Overwhelming debt makes most people feel out of control. In a nutshell, bankruptcy reverses the curse. Both Chapter 13 and Chapter 7 put debtors back in control of their own finances.

The bankruptcy filing rate recently hit a ten-year low. But the coronavirus quarantines will probably change that number, and change it radically. Millions of Americans lost their jobs, and millions of business-owners lost revenue they cannot replace. Stimulus payments, PPP loans, and mortgage payment deferrals offer temporary relief to some people. But this help only goes so far.

A bankruptcy filing spike will probably not happen quickly. Most people see bankruptcy as a last resort. So, their financial problems get progressively worse when relief is literally only a phone call away.

When debt becomes overwhelming, a Georgia bankruptcy lawyer can give you a number of legal options. In other words, bankruptcy helps people take control of their financial problems. There are many choices available and many decisions to make. Therefore, some additional knowledge generally lights your way.

The Automatic Stay

Generally, the moment debtors file their voluntary petitions, Section 362 of the Bankruptcy Code kicks in. In a nutshell, the Automatic Stay gives families the breathing room they need. This provision prohibits all creditor adverse actions, such as:

• Repossession,
• Foreclosure,
• Eviction (in some cases),
• Wage garnishment,
• Collection lawsuits, and
• Creditor harassment.

This protection does not apply to so-called serial filers. These people abuse the system by repeatedly filing bankruptcy and having no intention of following up. Additionally, this protection does not apply if the debtor threatens the lender’s security interest (e.g. “I’ll burn the house down so I don’t have to make mortgage payments”).

Usually, the Automatic Stay remains in effect as long as the case is pending. So, the Stay provides more than immediate relief. It also protects Chapter 13 debtors during the repayment period. More on that below.

Georgia Bankruptcy Lawyers and Asset Exemption

Bankruptcy gives people fresh starts. Therefore, they must retain most or all of their assets, even in a Chapter 7 “liquidation” bankruptcy. Otherwise, debtors would move behind the starting line. The Peachtree State has very generous bankruptcy exemptions, and a Georgia bankruptcy lawyer knows how to maximize them. Some illustrations include:

• Home Equity: Married couples can exempt up to $43,000 of equity. Some filers can use the tenancy of the entirety loophole to exempt all their home equity, regardless of the amount. Additionally, there is usually a big difference between a home’s bankruptcy value and its fair market value. The FMV might be eight or ten times higher than the bankruptcy value.
• Motor Vehicles: The $5,000 exemption might not seem like much. However, most new vehicles have high values but almost no equity. And, most used vehicles have considerable equity but practically no financial value.
• Retirement Accounts: Pre-filing planning often involves maximizing IRA, 401(k), and other retirement nest eggs. In 2014’s Clark v. Rameker, the Supreme Court confirmed that these accounts are 100 percent exempt in bankruptcy, regardless of the account balance.

Always work with a Georgia bankruptcy lawyer before you move money or sign any bankruptcy forms. Improper activity in these areas creates a presumption of bankruptcy fraud.

Debt Discharge

Generally, Chapter 7 discharges most unsecured debts in a matter of months. Some examples of unsecured debts include:

• Credit cards,
• Medical bills, and
• Payday loans.

Other unsecured debts are dischargeable in limited circumstances. Back taxes are a good example. These debts are dischargeable in bankruptcy if the debt is at least three years old, the returns have been on file for at least two years, and the IRS has not assessed the debt in the last 240 days.

Typically, if the IRS has not sent a collection letter in the last eight months, the debt has probably not been assessed.

Debt Repayment

If discharge is unavailable, or if the debt is secured, like a vehicle loan, Chapter 13 might be a better option. Here’s how it works.

About six weeks after the debtor files, the trustee (person who oversees the bankruptcy for the judge) puts the debtor on an allowance for up to five years. After the debtor pays basic living expenses, all disposable income goes to back taxes, home mortgage delinquency, or other debts. 

Since the Automatic Stay remains in effect, most creditors must accept the income-based repayment plan. This situation also gives a Georgia bankruptcy lawyer an opportunity. Attorneys are very good negotiators. So, a lawyer can often obtain a lower interest rate or partial loan forgiveness. Creditors know unless they make a deal, the judge might discharge the debt, leaving the moneylender with nothing.

Want to File Bankruptcy in Athens? Call Georgia Bankruptcy Attorney Today

Bankruptcy is the last resort for those undergoing severe financial hardships, and for good reason. Declaring bankruptcy gives you the opportunity to get your finances in shape, and even get a clean slate in some cases. The automatic stay order protects your assets from creditors that are trying to collect, deduct money from your bank account, garnish your wages, and more. As such, the bankruptcy process is very debtor-friendly, especially if an experienced Georgia bankruptcy lawyer from Morgan & Morgan, Attorneys at Law P.C. is in your corner. So, call us today at (706) 843-2905 for a free consultation.