Debt – it’s one of the few things that most Americans have in common. In addition, the debt burden that most of us carry is increasing. We are rapidly approaching all-time highs for consumer debt across the country.

According to the Federal Reserve Bank of New York, the US total household debt climbed to over $15 trillion in the third quarter of 2021, driven largely by new credit extensions. Credit card balances also increased to the tune of $17 billion during that same time. It’s a great time to be a lender, but not such a great time for consumers. That amount of debt can feel like an anchor, dragging you down.

It’s all too easy to find yourself getting behind on your payments. One late paycheck, or even an unexpected emergency, and you’ve missed a critical payment to a creditor. From there, it just snowballs and you’re never able to get caught up. The next thing you know, your creditors are calling you all day long and even sending threatening letters. Some might even turn your accounts over to debt collection agencies.

There is a way out – bankruptcy in Georgia. However, many consumers have a lot of questions about declaring bankruptcy. Can it really help you write off all your debts? Or does it only work for some of them? What should you know to help you decide if this is the right path for you? We’ll break it all down in this post.

 

What Is Bankruptcy in Georgia All About?

Bankruptcy has been around for a long time, but despite that, it’s often poorly understood. At its heart, it’s a way to find stable financial footing during the trials of life. Bankruptcy offers a path forward when everything seems bleak. It’s also a way to find peace, to put a stop to foreclosure proceedings, wage garnishment, and even lawsuits.

During this process, you will petition the court to either dismiss many of your debts or to allow you to create a structured repayment plan that will satisfy your creditors. The two most common types of bankruptcy for consumers are Chapter 7 (liquidation) and Chapter 13 (repayment). If the court grants your request, you will be able to start rebuilding your financial life.

Of course, there are many things that consumers don’t realize about bankruptcy. For instance, in Chapter 7, most of your non-exempt assets will be sold off to satisfy your creditors. However, one of the things that often surprises people is what can and cannot be written off during bankruptcy in Georgia.

 

Debt Types: What Can and Cannot Be Written Off in Bankruptcy in Georgia?

The term used to describe the process of writing off debt during bankruptcy is “discharge”. Some of your debts can be discharged during both Chapter 7 and Chapter 13 proceedings. However, not all debts can be discharged, and some types that can be discharged can be challenging to handle.

What Debts Can Be Written Off?

While not all of your debts can be discharged during bankruptcy, most types can, depending on the type of bankruptcy you file. If you are looking for relief from your debts because there is simply no way that you can repay them, then Chapter 7 is most likely the right path for you. Under Chapter 7, you can discharge a very wide range of debts, including:

• Credit card debt
• Medical bills
• Personal loans
• Phone bills
• Unpaid utility bills
• Remaining balances after repossessions
• Some types of legal judgments, such as those relating to unsecured debt (not those related to crimes, such as DUI)

All of the debts above will be automatically discharged about four months after your filing. However, there are some types of debts that are only sometimes discharged, and it’s important to understand what those are. These can include the following:

• Student loans
• Some types of tax debt

You will also find that there are a few types of debt that are not often discharged. These include credit card debt and personal loan debt incurred through falsifying application paperwork. If the lender believes that you obtained your credit card or loan through fraud, they can petition the court not to discharge the debt. This can also occur if the lender believes that you never planned to repay the debt in the first place.

 

What Debts Cannot Be Written Off?

So far, we’ve covered what debts are always discharged, those that are only sometimes discharged, and those that are rarely discharged. There is yet another type – debt that is never discharged. This type of debt will remain with you even after completing your Chapter 7 filing, and includes the following:

• Any tax debt from the last three years
• Tax debt incurred through fraud or willfully not filing your returns
• Debts related to divorce proceedings
• Child support
• Alimony/spousal support
• Court fines, fees, and penalties
• Personal injury case-related debt
• Non-tax debt owed to the government

 

Georgia Bankruptcy Exemptions

Previously, we mentioned that under Chapter 7, your non-exempt assets can be sold to repay your creditors. This begs the question of what Georgia allows as an exempt asset. The list is actually pretty long and includes the following:

• Your primary home (through a homestead exemption) as long as you don’t have too much equity in it. Currently, the maximum is $21,500, but that’s doubled if your spouse has an interest in the home, as well. This amount can be used to exempt real estate, personal property, and co-ops that are used as primary residences.

 

• If you do not use the entirety of your homestead exemption, you can use up to $10,000 as a wildcard exemption to protect any other type of property (the homestead exemption only applies to real estate).

 

• You can exempt up to $500 in jewelry.

 

• You’re allowed to exempt up to $5,000 for “animals, crops, clothing, appliances, books, furnishings, household goods, musical instruments, health aids, and burial plots”, but each individual item exempted cannot have a value over $300.

 

• You can exempt up to $5,000 for your car.

 

• You’re allowed up to $1,500 for tools and other items required for your trade.

 

• You’re allowed to keep up to 75% of your weekly earnings.

 

• You can exempt most types of retirement accounts, including 401(k)s, 403(b)s, IRAs, Roth IRAs, and more.

 

Debts That Can Only Be Discharged in Chapter 13

Thus far, we’ve covered debts that can be written off through Chapter 7 bankruptcy in Georgia. However, there are some types (very few) that can only be discharged through Chapter 13. Note that most debts are not discharged in Chapter 13.

Instead, you work to create an acceptable repayment plan that ensures your creditors will at least receive something. Under Chapter 13, you can discharge some types of divorce-related debts, such as property settlements.

 

Is Bankruptcy in Georgia the Right Way to Go?

Bankruptcy can help you wipe the slate clean and get a fresh start. However, it is not something that should be rushed into blindly. Both Chapter 7 and Chapter 13 have serious repercussions that will affect you for a long time to come.

For instance, a Chapter 13 bankruptcy will stay on your credit report for seven years. A Chapter 7 bankruptcy will linger for 10 years. During that time, they will push your credit score down, limit your ability to find lenders or apply for new credit cards, and will mean that in the instances that you are approved for a credit card or loan, you will receive a much higher interest rate than otherwise.

Because filing bankrupt has such long-lasting consequences, it’s important to consider your other alternatives. There are ways to find debt relief without going through the bankruptcy process. Your options include the following:

 

• Debt Relief: One option is to work with lenders and other creditors to restructure your debt to make it easier for you to pay them, without having to go through bankruptcy. For instance, you might be able to refinance your home mortgage to a lower interest rate. Credit card issuers might be willing to work with you on a payment arrangement, too.

 

• Debt Consolidation: In some cases, it makes more sense to consolidate your debts. In this instance, you take out a larger loan that allows you to pay off your other creditors, and then you make one monthly payment on the new loan. The loan you choose must have a low interest rate. You can also do this by applying for a new credit card – some are specially designed to make it possible to consolidate multiple credit card balances and offer no interest or low rates during their introductory period.

 

• Home Equity: If you have a significant amount of equity in your home, a home equity loan or line of credit might be worth considering. The interest is often tax-deductible, and it would allow you to pay off other debts, giving you some breathing room.

 

• Student Loan Consolidation: If you’re struggling with student loan debt, there are ways to consolidate both federal student loans and private loans that can help you find relief and lower your payments.

 

Finding Your Path Forward

Bankruptcy in Georgia offers a chance at a fresh start – the opportunity to wipe the slate clean and begin again. Most debts can be written off during bankruptcy, particularly a Chapter 7 filing. However, some debts are only sometimes discharged, others are rarely discharged, and yet others are never discharged. Complicating the situation is the fact that some types, such as property settlements in a divorce, can only be handled through a Chapter 13 bankruptcy.

Unsure of which path to take? We can help. Contact Morgan and Morgan today to schedule your no-obligation consultation and learn more about whether bankruptcy is the right path for you.