Bankruptcy. The word either brings fear or shame. However, bankruptcy is more common than many realize. It’s a way to get a fresh financial start when your financial world is spinning out of control.

In Georgia, you have the option of filing either Chapter 7 or Chapter 13 bankruptcy protection. Before you file for bankruptcy, it’s essential to understand the ramifications of the filing. Bankruptcy isn’t an immediate fix. It takes time to rebuild your credit. Not to mention, some requirements must be met before you can even file.

What Is Chapter 7?

In Chapter 7 bankruptcy, you are only allowed to keep property or assets that aren’t covered by exemptions. Some people call this form of bankruptcy “liquidation” bankruptcy because assets must be surrendered to the trustee and sold to satisfy debts. Before filing a Chapter 7 case, it’s crucial you understand that you must meet strict qualifications even to file. In addition, you must know what assets are exempt and what assets aren’t.

How Does Chapter 7 Bankruptcy Work in Georgia?

When you file for Chapter 7 bankruptcy, the court places a temporary stay on the debts you currently have. During this stay, your creditors can’t collect payments or take other forms of relief against you, such as eviction, foreclosure, or repossession. The court takes legal possession of your property and appoints a bankruptcy trustee.

It’s the trustee’s job to review your finances and assets and oversee your bankruptcy case. Any nonexempt property gets sold, and the proceeds are used to pay your creditors. The trustee also sets a creditor meeting for you to answer questions regarding your Chapter 7 filing.

Each state has its own rules about which property is exempt from bankruptcy proceedings. Most Chapter 7 cases are considered no-asset cases so that any nonexempt property will have a valid lien against it. Whatever debts you have left after the Chapter 7 process will be discharged, meaning you no longer have to pay them. However, you should know that some debts, like student loans, child support, and alimony, cannot be discharged through bankruptcy.

Income Limits for Filing Chapter 7 in Georgia

If you want to file a Chapter 7 bankruptcy claim in Georgia, you must meet income requirements as part of the qualification process. To qualify for a Chapter 7 filing, your income must be below a specific amount. Further, you must prove that you meet this requirement with two “means tests.”

For the first means test, you compare your income to that of the median household income in Georgia for households similar to yours. How is the median income decided? US Census data is used to determine the average household income. In 2020, for example, the census showed that a three-person household had an average income of $75,460. So, if your income was less than that and you had three people living in your household, you would qualify to file Chapter 7.

Income limits used for the means test experience regular adjustment. As of April 1, 2022, the median income used for the means test in Georgia had increased to $79,980 for a three-person household. That’s an increase of about $4,000 over the 2020 numbers.

What does that mean? Simply put, if you have a three-person household in Georgia and make less than $79,980 annually, you could move forward with a Chapter 7 bankruptcy filing.

What Happens If Your Income Is More Than Georgia’s Median Income?

If your income is more than the median income, you may still be able to file for Chapter 7 bankruptcy relief. There is a second means test that will determine if you qualify even if your income is higher than the current median. That test calculates your disposable income.

Disposable income isn’t difficult to calculate. To make the calculations, you need to know what your monthly expenses are. First, total your monthly expenses. Subtract that total from your monthly income, and you will have your monthly disposable income. If you have very little disposable income each month, you may still qualify to file for bankruptcy under Chapter 7.

Important Notes About the Means Test

The United States Trustees Office says the means test is a standardized form you must complete to file bankruptcy. When you complete the form, you will calculate your average monthly income. Then the figure will be annualized to determine your average annual income.

Here is some other important information regarding the means test.

1. Even if your spouse isn’t filing bankruptcy with you, your entire household income is used for the means test. A possible exception is if you are legally separated.
2. Using US Census Bureau data, your average household income will be compared to other household incomes in Georgia.
3. You must include the average monthly income from all sources for the six months before filing the bankruptcy case. 11 U.S.C. § 101(10A). So, if you are filing on September 12, the six-month period you must include is the time from March 1 through August 31. You would add all income for those months and divide your total by six. Only use income from any source once. For example, if you and your spouse are listed as owners of a rental property, only add the rental income in one column rather than attribute it to both people. If there is any line on the form that doesn’t apply to your situation, put $0 in that place on the form.
4. If you have income that varies each month, consider using an average income calculator to calculate your average monthly income.

Chapter 7 Bankruptcy Income Limit in Georgia

The income limits for bankruptcy cases in Georgia change approximately every six months. Here are the income limits as of May 15, 2022. If your household has more than nine people, add another $9,000 for each additional family member.

# of People	Annual Income
1	$55, 600
2	$71, 504
3	$79,980
4	$96,622
5	$106,522
6	$116,422
7	$126,322
8	$136,222
9	$146,122

What Income Is Considered?

It’s important to note that not all income is included in the means test calculations. Some disability and social security income isn’t included. Neither are payments of victims of war crimes nor payments related to a national emergency.

The definition of the income that is included says, “any amount paid by any entity other than the debtor, on a regular basis for household expenses of the debtor.” To better understand the broad nature of the definition, let’s look at specific types of income that are included.

• Income from salaries
• Spouse’s income (if not legally separated)
• Hourly income
• Overtime income
• 1099 income (Uber, Lyft, etc.)
• Net rental Income
• Georgia government income
• Child support
• Alimony
• Dividends, interest, and royalties
• Pension income
• Retirement income
• Net business income
• Annuity payments
• Unemployment compensation
• Worker’s compensation

How Is Household Size Calculated?

You may wonder how household size is determined for Georgia means test. Typically, your children or other individuals you report as dependents on your taxes are included in your household. A roommate who isn’t included on your taxes is likely not included in your household. Additionally, if you have children who are away from home at college or who are engaged but not married, you should check with your local bankruptcy court to learn the rules about including them in your household.

Other Qualifications for Filing Chapter 7 in Georgia

Even if you meet the income requirements for filing Chapter 7, you must still meet other eligibility requirements to be able to file. Those qualifications include the following:

• You can have no other Chapter 7 bankruptcy filing in your name within the previous eight years.
• You can have no Chapter 13 bankruptcy filing in your name within the previous six years.
• If you have attempted to file either a Chapter 7 or a Chapter 13 bankruptcy and your case was dismissed, you must wait 181 days before you can file again.
• Individuals are usually required to complete a credit counseling course within 180 days before filing for bankruptcy relief.
• If the court believes you are attempting to defraud your creditors to get out of paying your debts, the case can be dismissed, even if you meet other eligibility requirements.

What Happens If You Fail the Means Test in Georgia?

The good news is that if you fail the Georgia bankruptcy means test, you still have other options available to you. You might qualify for bankruptcy protection under Chapter 13. Or, you could consider alternatives to bankruptcy. Those include debt settlement, debt management, or debt payoff planning.

Final Thoughts

If you are drowning in a sea of debt and feel like you have no way out, it may be time to consider Chapter 7 bankruptcy relief. Remember, in Georgia, you must complete a means test to qualify for Chapter 7 bankruptcy. If you don’t meet the income requirements, you may still be able to get relief under Chapter 7.

If you are unsure if Chapter 7 bankruptcy is right for you, an experienced bankruptcy attorney can help you. At Morgan & Morgan, the attorneys are available to help you determine whether you meet the qualifications for Chapter 7 bankruptcy or whether you should choose a different option.

Related Content:  What Do You Lose When You File Chapter 7 in Georgia?