Bankruptcy is primarily controlled by federal law, with all bankruptcy cases heard in a federal court. However, each state does have its own rules and procedures. Below we will outline steps to filing bankruptcy as well as how bankruptcies work in Georgia.
Bankruptcy Options in Georgia
Understanding how bankruptcies work can be very complex. If you cannot keep up with your bills and believe that bankruptcy is your best option, you still have decisions to make. The primary decision to make is which form of bankruptcy to file. Chapter 7 and Chapter 13 bankruptcies are most common for consumers. An experienced attorney is critical for helping you through this process.
Chapter 7 bankruptcy is best if you cannot repay your debts, but you must also meet certain income requirements. If your income is below the median for your household size, then you are exempt from the means test and may file for Chapter 7 bankruptcy. However, you may still qualify for a Chapter 7 bankruptcy even if your income is above the median, so be certain to consult an attorney to complete your means test. If you do not qualify for Chapter 7 bankruptcy, you may be required to file under Chapter 13.
Chapter 13 bankruptcy is for those whose income is above the median and who have some ability to repay a portion of the debts. This form of bankruptcy requires creating a payment plan. Although you may not repay the entirety of your debts, your debts will be discharged after you complete your three to five-year payment plan.
Filing Bankruptcy Provides Instant Relief
Bankruptcy takes time, but there is one enormous advantage that you do not have to wait for: Filing for bankruptcy immediately stops all debt collection activities. Your creditors can no longer contact you in an attempt to collect the debt. Filing also stops:
Keep in mind that this relief is dependent on the approval of your bankruptcy filing and meeting all requirements.
Limitations of Bankruptcy
Stopping creditor harassment sounds appealing, especially coupled with the possibility of eliminating your debt. However, bankruptcy is not a cure-all. Filing for bankruptcy cannot eliminate debts such as:
- Some student loans
- Child support
- Some taxes
- Debts related to a criminal charge
You should also be aware that, if a friend or family member has co-signed on a loan with you, bankruptcy will not eliminate the debt for the co-signer. In many cases, your co-signer will be required to pay back some or even all of the debt, even if it is forgiven for you under your bankruptcy proceedings. Your bankruptcy attorney can help you to protect your loved ones, so be certain to alert your attorney to any co-signed debts.
What Happens to My Property After Bankruptcy?
The answer to the issue of your property possession depends on what kind of bankruptcy you choose to file as well as your financial situation. Chapter 13 bankruptcy generally allows you to keep more of your property, but both Chapter 7 and Chapter 13 are addressed below.
Under a Chapter 7 bankruptcy filing, you will be required to allow the sale of all non-exempt property by a court-appointed trustee. The proceeds from that sale will be used to make payments to your creditors, who agree to be satisfied with the payment and discharge or forgive, your debt. Do not panic, though. You will not lose all of your possessions. Under Georgia law, you can exclude some of your property from the sale. These exemptions include:
- Up to $21,500 in home equity, including up to $5,000 in personal property other than your home
- Up to $250 per month in disability benefits
- Life insurance proceeds, if necessary, for your support
- Alimony or child support needed to support yourself
For property which allows only a limited value to be retained, this value refers to the equity or the amount the item is worth minus what you owe. For example, if you recently bought your home, you are unlikely to have much equity in it, making it easier to retain in bankruptcy.
However, a home that is nearly paid off will most likely be sold during a Chapter 7 bankruptcy, since the equity will exceed the allowed exemptions. In most cases, debts you are not behind on and which have low equity value are easier to retain. This may mean working to get current on your payments for the property you wish to keep prior to filing.
Chapter 13 bankruptcies, by contrast, do not require the sale of your property. Instead, you are required to create an acceptable payment plan. The creditors involved have a chance to object to your plan, and any debts you are unable to pay under your plan are subject to repossession.
How Much Does Filing Bankruptcy Cost?
Contrary to common belief, bankruptcy is not free. Within 180 days before you file for bankruptcy, you are required to seek credit counseling. The course must be offered by an approved non-profit agency, but there are generally charges associated with the course in order to offset administrative costs. You can expect to pay up to $50 for most courses, though the fee may be waived depending on your financial situation.
At any point after counseling, you may decide to file for bankruptcy. You will then need to consult an attorney, who will charge for his or her services. The cost will vary depending on your attorney and how complicated your bankruptcy case will be. You can also choose to represent yourself, but you will still encounter court filing fees.
The official filing fees must be paid when you file with the federal court. A Chapter 7 bankruptcy filing costs $335, while Chapter 13 costs $310. In some situations, you may be allowed to pay the fee in installments.
Federal law also requires that you complete a debtor education course after filing for bankruptcy. Like the credit counseling, this course must be taken with an approved education provider. Generally, you can expect to pay $50 to $100 for the course.
Contact an Experienced Atlanta Bankruptcy Attorney
If you are considering bankruptcy to help you solve your financial problems, contact the attorneys at Cornwell Law Firm to review your options. Our attorneys will help you to understand the process and work to protect as much of your property as possible. Click here to request a free consultation with our bankruptcy experts.