This question is one of the most common ones that people ask us. Almost half of Americans have no savings at all. So, they are ill-equipped to deal with the financial storms of life, such as a coronavirus-related economic downturn, job loss, or serious illness.

In general, bankruptcy can be almost as brief or as long as you want it to be. Chapter 7 gives most debtors a fresh start in as little as six to nine months. Chapter 13 gives debtors up to five years to pay off their debts on their own terms.

As outlined below, the bankruptcy process is rather complex. Only an experienced Georgia bankruptcy lawyer knows how to guide debtors through it. Moreover, an attorney helps debtors make the most out of their fresh start.

Automatic Stay

Section 362 of the Bankruptcy Code usually takes effect as soon as debtors file their voluntary petitions. The Automatic Stay immediately halts all forms of creditor adverse action, such as:

• Wage garnishment,
• Repossession,
• Foreclosure, 
• Harassing phone calls, and
• Collection lawsuits.

In recent years, the Supreme Court has significantly diluted many key protections in the Fair Debt Collections Practices Act. As a result, Bankruptcy’s Automatic Stay might be the only way for families to obtain the breathing room they need.

Generally, the Automatic Stay applies to all creditor actions. So, if a student loan company is garnishing wages, bankruptcy stops that garnishment, even if the underlying debt is not dischargeable. And, that garnishment suspension lasts for up to five years.

Exempt Assets and Georgia Bankruptcy Lawyers

Bankruptcy does more than halt pending adverse actions. It also protects your key assets from creditor seizure. These assets include:

• House,
• Motor vehicle,
• Government benefits, such as Social Security benefits,
• Retirement accounts, and
• Personal property.

Furthermore, bankruptcy does not just protect these assets in the short term. It also makes them more affordable in the long term. Assume Felix owes $10,000 on a vehicle that’s only worth $3,000. If Felix files bankruptcy and he pays the creditor the current fair market value, the bank must write off the remaining unpaid principal balance.

A Georgia bankruptcy lawyer helps debtors take advantage of the cram-down option, as well as some other advanced bankruptcy options.

341 Meeting

The Automatic Stay and asset exemption are usually the same for both Chapter 7 and Chapter 13. At the meeting with the trustee, which usually happens about six weeks after debtors file their petitions, the procedure is different in different chapters.

Both Chapter 7 and Chapter 13 debtors must provide requested documents to the trustee (person who oversees the bankruptcy for the judge). These documents usually include the last few income tax returns, the last few pay stubs, recent bank statements, and home and auto title documents. Moreover, all debtors must present a government-issued photo ID and Social Security card for inspection.

Chapter 7 trustees typically only review the documents for possible fraud and confirm the debtor’s identity.

Chapter 13 trustees scrutinize the debtor’s monthly income figures and basically place debtors on an allowance for either three or five years. After they pay basic monthly bills, all the debtors’ disposable income goes to a monthly debt consolidation payment. This payment must retire all secured debt delinquency and certain other debts, such as attorneys’ fees before the protected repayment period ends.

Bankruptcy Endgame

Bankruptcy’s end is essentially the same for both Chapter 7 and Chapter 13 debtors. All these individuals receive fresh financial starts. Chapter 7 debtors simply receive their fresh starts much sooner than Chapter 13 debtors.

In the end, bankruptcy discharges the unsecured debt, such as credit cards, medical bills, and signature loans. Since the average credit card interest rate is about 20 percent, this discharge often frees up hundreds of dollars a month.

“Discharge” means the judge eliminates the legal obligation to repay the debt. The collateral consequences of that debt, if any, remain. If the IRS filed a tax lien against Anna before she filed bankruptcy, a Georgia bankruptcy lawyer must deal with this lien separately, even if the judge discharges the tax debt.

Depending on your needs, bankruptcy could take a few months or a few years. For a free consultation with an experienced Georgia bankruptcy attorney, contact Morgan & Morgan, Attorneys at Law, P.C. We routinely handle matters in Clarke County and nearby jurisdictions.