While bankruptcy rates have dropped across the United States, indicating an improvement in the economy that is a welcome change for many consumers, some areas have benefitted more than others. Alabama, Tennessee, and Georgia remain the states with the highest bankruptcy rates. In fact, bankruptcy rates climbed slightly, even as they fell in other states. Continue reading as we answer the question “how does bankruptcy work?”
Answering the Question: How Does Bankruptcy Work?
Many people wonder “how does bankruptcy work.” If you are struggling to keep up with your debts, bankruptcy may allow you to eliminate debt through the sale of some of your property or establishing a repayment plan acceptable to your creditors. Bankruptcy is both a federal and state issue, so you will want an experienced professional to assist you in working through the process.
Federal law requires that you go through credit counseling prior to filing for bankruptcy. This counseling must be completed within the six months prior to filing, so be certain you are ready to proceed with bankruptcy before you begin counseling.
Next, a means test, or analysis of your income and expenses, will determine the kinds of bankruptcy for which you qualify. Your attorney can assist you in choosing between the two most common types of bankruptcy — Chapter 7 and Chapter 13. Each has distinct benefits and drawbacks.
Common Bankruptcy Requirements
The process of actually filing for bankruptcy requires gathering lots of paperwork. An experienced bankruptcy attorney can be invaluable in helping you to determine exactly what paperwork is needed, but some commonly needed paperwork includes:
● Two years of tax returns
● Monthly living expenses
● Debts and loan documentation
● Real estate deeds
● Car titles
Your lawyer will next help you determine what property you can protect under bankruptcy exemptions. Georgia law does not allow for federal bankruptcy exemptions to be utilized, but that does not mean you have no bankruptcy exemption options. You may choose the standard exemption, which allows for up to $5,000 in general property exemption or up to $21,500 in exemptions if a primary residence is included. However, you may also choose to take multiple exemptions instead, including up to $21,500 for your home, $5,000 for your car, $500 for your jewelry, and $1,500 in anything necessary for your employment.
After all of the decisions are made and paperwork compiled, your lawyer will assist you in officially filing for bankruptcy. At this point, the court is in control of your debts and all property you were not able to claim under an exemption. A trustee will review your paperwork and ensure that your debts are paid, to the best of your ability. Then, about a month later, you’ll meet at court with any creditors, though most do not attend this meeting. Following this meeting, the terms of your bankruptcy filing will be carried out. Finally, you will be required to complete a financial management course after filing.
Consult a Bankruptcy Attorney
Don’t be afraid to ask the question “how does bankruptcy work.” Filing for bankruptcy may be complicated, but the attorneys at Cornwell Law Firm can help to make the process as simple as possible. We can also make sure that you retain your property and are able to recover financially on the other side of bankruptcy. Contact us today to schedule a consultation.