If you are a Georgia resident and you find yourself under the weight of overwhelming debt, bankruptcy could provide a means to protect you from creditors. Even while you attempt to pay off or eliminate your debt. Bankruptcy supplies a path forward for people who need a fresh financial start while also freeing them from stressful collection attempts by creditors.

A Common Fear about the Bankruptcy Process in Georgia

It is a natural concern for people considering bankruptcy to wonder about whether they get to keep any of their property or assets. Of particular concern are their homes, cars, and retirement accounts. Many individuals wonder if they will exit the bankruptcy process with anything at all. Or if they’ll have to sell everything they own to pay off as much of their debt as possible.

While these fears are understandable, Georgia law provides certain protections in the form of exemptions that apply for those going through bankruptcy. They allow residents to keep some of their assets even after the process is finished.

Bankruptcy Law in Georgia

Bankruptcy Courts are generally governed by the U.S. Bankruptcy Code. But federal law gives states certain latitude regarding what kinds of property and assets can be protected from debt collectors. Some states allow people to choose whether to use the federal exemptions provided by the Bankruptcy Code, but Georgia requires those who file bankruptcy in that state to use their exemptions.

The exception to this is that some federal exemptions can be used to protect certain retirement accounts and disability benefits.

The bankruptcy exemptions provided by the state of George apply differently depending on which method of personal bankruptcy you use.

• Chapter 7 bankruptcy – This form of bankruptcy is sometimes referred to as “liquidation bankruptcy” because any property not protected by exemptions must be turned over to a trustee who sells it and uses the money to pay your creditors. Exemptions are important in this kind of bankruptcy because you will often lose property that is not protected, though it does mean you end the bankruptcy with most or all of your debt paid. There are strict income requirements that must be met to qualify for this kind of bankruptcy.
• Chapter 13 bankruptcy – This is for people who have a reliable income but who need to restructure their debt in order to pay it off within a three-to-five-year period. Payments are made according to a plan approved by a court. This is a desirable means of debt settlement for homeowners because they often can keep their homes. In fact, you are likely to be able to keep most everything you own, but you can end up paying more out of pocket.

In either case, one benefit of filing bankruptcy in Georgia is that a stay is issued automatically when you file for bankruptcy. This stops almost all collection attempts. This can include foreclosure proceedings and lawsuits filed against you by creditors, but the exemptions are treated differently to ensure creditors receive the same amount regardless of which chapter is filed.

How is Eligibility for Bankruptcy Determined in Georgia?

To qualify to file for bankruptcy under Chapter 7, you must demonstrate a sufficiently low income. Eligibility is normally determined in one of two ways.

The first test is straightforward: If your household income is lower than the median household income for other similarly sized households, you qualify. For example, if the median yearly household income for a four-person household in Georgia is $50,000 and you make less than that, you will qualify to file under Chapter 7.

The second way to qualify for Chapter 7 bankruptcy in Georgia is to show that, after your monthly expenses are paid, you have little disposable income. This could allow you to file under Chapter 7 even if your annual income is above the median.

To file under Chapter 13, you must demonstrate that you have a steady income and do not have a certain amount of unsecured debt and secured debt. A bankruptcy attorney can help you determine the current debt thresholds.

Unsecured vs Secured Debt

Unsecured debt is debt wherein a creditor has no right to repossess any property because of failure to pay. Credit card debt and medical debt are among the most common forms of unsecured debt.

Secured creditors on the other hand have the right to repossess the property if you fail to repay what you owe. A common example of this would be that of a car loan. If you fail to repay what you owe on the car loan, the creditor has the right to repossess the property even in bankruptcy. That is unless you can work out some sort of payment plan. Besides a car loan, a home mortgage is the most common kind of secured debt.

Understanding the difference between secured and unsecured debt is important because these types of debt are handled differently depending on whether you file for bankruptcy under chapter 7 or chapter 13.

When Do Georgia’s Bankruptcy Exemptions Apply?

To prevent individuals from taking advantage of favorable state bankruptcy laws, most states have a certain length-of-residency requirement.

In Georgia, you can file for bankruptcy after living there for 180 days or more. However, for Georgia’s bankruptcy exemptions to benefit you, you must live in the state for at least 730 days (two years). If you can file bankruptcy in Georgia, but you have not lived in the state long enough for its exemption laws to apply, then you would use the exemption laws from your previous state.

Georgia Bankruptcy Exemptions

Some common bankruptcy exemptions Georgia filers often use are listed below. If your spouse owns property with you jointly and you file bankruptcy jointly, the exemption amounts can be doubled. In addition to Georgia’s exemptions covered under separate headings, you can take advantage of the following:

• Federal nonbankruptcy exemptions
• The federal COVID-19 recovery rebate exemption, which protects stimulus payments, tax credits, and child tax credits while in bankruptcy
• Tax-exempt retirement accounts, such as 401(K)s, 403(b)s, SEP and SIMPLE IRAs, and certain benefit plans and traditional and Roth IRAs up to $1,362.80 per person

Georgia Homestead Exemption

The Georgia homestead exemption lets you keep the home you’re living in as long as you don’t have too much equity in it. This exemption allows you to keep your property out of the hands of the bankruptcy trustee and your creditors.

The homestead exemption in Georgia allows you to exempt as much as $21,500 of the equity you have in your home at the time you file for bankruptcy. This amount doubles to $43,000 if your spouse owns the home with you and files for joint bankruptcy.

Wage Exemption

You are allowed to keep 75% of your weekly disposable earnings or 40 times the larger of the state or federal hour minimum wage. Bankruptcy judges have the discretion to let low-income earners keep more of their wages.

Motor Vehicle Exemption

If you have a car, you can exempt up to $5,000 of its value.

Jewelry

You are allowed to keep up to $500 in jewelry.

Tools of the Trade Exemption

You are allowed up to $1,500 for tools, books, and other necessary items used for work.

Personal Property Exemption

Under Georgia law, you are allowed to exempt the following household items. You can exempt a total of $5,000 combined, but no single item can exceed $300 in value.

• Furnishings
• Household Goods
• Clothes
• Appliances
• Books
• Musical Instruments
• Crops
• Animals

Support Exemption

Alimony and child support necessary for supporting your children is exempted in the state of Georgia.

Public Benefits Exemption

Under Georgia bankruptcy law, certain public benefits are exempt from bankruptcy proceedings. These include unemployment compensation, social security benefits, and public assistance. Also included is money from worker’s compensation, veteran’s benefits, old-age assistance, aid to blind or disabled persons, and crime victim’s compensation.

Pension and Retirement Account Exemption

Georgia law protects most pension and retirement plans, including:

• Tax-exempt retirement accounts like 401(k)s, IRAs, and other certain benefit plans
• Public office or employee plans
• Reasonable, necessary payments made because of illness, disability, death, age, or length of service under a pension or annuity plan

Other Exemptions

Other monies and benefits can be exempted under Georgia law. These include money from a health or medical saving account, professionally prescribed health aids, wrongful death benefits to the extent necessary for your support, and more. A Georgia bankruptcy attorney can assist you in determining what other exemptions may apply to your unique situation.

Wildcard Exemption

Under Georgia law, you may protect any personal property you own up to $1,200. In addition to this, if you do not fully use all the homestead exemptions, you can use up to $10,000 of the unused portion to protect personal property under the wildcard exemption. This exemption is an obvious benefit if you don’t have enough exemptions to cover some of your personal property.

Confirming Georgia Bankruptcy Exemptions

This article contains many of the most used exemptions available to those filing bankruptcy in the state of Georgia. However, there may be other exemptions available to you to help protect your property. In addition, the Georgia Assembly may periodically change exemption amounts so it’s advisable to confirm this information with a qualified bankruptcy attorney.

When to Consult with a Georgia Bankruptcy Attorney

If after reading this article, you think bankruptcy could be a path out of your overwhelming financial state, consider reaching out to one of the bankruptcy attorneys at Morgan & Morgan. We’ve got substantial experience helping individual Georgians and even businesses find a way forward, free from the crushing burden of debt. Contact us today to schedule a no-obligation consultation and discover your options.