Supreme Court Justice James Clark McReynolds was one of the first legal writers to call bankruptcy a fresh start for honest yet unfortunate debtors. He worded this phrase a bit differently because he wrote it in 1915. By most accounts, McReynolds was an unpleasant man and a second-rate Justice. But this one time at least, he got things right. 

Filing bankruptcy does not mean the end of the line. Some of the most successful business and political leaders in American history, like Henry Ford and Abraham Lincoln, filed bankruptcy at one point in their careers. They bounced back, and so can you.

On a related note, filing bankruptcy is not like filing your taxes. Bankruptcy is a legal proceeding, so you need legal representation. A financial fresh start is there for the taking, but only an experienced Athens bankruptcy lawyer helps your family make the most of this opportunity.

Bankruptcy’s Similarities

All bankruptcy debtors, regardless of their situations or the kinds of bankruptcy they file, are entitled to a fresh start. So, to an extent, bankruptcy is the same for everyone.

Automatic Stay

The moment debtors file their voluntary petitions, Section 362 of the Bankruptcy Code usually takes effect. This provision prohibits all forms of creditor adverse action, like repossession and foreclosure. In fact, the Automatic Stay prohibits most creditor communications. Judges impose harsh penalties on creditors who think they are above the law and ignore the Stay.

In a few cases, mostly if there is evidence of fraud or filing abuse, the Automatic Stay has limited applicability.

Exemptions

Part of bankruptcy’s fresh start includes asset retention. If people lost most or all of their assets, a real- life bankruptcy would be more like a Monopoly bankruptcy. In this board game, filing bankruptcy is the end of the line and there is no way to return to the game. That’s the opposite of a fresh start.

Basic Georgia exemptions include homestead, motor vehicle, retirement account, government benefits, personal property, and current wages. Unless debtors hold onto these things, it’s impossible to start over. Essentially, Georgia’s generous exemptions uphold the core principle of the Bankruptcy Code.

Debt Discharge

A discharge order extinguishes the consumer’s legal obligation to repay certain debts. But it is not a magic wand that makes these debts go away. Tax liens are a good example. Back taxes are dischargeable in most cases. But if the IRS filed a lien before the debtor filed bankruptcy, an Athens bankruptcy attorney must address the lien separately.

Incidentally, it’s illegal for the IRS to file a lien, garnish wages, or even send a threatening letter after a debtor files bankruptcy. The Automatic Stay does not just apply to private moneylenders. It also applies to the IRS, Attorney General, Department of Education, and all other public agencies.

Bankruptcy generally discharges only unsecured debts. If bankruptcy discharges secured debts, these creditors have a right to repossess the collateral. People must keep making payments in order to retain secured property, whether they file bankruptcy or not.

Bankruptcy’s Differences

People have different kinds of debts. So, there are several different types of consumer bankruptcy in Georgia.

Chapter 7 Bankruptcy

Americans owe almost $14 trillion in credit card bills. Households with a share of this debt have an average of four cards and about $9,000 in debt. At this level, the debtor could pay two or three times the minimum due every month, and yet the balance barely budges.

If you are tired of giving ever more money to the credit card company, Chapter 7 is a good option. In less than a year, Chapter 7 discharges most unsecured debts, such as credit cards and medical bills.

Chapter 13 Bankruptcy

Other people struggle with secured debt delinquency. Most states allow banks to begin the foreclosure process after just one missed payment. This process usually starts with an acceleration notice. After about thirty days, the bank stops accepting partial mortgage payments. As a result, the homeowner’s financial hole deepens every month.

The Automatic Stay does more than stop the foreclosure process. Chapter 13 includes a protected repayment period. Homeowners have up to five years to erase mortgage delinquency and other secured debt delinquency.

Advanced options, like lien stripping and cramming, might make your house more affordable in the long term. An Athens bankruptcy lawyer can review your options in this area.

“Chapter 20” Bankruptcy

Many people file consecutive bankruptcies. Assume Phil files Chapter 7 to take care of a student loan. He requests a discharge, and the judge rules against him. Phil can then file Chapter 13 and take advantage of the protected repayment period. The student loan company cannot take any adverse action, like wage garnishment, while Phil makes catch-up payments.

Sometimes, Chapter 20 works the other way. Now assume Phil files Chapter 13 to take care of his home mortgage delinquency. After a few months, he loses his job and can no longer make the monthly debt consolidation payment. Phil can convert to Chapter 7 and get his fresh start almost immediately.

Conclusion

Contrary to popular notion, filing bankruptcy does not mean the end of the road. In fact, it is considered a fresh start that allows people to gain better control over their finances. There is a legal process to filing bankruptcy. As soon as you file, an automatic stay will come into effect, prohibiting all forms of creditor adverse action. This can be a huge relief. Working with an experienced Georgia bankruptcy attorney will allow you to know your options, thereby helping you make the most of it. 

Reach Out to a Skilled Bankruptcy Attorney in Athens, GA

Bankruptcy gives honest yet unfortunate debtors a fresh start. For a free consultation with an experienced bankruptcy lawyer in Georgia, contact Morgan & Morgan, Attorneys at Law P.C. at (706) 843-2905. After-hours visits are available.