When hard financial times hit, many families must use bankruptcy laws to protect vital assets and prevent creditors from seizing everything they own–including vital transportation, the money needed for groceries and other necessities, and shelter. Bankruptcy in Georgia prevents creditors from leaving families destitute.

Bankruptcy laws also protect some types of property up to specified dollar amounts. For instance, bankruptcy petitioners can retain certain levels of home- and vehicle equity and life insurance cash values.

Retirement savings and benefits also escape seizure in bankruptcy. IRAs, 401(k)s, and other retirement assets remain out of creditor reach.

The bankruptcy policy in Georgia achieves this by granting exemptions. In bankruptcy, the debtor receives relief from his obligations in exchange for surrendering the property to creditors (Chapter 7) or fulfilling a repayment plan (Chapter 13). But certain property is essential for immediate- and long-term survival, and bankruptcy exemptions protect these assets.

Bankruptcy in Georgia Exemptions

Exemptions apply in both Chapter 7- and Chapter 13 bankruptcies. Choosing the correct chapter for your situation depends on what non-exempt property you own and whether you meet the qualifications for Chapter 7. Some households have too much income to qualify for a Chapter 7, though they can still protect their assets by filing a Chapter 13.

Later in the article, we explore the qualifications for Chapter 7 and why it is advantageous in certain cases. However, as a general rule, if all of your property is exempt and you meet the Chapter 7 qualifications, Chapter 7 provides the most benefits, though it has a more severe impact on your ability to obtain credit for several years after the case ends.

Qualifying for Georgia’s Bankruptcy Exemptions

If you qualify for Georgia’s bankruptcy exemptions, you have eligibility for all of them. However, if you fail to meet the standards, you can use none of the exemptions. Therefore, in many cases, your qualification for exemptions is a key consideration.

Georgia law permits you to file bankruptcy once you have lived in the state for more than 180 days. However, you must have resided in Georgia for at least 730 days to use the exemptions.

Those with less than 730 days of residency can still benefit from exemptions–but they use the ones from the state they resided in during the two years before moving to Georgia. As a result, if you have less than 730 days of Georgia residency, it’s essential to understand the implications of exemptions when deciding whether and when to file.

In a few instances, Georgia bankruptcy filers resided in more than one state before relocating to Georgia. In that case, you can apply the exemptions for the state you resided in for the majority of the 180 days preceding the two years preceding your filing.

Assuming you qualify for Georgia’s bankruptcy exemptions, you can double the exemption amounts if you are married and you file a joint bankruptcy. Qualifying for exemptions may make a difference of thousands or tens of thousands in retained property, so review the list carefully.

The Georgia Homestead Exemption

For many bankruptcy petitioners, the Georgia homestead exemption is the most important. Few financial catastrophes are worse than losing your primary residence. Recognizing the devastating impact foreclosures and forced sales have on families, Georgia law offers protection unless you have a significant equity position in the home.

The homestead exemption permits you to keep your home after a Chapter 7 bankruptcy, providing you have less than $21,500 in equity for single filers and $43,000 for married petitioners filing jointly. This exemption applies to primary residences only. You must sell investment and vacation home properties with substantial equity in Chapter 7. The proceeds of the sale go to the creditors.

Saving Your Home in a Georgia Bankruptcy

Saving the family home is the primary motivation for many Georgia bankruptcy filers. The bankruptcy code provides avenues for keeping your home even if your equity exceeds the levels of a Chapter 7 bankruptcy exemption.

Negative Equity

If you have negative equity in the property, it may be possible to reaffirm the mortgage. However, you may decide it is better to let the home go.

For reaffirmed debts, you become responsible again for the full balance, plus any fees and penalties. Eliminating the mortgage on a substantially underwater property is one of the benefits of Chapter 7, making reaffirmation of this debt undesirable for many people.

Chapter 13 Bankruptcies and Preserving the Family Home

Those with more home equity than allowable under Georgia’s homestead exemption may be able to keep their primary residence and other properties by filing a Chapter 13.

Chapter 13 bankruptcies restructure debt rather than eliminate it. This structure allows you to keep real estate too valuable for the homestead exemption, provided you comply with the court-approved Chapter 13 repayment plan terms.

For example, suppose you have a primary residence with $100,000 in equity, have fallen behind on mortgage payments, and the lender has filed foreclosure proceedings. In most cases, you would want to protect that substantial equity position rather than allowing the lender to repossess the home or lose it in Chapter 7.

Chapter 13 saves the home and your hard-earned equity. You would create a plan to repay your debts and submit it to the court. A Chapter 13 plan allows you to reduce your monthly outgo to match your income, a key benefit for households with too much debt or a reduced income.

For a secured property like a home, you must repay the full debt but on the affordable Chapter 13 plan. On the other hand, you can discharge part of unsecured debts, such as credit cards.

For example, you may have a past-due credit card balance of $20,000 and repay $15,000 according to a five-year Chapter 13 plan. When the plan concludes, and the court discharges your case, you can wipe out the remaining $5,000. Being free of this remaining unsecured debt can make it easier to pay off the full balance of your mortgage.

Filing Bankruptcy in Georgia to Stop Foreclosure

Debtors in imminent danger of losing their homes can stop the foreclosure by filing a Chapter 7 or a Chapter 13 bankruptcy. The court issues an automatic stay in both cases, which forces the lender to halt all collection activity, including foreclosure. In essence, the automatic stay suspends the repossession process.

However, if you filed a Chapter 7, the court may order the home sold if you have sufficient equity. Alternatively, you might reaffirm the debt if you qualify for the Georgia homestead exemption or decide to let the home go. If you choose not to keep the home, you must surrender it to the lender after the bankruptcy case concludes.

Chapter 13 allows you to keep the home provided the court approves your debt repayment plan. The automatic stay remains in effect for the time your case is open, usually between three to five years, allowing you to reduce debts and be free from the threat of foreclosure during this period. Once the case ends, you can keep the home, provided you continue to pay your mortgage.

Other Key Exemptions

Georgia bankruptcy law allows for many other helpful exemptions, including the following:

The Georgia Motor Vehicle Exemption

You can keep a vehicle as with a home, provided your equity share is under the exception limit. In the case of vehicles, this is $5,000 ($10,000 for married couples filing jointly).

Other Personal Property

• Up to $500 in jewelry
• Up to $5,000 in total value ($300 per individual item) of animals, crops, clothing, appliances, books, furnishings, household goods, and musical instruments
• Burial plots
• $7,500 of compensation for future earnings needed for living cost
• Health aids
• Up to $10,000 of personal injury recoveries
• Wrongful death recoveries needed for living expenses

Support

• Alimony
• Child support

Public Benefits

• Unemployment compensation
• Social Security benefits
• Public assistance
• Worker’s compensation
• Veteran’s benefits
• Old age assistance
• Aid to blind persons
• Aid to disabled persons
• Crime victims’ compensation

Wage Exemption

• 75% of earned but unpaid weekly disposable earnings (income limits apply)

Tools of the Trade

• $1,500 of implements, books, & tools for a trade

Wildcard

• $1,200 of any property
• Up to $10,000 of the unused portion of a homestead exemption

Pensions and Retirement Accounts

• Traditional IRAs, Roth IRAs, SEPs, and solo 401(k)s
• Traditional 401(k)s and Erisa-qualified benefits
• Pensions necessary for support
• IRA necessary for the support
• Public employees’ retirement benefits

Insurance Proceeds

• Group life insurance
• Life insurance proceeds
• Annuity & endowment contract benefits
• Disability or health benefits to $250 per month
• Fraternal society benefits
• Proceeds and avails of industrial life insurance
• Unmatured life insurance contracts
• Unmatured life insurance dividends, interest, loan value, or cash value (up to $2,000)

 

The above list represents the most common bankruptcy exceptions under Georgia law. However, other exemptions exist. If you have questions about protecting specific property types, contact Morgan & Morgan for a consultation.

Bankruptcy in Georgia exemptions ensures that petitioners avoid falling into destitution because of asset seizures. Without exemptions, many indebted people would lose every penny in bankruptcy, including money for immediate needs, such as food and shelter, and assets fundamental to long-term financial security, including homes and vehicles.

But Georgia law limits exemptions according to dollar amounts. These limits prevent bankruptcy abuse. For example, the homestead exemption allows petitioners to keep a specific level of home equity. This limit prevents unscrupulous debtors from piling assets into real estate with creditor money and then declaring bankruptcy to keep those funds.

If you are considering bankruptcy in Georgia, it is vital to plan your finances so you can protect your vital assets while keeping within the bounds of the law. Morgan & Morgan are experts in helping clients decide how best to retain exempt property and the implications of the choice between pursuing a Chapter 7 or Chapter 13 discharge.

To learn more about your rights in bankruptcy, contact Morgan & Morgan for a consultation.

 

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