Unlike most other civil actions, consumer bankruptcy almost always starts with a voluntary petition. The V-word is significant. Debtors chose if and when to file. That control continues throughout the process. In most cases, debtors can unilaterally withdraw their petitions at any time.

Fundamentally, bankruptcy is about regaining control of your finances. Many distressed debtors feel there is nothing they can do about unpaid bills and that filing bankruptcy is like using a blowtorch to kill a housefly. Neither of these things is true.

An Athens bankruptcy attorney does more than file a voluntary petition on your behalf. An attorney stands up for you throughout the process. Additionally, only an Athens bankruptcy lawyer can give you the advice to need to make solid choices.

Getting Ready to File

Preparation is a key to success in most areas, and bankruptcy is no exception. In this context, preparation usually means document collection. At a minimum, the trustee (person who oversees the bankruptcy for the judge) will want to see picture identification, the filer’s Social Security card, the last two years of tax returns, and the two most recent pay stubs (if applicable).

Substitutes are sometimes, but not always, acceptable. For example, if the debtor does not have a Social Security card, an IRS letter or other document with the SSN preprinted on it will probably suffice.

Many trustees want to see additional documents, such as insurance declaration pages, property deeds, and loan documents. Therefore, your Athens bankruptcy attorney will probably give you a long list of documents to gather. Some of them might not be necessary. But it’s better to err on the side of caution.

The oddly-named Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 introduced some additional requirements for the process. For example, all filers must take a credit counseling class before they file. This class is typically available online. It usually only takes a few minutes and costs a few dollars.

The credit counseling class that is mandatory according to the Bankruptcy Act must be taken within six months before you file for bankruptcy. This counseling session is designed to help you determine if you have alternatives to filing bankruptcy. While working with the credit counselor, you will review your income compared to your expenses, and they will help you design a personal budget.

Discussion of short-term and long-term financial goals is a portion of these credit counseling sessions. If the counselor determines that bankruptcy is your best course of action, they will explain the effects of bankruptcy and the steps you should consider to get back on track financially.

The credit counseling agency you use must meet the US Trustee Program office’s approval. Even if the credit counselor helps you develop a workable plan, you are under no obligation to agree to it. However, the plan must be filed with your bankruptcy filing as part of your financial disclosure paperwork.

Supposedly, moneylenders approached then-President George W. Bush about signing BAPCA when he took office in 2001. He supposedly said it was too draconian to sign in his first term, but that he would sign it if he was reelected. But that’s the subject of another blog.

Chapter 7 Pre-Filing Steps

The liquidation bankruptcy means the test is another BAPCA change. Debtors cannot file Chapter 7 unless their income is below the average amount for that geographic area and family size. In Georgia, as of May 1, 2020, that amount is $87,313 for a family of four.

For the means test, courts will compare your average income from the previous six months to the median income for Georgia. If your average income is below the median income, you will be allowed to choose to file Chapter 7. However, if your income exceeds the median range, additional sections of the means test will determine if you can file Chapter 7 or if you must opt for Chapter 13.

Generally, the means test is not a problem. Truthfully, if your household income is significantly above $83,000, you probably do not need to file Chapter 7. Other options are probably available.

Chapter 13 Pre-Filing Steps and Athens Bankruptcy Lawyers

Repayment plan bankruptcies also have income limits. These restrictions predate BAPCA, at least in principle. The amounts change frequently. As of April 1, 2019, the Chapter 13 debt maximum is $420,000 in credit cards, back taxes, and other unsecured debt, and $1.25 million in home loans, vehicle loans, and other secured debt.

$420k in unsecured debt sounds like a lot, but many families are at or near this limit. Frequently, if a customer maxes out one card, the bank simply issues another one, and the debtor’s financial hole gets deeper. Secured debt sometimes approaches the maximum as well, particularly if the debtor has a large house along with a HELOC (Home Equity Line of Credit).

For Chapter 13 bankruptcy, you must also submit a proposed repayment plan detailing how you plan to divide your money between your creditors after you pay your living expenses. Priority debts like back child support and tax debt will need to be paid in full. Typically, you will pay unsecured debts partially; sometimes, these debts are paid for as little as 10 cents on the dollar.

Your chapter 13 repayment plan needs to pass these three tests:

1. You must make a good faith effort to deliver a workable plan.
2. Your unsecured creditors must be paid as much as they would have been in a Chapter 7 bankruptcy—usually the value of your nonexempt property.
3. Your disposable income must be paid into the plan for a minimum of three years—up to five years if necessary to satisfy the second tier of requirements.

Once you’ve filed for Chapter 13 bankruptcy, you have to start making payments. Usually, these payments will be withdrawn directly from your wages. If it isn’t set up that way, you or your attorney should arrange with the court for your payments to come directly from your paycheck.

Sometime before the judge closes a Chapter 7 or Chapter 13 bankruptcy, debtors must take a debt management course. This class is also available online, in most cases. However, our Athens bankruptcy lawyers usually recommend taking this class live. The trustee often sponsors free classes. The class is usually boring. But, there may be a gold nugget or two that can help debtors make the most of their fresh starts.

The mandatory debt management course that is now required when filing bankruptcy teaches you valuable money management skills. It is designed to help you avoid another trip to bankruptcy court. The course will teach you how to budget, manage your money, responsibly use credit, and deal with financial emergencies.

The debt management course provides you with a certificate of completion that must be filed with the bankruptcy court by a deadline based on the type of bankruptcy you filed. For a Chapter 7 bankruptcy, you have 45 days from the creditors’ meeting to complete the course and file the certificate. For Chapter 13, you have until the date of your last payment in the repayment plan or the date of filing a motion for bankruptcy discharge.

Filing Bankruptcy in Georgia

After you’ve gathered all of your pre-filing documentation, it’s time to look at the filing process. The first step is determining which property you think is exempt based on Georgia exemption rules. Either you or your attorney must file a two-page petition for bankruptcy along with other required forms with the Georgia district bankruptcy court. These schedules are made for you to provide the court with information regarding your financial situation—typically going back two years.

Your creditors and the judge will be attempting to discover if you have been truthful with the bankruptcy petition. If either or both of them feel you haven’t been forthcoming, then your petition could turn out differently than you want.

Filing Chapter 7 bankruptcy will cost $306. The fee can’t be waived, but you could get an installment plan if the court agrees. For Chapter 13, the fee is $281, and that fee cannot be waived.

Automatic Stay

Once you’ve filed all necessary documents with the bankruptcy court, an automatic stay goes into effect. The automatic stay keeps creditors from directly contacting you or making claims against your property from the day you filed. The automatic stay will stop foreclosure procedures.

The 341 Meeting

However, we are getting ahead of ourselves. Long before the judge closes the case, there is a 341 meeting of creditors. This meeting has an odd name as well. The only people present are the debtor, the trustee, and the debtor’s Athens bankruptcy lawyer.

Chapter 7 341 meetings are quite straightforward. The trustee verifies the debtor’s identity, asks a few boilerplate questions, and inquires about any bankruptcy red flags. These meetings usually only take a few minutes.

Chapter 13 341 meetings are more involved. The trustee reviews Schedules I and J, the monthly income and expense schedules, and places the debtor on an allowance for either three or five years. All the debtor’s disposable income goes to a monthly debt consolidation payment.

Generally, debtors can switch from Chapter 7 to Chapter 13, and vice versa, at any time. That’s part of the complete control mentioned above.

Where Filing for Bankruptcy Doesn’t Help

Filing for bankruptcy is not the solution to all debt-related problems. Here’s what it cannot do

• Stop a secured creditor from foreclosing or repossessing any kind of property you can’t afford
• Get rid of child support and alimony obligations
• Remove student loans, unless the circumstances are extraordinary
• Eliminate most tax debts, especially recent ones
• Remove other non-dischargeable debts
• Clear debt that resulted in a fraud

Too Deep in Debt to See a Way out? Call a Georgia Bankruptcy Attorney Today

Filing for bankruptcy can prove to be an effective remedy if you’re facing serious debt problems. It prevents most steps for collection, including telephone calls, wage garnishments, and lawsuits. It also helps remove several types of debt, such as credit card debts, medical bills, personal loans, and more. There are, however, exceptions to this. Filing for bankruptcy will not stop all creditors, and will not eliminate all obligations. For a free consultation with an experienced bankruptcy attorney in Athens, contact Morgan & Morgan, Attorneys at Law P.C. at (706) 843-2905. Convenient payment plans are available.