Facing decisions on how to manage debt is difficult enough for an individual, so you are dealing with additional challenges when your debt encompasses the financial interests of another person. Your debts are closely intertwined, whether for personal, relationship, or business reasons. At the same time, joint debtors share in the potential to become debt-free through bankruptcy, benefitting you both. Because of the many advantages, it is important to know what to expect when dealing with co-signed or joint debts during bankruptcy in Georgia.

For individuals and married couples, the most common types of bankruptcy are Chapter 7 and Chapter 13. Business owners may also have additional options when they are seeking to address the debts of the company. Therefore, important initial considerations are determining your eligibility for bankruptcy and deciding which form will deliver the most useful benefits for your situation.

 

Without a legal background, you may not realize how the laws apply to your case and any joint debts you carry. Advice from a skilled Georgia bankruptcy attorney is crucial, and legal help ensures a smooth process without mistakes. If you have co-signed on an account with another person or entity, some background about Chapter 7 and Chapter 13 is also informative.

 

Overview of Georgia Bankruptcy

Before getting into the issues involving co-signers on debt, you should get a grasp of your bankruptcy options and how they work. One common option through the US Bankruptcy Court for the Middle District of Georgia is Chapter 7, in which you can discharge qualifying debt if you meet the eligibility criteria. You automatically qualify if your earnings fall below the state median income, or if you meet the Means Test that measures both income and monthly expenses.

 

There is an important note for Chapter 7, and it could affect joint debts. Though your debts are discharged, the bankruptcy trustee does have the power to sell your assets to satisfy debt to creditors. You can protect some real estate and personal property through exemptions. Plus, there are some items the trustee may opt not to sell.

 

Chapter 13 may be an option for you if you do not meet the eligibility criteria of Chapter 7. Alternatively, you might choose Chapter 13, because there is no liquidation and risk of your assets being sold. Instead, you pay creditors back through a debt repayment plan. First, your debts are restructured and reduced. Then, they are combined into a single monthly payment that you can afford based upon your earnings. Therefore, the only rule to qualify is that you must have a job. 

 

Facts About Joint Debts in Bankruptcy

It is crucial to get advice and counsel from a knowledgeable bankruptcy attorney in Georgia when you are considering bankruptcy and have joint debts. These cases largely impact married couples, but bankruptcy affects anyone who might co-sign on a loan, including business partners, parents for children, and other relationships.

 

• In many cases, joint debtors will gain the most benefits by filing together. With this option, they will both discharge qualifying debt. Spouses are often in the position to file a joint petition for either Chapter 7 or Chapter 13.
• One co-signer on a debt may file Chapter 7 individually, but keep in mind that this action only wipes out the debt with respect to the filer. The co-signer is still on the hook, and creditors can still pursue collection actions.
• A person who is a joint debtor could go with Chapter 13 as an individual, and this process may protect the co-signer. US bankruptcy laws prohibit creditors from pursuing a co-signer so long as the filer pays on the debt through the debt repayment plan. This rule applies to consumer debt, not cases for businesses.
• Many types of unsecured debt do not get paid in full through Chapter 13, including credit cards, medical debt, lines of credit, and personal loans. When a co-signed loan or extension of credit means the creditor will receive less through a proposed debt repayment plan, it is likely that it will object.
• When joint debts involve married couples, there are implications for your eligibility. Your spouse’s income is included when assessing whether you qualify for Chapter 7.

Automatic Stay and Joint Debts

There is an important rule that applies to Chapter 7 and Chapter 13 cases, and it will impact bankruptcy in a situation of co-signed debts. The automatic stay in bankruptcy is a law that prohibits creditors from taking legal action against a person from the date of filing the bankruptcy petition. They cannot sue in a collection action, garnish your wages, impose liens on your property, or other collection efforts.

 

However, the automatic stay does not prevent creditors from going after someone who has co-signed on debts that are before the bankruptcy court. Chapter 7 and Chapter 13 only stop actions against the filer, and they will only discharge the filer’s liability for the debt. Plus, creditors can lift the stay under certain circumstances, enabling them to continue collection efforts.

 

Exemptions in Chapter 7 Bankruptcy

One of the most critical tools you have in your favor to protect assets in bankruptcy involves exemptions, and they benefit you whether you file individually or jointly. In many cases, exemptions provide additional advantages because they can be doubled for married couples filing together. The important fact to remember about exemptions is that they protect your equity in an asset, and there are dollar limitations on the value of the exemption. For instance:

 

• The Georgia exemption for your home is $21,500, but it is doubled to $43,000 for married spouses filing jointly.
• Your retirement savings are exempt, provided they are covered by the federal Employee Retirement Income Security Act (ERISA). Note that these funds are protected only as long as they remain in the account, and they are subject to bankruptcy laws if you take withdrawals.
• There is an exemption for your vehicle, up to $5,000 in equity.
• You can take advantage of a wild card exemption up to $1,200, which you can increase to $10,000 if you did not apply the entire exemption for your home.

 

Bankruptcy and Your Credit

When you file for bankruptcy, there will be a drop in your credit score. Plus, the case will remain on your credit history for up to 10 years after a Chapter 7 case, and for 7 years after Chapter 13. However, despite these perceived drawbacks, bankruptcy is a wise solution for many debtors, on individual and joint debts. After going through the process, you are debt-free. You no longer miss out on financial opportunities because of a poor credit score, and you can use strategies to rebuild credit. For instance:

 

• If you are able to stay current on your mortgage, your record of payments is reported to credit bureaus in a positive light.
• By making full payments on time for monthly bills, you will increase your credit score over time.
• When the time is right, you can obtain a secured credit card to further improve your credit. With this arrangement, you deposit cash as security for the extension of credit.

 

Factors Before Filing for Bankruptcy

There are many considerations you need to review as you look into bankruptcy options, and one initial task is to assess the big picture of your finances. Think about whether you might qualify for Chapter 7, and if you would risk losing property to liquidation. In addition, you need to weigh what your future would look like if you did not file for bankruptcy. To become debt-free, you might need several years or even decades to take control.

 

Additional factors to consider include:

 

• Whether you would benefit from any non-bankruptcy debt solutions;
• How you might handle a Chapter 13 case filed jointly, particularly when the debt repayment plan period is 3 to 5 years;
• Options to keep your home, which might include continuing to pay your mortgage during bankruptcy or a loan modification.

 

Of course, when you are dealing with co-signed or joint debts, you must also consider additional factors. The implications for a co-signer can be severe with Chapter 7, so you might reaffirm the debt or redeem to protect that person.

 

Benefits of Getting Legal Help with Bankruptcy

Another factor to consider before filing is retaining a lawyer as early on in the process as possible. The added complexities of cases involving co-signed or joint debts means you need skilled legal guidance as you prepare to file, as well as during each stage of the case. Your Georgia bankruptcy attorney will serve your needs by undertaking the following tasks:

 

• Consult with you on your financial status, the interests of co-signers on joint debts, and your goals for bankruptcy;
• Coordinate with you on completing the credit counseling course that is required within 180 days before filing;
• Gather and organize all financial documents;
• Complete the bankruptcy petition, forms, and schedules;
• Advise you on strategies to maximize exemptions in Chapter 7;
• Develop a debt repayment plan that will be acceptable to the court and creditors;
• Represent you during the meeting of creditors; and,
• Finalize all requirements for bankruptcy and obtain the discharge order.

 

Discuss Options with a Georgia Bankruptcy Lawyer

While it is useful to review information on joint debts during bankruptcy in Georgia, you should rely on skilled legal counsel for assistance with your case. Anyone who has co-signed a debt must consider various factors to leverage the advantages of a Chapter 7 or Chapter 13 case. Our team at Morgan & Morgan, Attorneys at Law, P.C. will be at your side for each step in the process, so please contact our firm today. We can schedule a no-cost consultation with an experienced Athens, GA bankruptcy lawyer.