Basics on Bankruptcy - Help for Every Financial Situation
For most people in Georgia, the decision to file bankruptcy is not an easy one. In many cases, people are reticent because they are not aware of the options that bankruptcy offers. Once people understand bankruptcy, they realize that it can be an excellent tool for putting their families on a better financial track and giving them a fresh start for the future.
Although there is no substitute for speaking with an experienced Atlanta bankruptcy lawyer to determine the best option for your situation, the following article will briefly review the basics of bankruptcy.
Different Bankruptcy Options
The majority of people who file bankruptcy pursue either Chapter 7 or Chapter 13 bankruptcy. Both bankruptcies are designed to give people a fresh start. While their processes are unique, there are some truths that apply to both of them.
First, you will be able to keep your possessions, including your home, your car and your retirement accounts. Whether you are in Marietta, Cumming, Dallas, Gainesville, Atlanta or Douglasville, there are bankruptcy exemptions in Georgia that protect your possessions from being disposed of in your bankruptcy estate.
Second, once your case has been filed, your creditors are barred from pursuing you any further. An injunction known as the "automatic stay" will stop all court actions, including garnishments and foreclosures.
Third, there are certain debts that may not be discharged. Student loans, child support, alimony, any debts incurred by fraud or any personal injury debts caused by driving while intoxicated cannot be discharged in a bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy was designed to give people a fresh start. It allows for the wiping out of various debts, including:
- Credit card debt
- Medical debt
- Unsecured loans
- Deficiency balances from old auto loans and foreclosures
- Income tax debt (in certain situations)
Anyone filing Chapter 7 bankruptcy will list all of their assets, debts, income (if any) and expenses. A bankruptcy attorney will help determine how to exempt your assets.
The "means test" refers to the median family income for a given household size. It varies depending on each state and is periodically adjusted depending on Census Bureau statistics. Even people whose household family income exceeds the median family income may still qualify depending on their circumstances and expenses.
Chapter 7 bankruptcy is often attractive to people because it gives them a fresh start. Once it is filed, it generally takes approximately 30 days for the hearing and 60 days after that a person receives a discharge.
Chapter 13 Bankruptcy
Although Chapter 13 bankruptcy takes longer than Chapter 7, between 36 to 60 months, it has a number of advantages that make it attractive to many people in the long term.
A Chapter 13 bankruptcy requires the creation and approval of a repayment plan. The amount of repayment is determined by a combination of what income is available and what needs to be paid.
People with non-dischargeable tax debt often use Chapter 13 bankruptcy to pay off what they owe to the government. The advantage of using bankruptcy to resolve this debt is that you are protected from having your wages garnished and are not forced to pay crushing interest and penalties.
Another benefit is often the opportunity to make car payments more manageable. If you have a secured debt, such as a car, you must continue to pay for the car to keep it. People often save money on cars by placing them into the Chapter 13 plan, which can help lower their interest rate or at least extend the period over which the car is paid, thereby reducing their monthly car loan payment.
The most popular use of a Chapter 13 is to stop foreclosure. Mortgage arrears can be paid back in the plan. As long as future payments are not missed, the homeowner will be protected from foreclosure.
Because every situation is unique, there is not one kind of bankruptcy that is better for all individuals. Determining the best bankruptcy for you and your family will depend on your needs. If you are buried in debt and are looking for some creative solutions to your financial problems, you should speak with an experienced Atlanta bankruptcy attorney to review your options.