assets available for judgment collection. It also may have unintended consequences such as reducing available collateral to support a business loan e.g. personal guarantees securing a commercial loan.