Types of Bankruptcies: Which is Right for You?

Common Types of Bankruptcies in Georgia

In 2019, just over 2,000 bankruptcies have been filed each month in Georgia. This number does not include debtors who reopened bankruptcy cases. Although bankruptcy is a relatively common occurrence, it can be terrifying when you feel your own debts piling up and realize that you may join the ranks of those filing for bankruptcy. If, after consulting with an experienced attorney, you determine that bankruptcy is your best option, you will have some decisions to make. Continue reading to learn more about the most common types of bankruptcies and which is right for your situation.

Choosing Your Bankruptcy Chapter

As you begin researching your bankruptcy options, you may feel overwhelmed. Not only are your finances in disarray, but you now face difficult, complicated choices about how you will file. There are many different forms of bankruptcy, each with their own requirements and benefits. Choosing the best option for you begins by examining the requirements to determine whether or not your case qualifies. An experienced attorney can also help you to make this determination quickly and efficiently.

Before you or your attorney can choose the best bankruptcy option, you will need to closely examine your financial situation. Whether or not you have yet consulted an attorney, you will need some basic financial information, including:

• Monthly income
• Detailed monthly expenses
• List of all debts owed, whether or not you are delinquent
• Equity in large assets, such as your home and vehicles

Your income will help to determine which bankruptcy chapters you can qualify for, but it is the list of debts owed that may be the most important. While bankruptcy can discharge, or forgive, your debts, only those debts listed in your bankruptcy documents are covered by the bankruptcy proceedings. In other words, any debts you forget to list will not be forgiven and will still be your responsibility.

Chapter 7 Bankruptcies

One of the most common bankruptcy options, a Chapter 7 bankruptcy is also referred to as liquidation bankruptcy. Chapter 7 may be right for you if:

• Your income is lower than the median Georgia income, $29,668 for an individual as of the time of writing OR you can pass the means test
• You are unemployed
• You have few assets or very low-value assets
• You owe more on your home than it is worth, protecting it from bankruptcy

Keep in mind that a Chapter 7 bankruptcy may require you to sell some of your assets and use that money to pay off a portion of your debts. The law allows you to keep certain assets if your equity in them is below the limits. Georgia allows up to $21,500 in a homestead exemption, for example. Although you may lose some assets, most people who choose to file a Chapter 7 bankruptcy do so because their equity protects those assets most important to them. An additional benefit is that most of your debts, with the exception of child support, some student loans, taxes, and debts owed as a result of a criminal offense, will be fully discharged.

Chapter 13 Bankruptcies

Out of all the various types of bankruptcies, Chapter 13 is the most common. It is a reorganization of debt, which requires a repayment plan and, unlike a Chapter 7 bankruptcy, does not generally require that you give up any assets unless you are unable to pay off an adequate amount of the debt in your repayment plan. Chapter 13 may be right for you if:

• Your unsecured debt is less than $419,275
• Your secured debt is less than $1,357,850
• You are willing and able to stick to a repayment plan for 3-5 years
• You are behind on your mortgage and wish to keep your house
• You have a large amount of equity in your home, vehicles, or other property

Although filing your bankruptcy as a Chapter 13 generally allows you to keep your home, car, and other assets, there are drawbacks. You will create a repayment plan based on your disposable income, which is calculated by deducting your monthly expenses, for which there are some limits, from your monthly income. All disposable income will then be utilized in your debt repayment plan, which will last three to five years depending on your income level and how long it will take to repay debts. In essence, a Chapter 13 bankruptcy requires that you live on an extremely tight budget for three to five years. At the end of Chapter 13, though, your debts will be discharged, with the same exceptions as in Chapter 7.

Less Common Types of Bankruptcies

Chapters 7 and 13 are the most common bankruptcy filings, but there are other options available to you in some circumstances. These include Chapters 11, 12, and 15 bankruptcies. Check into these carefully, as they have specific qualifications and most filers do not qualify.

One less common option is Chapter 11. This form of bankruptcy is also called large reorganization. Unless you represent a large company or corporation or have extremely high levels of debt and income that prevent you from filing under another chapter, a Chapter 11 bankruptcy will not likely be appropriate for you. Individuals are allowed to file a Chapter 11 bankruptcy, though, so consult with your attorney if you believe it could be an option for you.

Chapter 12 bankruptcy is intended for farmers and fishermen, whose income can be less predictable than those in traditional jobs. The bankruptcy still requires a repayment plan, but the terms are more flexible than those of a Chapter 13 bankruptcy. There are also higher debt limits and more options for reducing debts.

It would be rare that you would qualify for a Chapter 15 bankruptcy, which deals with foreign companies and allows them to file for bankruptcy in the US courts. However, if you do have foreign business assets, be certain to ask your attorney about how you should file.

Contact an Experienced Atlanta Bankruptcy Attorney

Even if you are certain that you know which form of bankruptcy best suits your needs, you will want an experienced bankruptcy attorney on your side. The attorneys at Cornwell Law Firm will ensure that you filed under the best chapter for your situation, as well as helping you to navigate the difficult process smoothly. Contact us today to schedule a consultation.