Often the people who would benefit the most from bankruptcy don’t know enough about the protections they’re afforded under the law. When you have financial stress, there are emotional traumas that come with the problem. There may be embarrassment and depression. Those issues shouldn’t keep you from thoroughly researching the legal options you have. In fact, once your total financial picture is clear, your depression and emotional strains will usually abate. You won’t have the worry over bill collectors and you’ll be able to schedule payments in a timely manner to better rebuild.

Many clients think that the bills they’ve accrued won’t be covered under bankruptcy laws. The truth is that it can give most individuals a good opportunity to start over and build their credit anew. It doesn’t take as long as people assume and it often includes most of the debts that have become so crippling. For the outstanding debts that can’t be relieved through it, there are payment solutions available to meet your needs.

Bankruptcy: It’s A Federal Matter, Or Is It?

Bankruptcy proceedings are governed by the US Bankruptcy Code, which is a federal law. Federal courts oversee bankruptcy proceedings and trustees’ actions. Some rules of bankruptcy are different depending on the state where you live. For example, Georgia doesn’t allow you to file federal exemptions. Instead, you must file Georgia exemptions, but you can file the federal nonbankruptcy exemptions.

Other rules that apply to Georgia include those governing how long you must live in the state before you file bankruptcy and how long you must live in Georgia before you use the state’s exemptions. You must reside in the state 180 days before filing the petition. However, before you can use the state’s exemptions when filing, you must live in the state for a minimum of two years. So, you can file after 180 days, but you must have 730 days as a resident of the state. If you haven’t resided in Georgia for at least two years, you will use your previous state’s exemptions for filing bankruptcy.

Debt Relief Through Bankruptcy

There are a few items that will not be wiped out through a bankruptcy, such as child support payments or past taxes. In those scenarios, you can often consolidate your debt to come up with a timely payment schedule to reclaim your financial freedom. Here are some items that can be relieved.

1. Credit Card Debt. Bankruptcy can help you get out from under credit card debts and there are options to consolidate debt so that payments are more affordable.
2. Payday Loans. Payday loans come with notoriously high interest rates. There are legal protections to help discharge the debts and lower interest rates to aid in repayment.
3. Foreclosure. Foreclosure is a devastating occurrence for your family. There are options to keep your home after filing for bankruptcy and often the owed payments can be paid off over the course of a few years to help you stay in your home and get back on track.
4. Car Title. In Georgia, there are laws to help you keep your car in the event of a bankruptcy, depending on the amount owed and the worth of the vehicle.

Two Kinds of Bankruptcy to Consider

Individuals who need debt relief through bankruptcy may not realize there are two options for filing bankruptcy. The choice is between Chapter 7 and Chapter 13 bankruptcy. Both have their advantages and disadvantages, so it’s essential to thoroughly discuss the option with an attorney specializing in bankruptcy filings before deciding which is best.

Chapter 7 bankruptcy filings can erase most debts. Some debts are only sometimes dischargeable, dependent upon the debtor’s financial situation and the timing of the filing. For example, sometimes, tax debt older than three years old can be eliminated through Chapter 7 bankruptcy.

It’s important to understand that if you file a Chapter 7 bankruptcy claim, you will likely lose some of your property in the process. With a Chapter 7 filing, your nonexempt assets are subject to seizure and sale by the trustee. Once the assets are sold, the trustee will use the money gathered from the sale to pay some of your creditors. That’s why Chapter 7 is referred to as liquidation bankruptcy.

Chapter 13 bankruptcy allows for the creation of a payment plan to satisfy debts with creditors. The payment plan is designed to last for 3 to 5 years, depending on the situation and the amount of debt you are including. Typically, with Chapter 13, you will retain property because you continue to make payments on it.

Chapter 13 is called a reorganization bankruptcy. In Chapter 13, you have a plan for repaying creditors, so you are reorganizing your debt rather than eliminating it. In both Chapter 7 and Chapter 13, the creditor is prohibited from taking action against the debtor once a debt has been discharged.

Exempt Versus Nonexempt Assets

When you choose to file bankruptcy, some of your assets are exempt from liquidation to satisfy your debts. Exempt assets usually include partial equity in your home, partial equity in your car, clothing, tools you need to make a living, pension plans, and Social Security benefits. These are the assets you can likely retain during the bankruptcy process.

On the other hand, nonexempt assets are subject to liquidation by the bankruptcy trustee. That means the trustee will seize and sell the assets to satisfy your debt. Assets that are nonexempt include property that isn’t your primary home, a second vehicle, recreational vehicles including boats, collections, valuables such as jewelry or artwork, bank accounts, and investment accounts.

Secured Versus Nonsecured Debt

Along with exempt and nonexempt, you should understand the difference between secured and nonsecured debts if you’re filing for bankruptcy. Secured debts are attached to collateral—your home or car, for instance. Nonsecured debts aren’t attached to collateral, such as medical bills (it would be difficult to repossess a surgery date or your cast from your broken arm) or signature loans.

When A Creditor Objects

Sometimes, creditors will request that a debt they are owed not be discharged. This typically happens if a bank thinks that the debtor lied to obtain the credit. Occasionally, a creditor, such as a credit card company, will argue that the debtor never intended to pay the debt and Is using bankruptcy law to get out of the debt they never intended to pay.

The US bankruptcy code determines who has to prove their case—the debtor or the creditor. If you want to avoid the credit card company objecting to your bankruptcy filing, you should stop using credit cards as soon as you’ve decided to file. You will have mandatory credit counseling before your case is filed, so you can discuss how to manage your budget without credit cards at that point.

Have You Considered Bankruptcy Protection to Clear Your Old Debts?

Are you struggling with bills and worried about your ability to meet your obligations. Explore Morgan’s debt relief services and contact our experienced bankruptcy attorneys for a free consultation about your case.

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.