Bankruptcy is a scary term for most people to think about, bringing forth thoughts of doom and financial ruin. Bankruptcy is not an admission of defeat, but a chance to take control of your life and financial future. A bankruptcy filing can give you a fresh start, and ultimately put you in a better position than you were in to begin with.

To understand how bankruptcy can help those in the Athens, Georgia area, it helps to understand how the process works and why it exists in the first place. It also helps to know that the Athens-based bankruptcy attorneys at Morgan & Morgan have brought many others back on the road to financial opportunity when debts seem insurmountable. Our legal team helps people just like you understand the process in a way that works for you and can be tailored to your situation.

 

What is Bankruptcy? 

Bankruptcy is a legal process that operates through the federal court system. The United States Bankruptcy Court for the Middle District of Georgia serves those in Athens and the surrounding area. When people fall behind on debts and can no longer pay their creditors, bankruptcy offers a “fresh start”. Through bankruptcy, debtors have the opportunity to liquidate assets, establish repayment plans, or discharge some debts entirely. Bankruptcy can offer someone a “deep clean” of their financial situation, reorganizing finances and prioritizing certain debts. Bankruptcy laws in the United States go back to the early 1800s, as our government and judicial system recognized the need for a system to assist debtors and creditors.

 

The two main purposes of bankruptcy are to:

 

1. Provide honest debtors with a financial fresh start;
2. Provide creditors with a chance to be repaid in an organized manner, based on any assets the debtor does have available.

 

When a debt is discharged through bankruptcy, a creditor can no longer sue over that debt or take any other collection action related to it – including calls, letters, or other activities. This allows the debtor to move forward with some peace of mind that they won’t continue to be harassed over debts they cannot pay.

 

For many people battling debt, bankruptcy can provide a sensible solution. Starting the process with an understanding and knowledgeable Athens bankruptcy attorney can be a great first step for those seeking to clear a path back to financial solvency.

 

What Are Your Options in Bankruptcy? 

Bankruptcy proceedings typically take 2 different forms: Chapter 7 bankruptcy and Chapter 13 bankruptcy. To understand which better meets your needs, it helps to know more about each type of bankruptcy.

 

Understanding Chapter 7 Bankruptcy in Athens

Chapter 7 bankruptcy in Georgia allows individuals to liquidate assets and discharge certain unsecured debts. Commonly known as “straight bankruptcy”, Chapter 7 bankruptcy involves the appointment of a trustee to review the debtor’s assets and liabilities. The bankruptcy trustee will also review the debtor’s income, living situation, and monthly expenses. Eligibility for Chapter 7 bankruptcy in Georgia is determined through a bankruptcy means test, evaluating your income, assets, and ability to repay debts. Chapter 7 is usually best suited for those with lower incomes and a high debt-to-income ratio.

 

For debts that are supported by collateral – such as a mortgage or auto loan – the debtor and trustee will seek to satisfy those debts through the sale of assets, if available. Non-exempt, unsecured assets will typically be sold off, with the proceeds going toward case-related expenses and payments to creditors.

 

Unsecured debts are usually discharged through the Chapter 7 process. Debts that can be discharged might include:

 

• Credit card debt;
• Medical debt;
• Personal loans.

 

Not all personal debt can be discharged through bankruptcy, however. Debts that are non-dischargeable include:

 

• Tax debt accrued within 3 years of the bankruptcy filing;
• Child support arrearages;
• Spousal support (alimony) arrearages;
• Student loans, unless a hardship can be proven;
• Court-ordered fines and expenses;
• Debts not included in the bankruptcy petition.

 

If student loans or tax liabilities are your only troublesome debts, Chapter 7 bankruptcy might not be the solution. However, it can still make sense to file for Chapter 7 bankruptcy if the discharge of certain debts will allow you to pay toward your mortgage, auto loan, and non-dischargeable debts such as back taxes or student loans. Generally, individual debtors filing Chapter 7 bankruptcy will receive a discharge of debts in 99% of cases.

 

Chapter 7 bankruptcy is not limited to individual debtors, meanwhile. Corporations, partnerships, and other business entities can also file for Chapter 7 bankruptcy if they meet the threshold qualifications.

 

Understanding Chapter 13 Bankruptcy in Athens

Not every individual or business qualifies to file for Chapter 7 bankruptcy. If the means test shows that a debtor does not qualify for Chapter 7 – or they prefer not to go through Chapter 7 – Chapter 13 bankruptcy in Georgia can be the next option. Chapter 13 bankruptcy is essentially a payment plan, and does not involve discharge of debts.

 

Chapter 13 bankruptcy offers the best way to prevent foreclosure of your home, repossession of vehicles, or loss of other personal property. Since discharge is not involved, you get to keep what you have as long as you follow the payment plan.

 

Chapter 13 also includes an automatic stay – or stoppage – of all collection activity for Georgia residents that file for bankruptcy. This provides relief from the onslaught of calls, mailings, and emails that plague debtors when they fall behind on payments. An automatic stay in a Georgia bankruptcy case can also put a halt to wage garnishments and other collection methods as the case is pending.

 

How does a Chapter 13 Repayment Plan Work? 

At the outset of a Chapter 13 bankruptcy case, the court will review:

 

• A breakdown of your assets and liabilities;
• A comparison of monthly income and expenses, to determine what you can afford;
• A schedule of leases and other contracts you might be obligated under;
• An overview of your financial condition.

 

After assessing your overall financial situation, the Chapter 13 repayment plan will prioritize your debts and require full repayment of certain obligations. High-priority debts often include:

 

• Tax debts;
• Child support and spousal support;
• Federal student loans;
• Secured debts such as mortgages and auto loans.

 

The Chapter 13 repayment schedule must be completed within 3-5 years and will set your monthly payments at a rate that is achievable based on your income. The repayment plan requires strict compliance, as missed payments can jeopardize your case. If you fail to make payments, the Trustee or a creditor can file a motion to dismiss your Chapter 13 case entirely. Missed or late payments can happen, but you will need to correct the situation as quickly as possible.

 

One key benefit of a Chapter 13 plan is you are protected from collection activities while the plan is in place. This means no harassing calls, no wage garnishments, and no other threats from your creditors. The other important benefit is that Chapter 13 allows you to stay in your home or keep your vehicle which is covered under the repayment plan.

 

Navigating a Chapter 13 proceeding in the Middle District of Georgia is not always easy and is best done with a well-qualified Athens bankruptcy attorney. With expert legal help, a Chapter 13 debtor can get fair and efficient results that help them move on with their lives.

 

When Should You Think About Filing For Bankruptcy in Athens? 

We all face debt, bill payments, car payments, mortgage payments, and other costs involved with daily life. When these debts become so overwhelming and the stress becomes too much for you and your family, it is time to think about all options – including bankruptcy.

 

Keep in mind that bankruptcy is not a “free pass” toward leaving debt behind. A significant drawback to filing bankruptcy is the damage it can do to a person’s credit. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years and negatively impact your credit score. A Chapter 13 filing can appear on your credit report for up to 7 years, meanwhile. Either filing reflects that you had, at one point, an inability to pay your debts in full.

 

However, the alternatives can be just as damaging not only to your credit score but to your life in general. Without bankruptcy, in some cases, you could face foreclosure of your home, repossession of a vehicle, tax liens, and other harsh measures that dramatically harm you and your family.

 

Thousands of people from all backgrounds file for bankruptcy in Georgia each month, for various reasons. Most filers struggled deeply with financial trouble for months or years before they gathered the strength to file for bankruptcy. You are not alone in considering bankruptcy as an option to gain a fresh start in life. To take that next step, you want trustworthy legal advice to guide you through the process at every stage.

 

Our Athens, Georgia Bankruptcy Attorneys Are Here to Help You Get a Fresh Start in Life Through Bankruptcy 

Making the decision to file for bankruptcy is tough for anyone. Our legal team is here to help you gain positive long-term results through bankruptcy and guide you through the process from step one to the finish line. We will consult with you to determine whether Chapter 7 or Chapter 13 bankruptcy is right for you, and how you can keep your home and the possessions that matter most to you. Our Athens, Georgia bankruptcy law firm offers free consultations to talk about your situation. Feel free to complete our online submission form, or call us today at (706) 508-4179.

Related Content: What Happens When You File Bankruptcy in Athens?