Bankruptcy in Georgia has come a long way since the first federal bankruptcy act in 1800. Back then, there were no advantages to filing bankruptcy. In fact, creditors could file involuntary petitions and force people into bankruptcy, but debtors could not file on their own. Not surprisingly, this law only lasted three years.

Today, bankruptcy has a number of advantages for debtors, both at the time they file and in the years thereafter. In this post, we’ll look at four major advantages of filing bankruptcy.

For the most part, these advantages are not nearly as meaningful unless a Georgia bankruptcy attorney prepares the petition, files it, and stands up for debtors in court. The bankruptcy courts are part of the federal court system. So, everyone who files must know all procedural and evidentiary rules. Only a bankruptcy lawyer has that kind of expertise.

Automatic Stay

Many people file bankruptcy almost exclusively to take advantage of Section 362 of the Bankruptcy Code. Creditors might ignore stop signs on the way to work, but they cannot ignore this stop sign. The Automatic Stay prevents all creditor adverse action, such as:

• Home foreclosure,
• Vehicle repossession,
• Collection lawsuits, and
• Wage garnishment.

The Automatic Stay is only binding if creditors have actual notice. This provision is sometimes problematic.

Mortgage notes are a good example. Typically, the original lender does not service the note. Another company handles that chore. Frequently, servicing companies sell these notes to one another. Technically, the servicing company is supposed to notify the borrower. But that doesn’t always happen. 

A lawyer knows how to deliver proper notice to the proper party. So, a lack-of-notice loophole is not a problem.

Credit Score Reboot

Bankruptcy is one of the biggest, blackest marks which can stain a credit report. Normally, this notation stays on credit reports for seven or ten years.

Seven or ten years is a long time, but it is not forever. Additionally, many creditors only examine the last six months of credit history. If debtors take some steps to rebuild their credit after bankruptcy, their scores recover much more quickly.

Additionally, bankruptcy stops a credit score’s downward slide. Every month that debt is delinquent, a new negative notation appears. These notes stop once debtors file bankruptcy.

As a final note, too many creditors, bankruptcy looks better than foreclosure, repossession, or collection referral. These notations usually mean the debtor gave up. Debtors who filed bankruptcy at least did something. And, debtors who filed Chapter 13 bankruptcy usually pay most or all of their debts over time.

Financial Control

Unless debtors file bankruptcy, moneylenders hold all the cards. Moneylenders can launch adverse actions at will. Moneylenders also dictate all repayment terms. When it comes to things like interest rates, debtors have almost no leverage. And, if the creditor offers a payment plan, it does not reflect the debtor’s best interests.

Bankruptcy changes all these things.

As mentioned, the Automatic Stay prevents adverse action. In fact, it is illegal for creditors to communicate with debtors. That means no more “friendly reminders” about debts the family cannot pay. In terms of payment term negotiations, debtors have more leverage. Creditors know if they refuse to compromise, debtors walk away, and they get nothing. Finally, Chapter 13’s debt consolidation payment is an income-based solution. In other words, debtors pay what they can afford to pay, and not what the moneylender demands.

Asset Exemption

As mentioned, some debtors file bankruptcy to take advantage of the Automatic Stay. Others file to take advantage of asset exemption. In some cases, creditors do not even need judicial approval to seize the debtor’s assets. Bankruptcy is often the only way to protect things like:

• House,
• Motor vehicle,
• Government benefits, like Social Security Disability payments,
• Personal property,
• Tools of the trade,
• Retirement accounts, and
• Family Support Obligation payments, such as child and spousal support.

That last bullet brings up a point about bankruptcy and divorce. These two things often go together. And, there is considerable debate about whether it’s best to file bankruptcy before divorce. Generally, that’s a good idea. Filing bankruptcy before divorce often cleans up the marital estate and reduces legal fees during the marriage dissolution.

Conclusion:

Declaring bankruptcy can be advantageous to individuals or businesses that are having a hard time paying off their debts. It can help you resolve your financial difficulties and rebuild your credit score. As soon as bankruptcy is declared, the incessant phone calls and letters demanding payment will stop. You will also be able to protect some of your assets. However, whether or not declaring bankruptcy is the right solution for you will depend on your unique financial situation, and how much property you need to protect. If you are considering going down this road, it is best to discuss your legal options with an experienced bankruptcy attorney and get the most suitable guidance.

Receive Consultation from a Dedicated Bankruptcy Attorney in Athens, GA

There are a number of advantages to filing bankruptcy. For a free consultation with an experienced bankruptcy lawyer in Georgia, contact Morgan & Morgan, Attorneys at Law P.C. at (706)-843-2905. Convenient payment plans are available.