Congress has revised the Bankruptcy Code several times, most recently in 2005. Despite all these revisions, bankruptcy procedure has not changed much since the 1898 Nelson Act. Most Georgia bankruptcies follow the same basic procedural map, which is outlined below.

Before 1898, bankruptcy was random. For example, when future President Abraham Lincoln filed in 1833, he spent seventeen years repaying his creditors. Today, a bankruptcy judge would have discharged Lincoln’s debts in as little as nine months.

Benefits of Bankruptcy

Before we dive into how bankruptcy works in Georgia, we should look at some of the benefits of bankruptcy.

The Automatic Stay is at the top of this list. Section 362 of the Bankruptcy Code prohibits all creditor adverse actions. This provision is more important than ever today. The Supreme Court has diluted some of the consumer protections in the Fair Debt Collection Practices Act. Therefore, moneylenders are more aggressive than ever when it comes to collecting debts.

Additionally, bankruptcy protects assets, such as:

• Home equity,
• Motor vehicles,
• Personal property,
• Social Security benefits, and
• Retirement accounts.

Georgia’s bankruptcy exemption rules are quite complex. Only the best Athens bankruptcy lawyers know how to use these rules to protect your core assets.

Filing Bankruptcy

Because of the aforementioned 2005 Bankruptcy Code reforms, qualifying for bankruptcy is a bit more difficult than it was before. However, despite popular myth, almost all debtors still qualify for all forms of consumer debt protection and relief.

Debtors qualify for Chapter 7 if their annual income is below the statewide average for their household size. In Georgia, that figure is $87,317 as of May 1, 2020.

Furthermore, all debtors must take a credit counselling class. This class is usually available online for a minimal cost.

Most debtors file voluntary bankruptcy petitions. The V-word is significant. No one forces debtors into bankruptcy, at least in most cases. They can voluntarily dismiss their petitions at any time. Debtors can also convert from Chapter 7 to Chapter 13, and vice versa, at almost any time.

341 Meeting

About six weeks after debtors file their voluntary petitions, there is a meeting with the trustee (person who oversees the bankruptcy for the judge). Although this event is technically called a “creditors’ meeting,” the creditors hardly ever appear.

In both Chapter 13s and Chapter 7s, the trustee usually reviews a number of documents. At a minimum, these documents include the debtor’s Social Security card, drivers’ license, and last two years of federal tax returns. Many trustees want to see other documents as well, such as insurance declaration pages and recent paystubs.

Chapter 7 341 meetings are usually quite brief. Assuming there are no red flags, the trustee simply verifies the debtor’s identity and asks a few yes/no questions. Shortly after this meeting, the judge typically discharges all unsecured debts.

Chapter 13 341s are a bit different. In addition to the above items, the trustee scrutinizes Schedules I and J, the debtor’s income/expense schedules. The trustee sets up a monthly debt consolidation payment based on this information.

Essentially, the trustee puts the debtor on an allowance for either three or five years, depending on the debtor’s income. All disposable income goes to the debt consolidation payment. The trustee then divides these funds according to the creditor’s priority. Moneylenders must wait in line to get paid. At the end of the protected repayment period, any remaining unsecured debt is discharged.

“Discharge” means the judge wipes away the legal obligation to repay the debt. The account still exists, as do the collateral consequences of debt. Past due taxes are a good example. These debts are dischargeable in many cases. However, if the IRS filed a tax lien, the debtor must address that matter separately.

Assuming the debt repayment plan fully satisfies all secured debt arrearage, such as past-due mortgage payments, all moneylenders must accept the income-based repayment plan. 

Life After Bankruptcy

Rebuilding credit is usually a priority for former bankruptcy debtors. Typically, a bankruptcy filing causes a FICO score to drop about 200 points. 

That being said, bankruptcy usually loos better to creditors than a repossession, charge-off, foreclosure, or similar entry. These events indicate the debtor simply gave up. If debtors file bankruptcy, at least they did something. Furthermore, Chapter 13 bankruptcy involves debt repayment, as outlined above. As a result, Chapter 13s do not stain credit reports as long as Chapter 7s.

There are a number of ways debtors can put bankruptcy in their rear-view mirrors. By using credit responsibly, most people can reach excellent or good credit scores shortly after their filings fall off their credit history reports.

Call Our Georgia Bankruptcy Attorney Today to Know More about Bankruptcy

Bankruptcy procedure is rather straightforward in Georgia. However, you need to be wary of certain state and local nuances that might affect the outcome of your case. To increase the likelihood of success, you will need skilled representation so you are able to comply with all the relevant bankruptcy rules. For a free consultation with an experienced bankruptcy lawyer in Athens, contact Morgan & Morgan, Attorneys at Law P.C. on (706) 843-2905. We routinely handle matters in Clarke County and nearby jurisdictions.

Lee Paulk Morgan

Lee Paulk Morgan

With more than 41 years of experience in the areas of Bankruptcy, Disability, and Workers’ Compensation, Lee Paulk Morgan is one of the most respected Bankruptcy and Disability attorneys in Athens, Georgia. His tireless dedication to serving clients has gained him the reputation of a premier attorney in his areas of practice, as well as the trust and respect of other legal experts, who often refer clients to him.