Filing a bankruptcy action is not a step that people take lightly. A decision often involves a careful weighing of options and 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 bankruptcy is the right choice to select the filing option that best meets his or her needs.
A Chapter 7 bankruptcy action often may be referred to as a liquidation 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 a Chapter 7, including student loans, specific types of tax debt, child or spousal support obligations, or criminal fines. In addition, a bankruptcy court will not discharge debt that was acquired in anticipation of filing for bankruptcy, which often involves the purchase of expensive luxury items. Unsecured debt that may be discharged in a Chapter 7 action includes:
- Credit card debt;
- Unpaid medical bills;
- Outstanding rent;
- Overdue utility bills; and
- Signature loans – often referred to as character loans, these 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, also are not subject to discharge in a Chapter 7 action, with the exception that it may be possible to discharge the debt if the collateral is turned back over to the creditor. There are circumstances where a debtor may have limited equity in a home or vehicle and is permitted to keep the residence pursuant to an applicable homestead exemption and the car under another exemption. This only applies if the creditor is able to keep making payments on the secured debt.
In order to file a Chapter 7 action in Georgia, it is necessary to satisfy the means test. This involves a review of a person’s income and a determination about whether it falls below the established median threshold. It is important to perform this review carefully as a mistake may lead to filing a case that is dismissed after significant costs are incurred.
The Benefits of a Chapter 7 Filing
If a person does qualify to file a Chapter 7 bankruptcy case, the filing puts in place and automatic stay, which also happens in other bankruptcy actions. This means that creditors must stop contacting the filing party and let the court case resolve any issues of outstanding debt. This is a very important tool for those being routinely harassed by creditors and debt collection agencies. In addition to the stay, a person also has the opportunity to preserve certain assets during a Chapter action, which are referred to as exempt property. Any non-exempt property may be sold to pay creditors, to the extent possible, before the discharge of any remaining, qualifying debt. Georgia’s exemptions are relatively limited when compared to some other states.
Commencing a Chapter 7 Case
There is a lot of preparation that goes into the filing of a bankruptcy case, including 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, and the attendance of mandatory credit counseling. It is important to make certain that everything is done properly so that there can be a discharge of debt at the conclusion of the case and a fresh start for the person going through the bankruptcy.
Roswell Bankruptcy Attorneys Provides Necessary Assistance during a Bankruptcy Case
There are many complicated issues that arise during a bankruptcy case, including determining what type of action is the best choice 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.