Depending on the type of case you file, bankruptcy works in several different ways. All these procedural pathways end in the same place. Distressed debtors get a fresh start. If you’re wondering how bankruptcy works, the Automatic Stay, property exemptions, and debt discharge are the three main elements of this fresh start.

Section 362 of the Bankruptcy Code halts adverse creditor actions, such as repossession, wage garnishment, foreclosure, and creditor lawsuits. Bankruptcy also discharges most unsecured debts, such as medical bills, revolving charge accounts, and credit cards. Bankruptcy property exemptions allow you to keep your house, car, retirement account, and other important assets.

A bankruptcy lawyer in Athens, GA is an important part of this process. Consumer bankruptcy obviously has a lot of moving parts. Unless all these components move in the right way at the right time, debtors do not get the fresh start they deserve. Instead, they end up settling for less. Unfortunately, many of these debtors end up in bankruptcy court again.

Chapter 13 Bankruptcy in Georgia

Legally, banks can repossess your car or home if you miss one payment. Many banks do not act that quickly, not because they care about their customers, but because they do not want to look like Ebenezer Scrooge. So, if you fall behind on secured debt payments, it’s best not to rely on the bank’s largesse. It’s much better to file Chapter 13 and prevent foreclosure, repossession, and other adverse actions.

Bankruptcy stops these actions fairly easily. Proper notice is usually the only real issue. However, it’s very hard to undo adverse actions once they happen, whether or not you have a Georgia bankruptcy lawyer. So, bankruptcy is a pre-emptive strike.

Secured debt delinquency must be repaid eventually. There is no such thing as a free lunch, a free house, or a free car, at least in most cases. Chapter 13 gives debtors up to five years to gradually pay back delinquent vehicle payments, house payments, and other secured debts.

Each month, Chapter 13 debtors remit their disposable income to the trustee (person who oversees the bankruptcy for the judge). The trustee then distributes this money among allowed claims, mostly secured debt delinquency and administrative costs.

The Automatic Stay remains in effect throughout the protected repayment period. So, as long as the monthly repayment plan meets minimum legal requirements, banks cannot pressure debtors to pay more money or pay it faster. They get what they get and they don’t throw a fit.

Five years is a long time. If your financial circumstances change and the monthly payment becomes a problem, a Georgia bankruptcy lawyer can offer options. These options include conversion to Chapter 7, payment plan modification, and hardship discharge.

Chapter 7 Bankruptcy in GA

If you’re wondering how bankruptcy works in Chapter 7, this form of bankruptcy is designed for folks with excessive unsecured debt. Generally, if credit cards, medical bills, and other unsecured obligations eat up more than 10 percent of your monthly income, you probably owe more than you can pay. This imbalance means you need to take radical action and enact radical change.

Procedurally, Chapter 7 is much more straightforward than Chapter 13. A Chapter 7 trustee normally only looks for clear evidence of fraud and verifies the debtor’s identity. So, the trustee usually requests documents, such as recent tax returns and a government-issued photo ID. If you do not have the requested documents, a Georgia bankruptcy lawyer can usually convince the trustee to accept a substitute.

Bankruptcy Fraud in Georgia

A quick note about bankruptcy fraud. Concealing income or assets is clear evidence of fraud. So is borrowing money without intending to repay it. If you have not done these things, you do not need to worry about the F-word.

Chapter 7 Bankruptcy Discharges

Generally, a Chapter 7 judge discharges (forgives) most unsecured debts without holding a hearing. Some unsecured obligations, like student loans and back taxes, are priority unsecured debts that are only dischargeable in some situations.

Chapter 20 Bankruptcy in Athens, GA

This procedure, which most jurisdictions permit, usually involves a Chapter 7 immediately followed by a Chapter 13. So, Chapter 20 is basically a best-of-both-worlds bankruptcy. If you’re asking ow does bankruptcy work, chapter 20 isn’t that much more tricky, especially if you have an MN bankruptcy attorney by your side.

Assume Tom has student debt, and he is behind on payments. He files Chapter 7, partly so the Automatic Stay prevents wage garnishment, and partly because he hopes the judge will discharge the loans. But, largely because he does not have a Georgia bankruptcy lawyer to advocate for him, he does not meet the complicated requirements. As soon as the judge closes Tom’s Chapter 7, the bank starts licking its chops.

Bankruptcy Chapter 13 Discharges

With the help of a Georgia bankruptcy lawyer, Tom could probably file a Chapter 13 at this point. He wouldn’t be eligible for debt discharge. But since he just filed Chapter 7, he doesn’t want or need a discharge. He just needs time to make catch-up payments.

A Georgia bankruptcy lawyer could also take another shot at discharging Tom’s student debt. But, since a judge just ruled the obligation is non-dischargeable, this shot is more of a Hail Mary pass.

Learn What Type of Bankruptcy Is Right for You

If you’re asking how bankruptcy works, you should know that while different bankruptcies work differently, they end the same. For a free consultation with an experienced Georgia bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. Convenient payment plans are available.

Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.