Commenter Keter raises some interesting points:
Formaldehyde in clothing also makes it more flammable, and can cause contact dermatitis. Washing will remove the chemical treatment. Baking soda adsorbs (yes, that’s spelled right, it is a chemical process, no a physical one) some of it, but does not neutralize it.
Try soaking the clothes in a plastic tub containing hot salt water with a little bit of lemon juice in it — place a stainless steel spoon on one side of the clothing and a wad of aluminum foil on the other…there are usually metal salts in the sprayed on solution, and the anode effect you create this way may help pull the stuff out of the fabric.
Now, let me put down the baby and get my geek on.
Yes, formaldehyde has all kinds of skeery information attached to its Wikipedia page. . . Words like carcinogen and contact irritant come to mind, but it is important to remember it is also a natural byproduct of some of our own biologic processes. So yes, do what you can to minimize your exposure, but there is no need to invest in a Hazmat suit. We are surrounded by formaldehyde, it’s in the smog we breathe, but levels are often higher indoors than out, it’s in particle board, furniture, and many paper products. Reality is, unless you live in a yurt and weave your own clothing, chances are you will have some exposure to this chemical.
Formaldehyde is readily soluble in water. It is also an acid, by adding baking soda to the wash water you are creating a solution that will reduce the amount of chemical on the material.