Filing a bankruptcy action is not a step that people take lightly. This decision often involves a careful weighing of options. It also requires a determination that a person, or couple, needs the economic clean slate that bankruptcy can provide. Often, a traumatic life event, such as a medical emergency, divorce, or job loss, has prompted the filing. It is important for the person who has made the determination that filing for Chapter 7 protection is the right option that best meets his or her needs.
Liquidation bankruptcy is another name for Chapter 7 bankruptcy. This is because the goal of the filing is to discharge certain unsecured debt rather than reorganize the debt and establish a payment plan. There are specific categories of unsecured debts that cannot be discharged in Chapter 7. These include student loans, specific types of tax debt, child or spousal support obligations, or criminal fines. Also, a bankruptcy court will not discharge debt that was acquired in anticipation of filing for bankruptcy, which often involves purchasing expensive luxury items. Unsecured debt that may be discharged in Chapter 7 protection includes:
- Credit card debt;
- Unpaid medical bills;
- Outstanding rent;
- Overdue utility bills; and
- Signature loans (character loans) are provided without collateral and the funds may be used for any purpose, but these loans often are subject to high interest rates.
Secured debts, such as mortgages, are also not subject to discharge in a Chapter 7 action. One exception is that it may be possible to discharge the debt if the collateral is given back over to the creditor. There are circumstances where a debtor may have limited equity in a home or vehicle but have permission to keep the residence under an applicable homestead exemption and the car under another exemption. This only applies if the creditor can keep making payments on the secured debt.
To file a Chapter 7 action in Georgia, it is necessary to satisfy the means test. This involves reviewing a person’s income and determining whether it falls below the established median threshold. It is important to perform this review carefully. Making a mistake may lead to a dismissed case after spending significant money.
The Benefits of a Chapter 7 Filing
If a person does qualify to file a Chapter 7 bankruptcy case, the filing puts in place an automatic stay. The automatic stay also happens in other bankruptcy actions. This means that creditors must stop contacting the filing party and let the court case resolve outstanding debt issues. For those being routinely harassed by creditors and debt collection agencies, this is an essential tool. In addition to the stay, a person also has the opportunity to preserve certain assets during a Chapter action. We call the preserved assets exempt property. Before the discharge of any remaining, qualifying debt, you may sell any non-exempt property to pay creditors.
Commencing a Chapter 7 Case
There is a lot of preparation that goes into the filing of a bankruptcy case. You should include the following items when filing for a bankruptcy case:
- the collection of all relevant financial documents
- the completion of schedules
- listing all creditors
- the filer’s income and expenses, as well as any assets
- the attendance of mandatory credit counseling.
Making sure everything is correct is very important. This may allow a discharge of debt after the case and a fresh start for the person going through bankruptcy.
Roswell Bankruptcy Attorneys Provides Necessary Assistance during a Bankruptcy Case
Many complicated issues arise during a bankruptcy case. One of the biggest issues is determining what type of action is best for a particular person or couple. If you live in the Roswell or Alpharetta area, the experienced bankruptcy attorneys at Roswell Bankruptcy Attorneys are ready to help you. Call us at (770) 993-1005 to schedule an initial consultation.