Life happens. Bills pile up, there are accidents, jobs are lost with recessions (or pandemics), medical issues wreak havoc. Sometimes maybe it’s just a case of becoming an adult and not having been taught responsible financial habits, and having to learn the hard way. Whatever it is, people all over the country, including in Georgia, want to get out of debt. Many people want to be able to do it without paying off the excruciating amount of bills that they have incurred. It seems miraculous, but it’s a possibility. Let’s explore your options.

What Bankruptcy Is and What It Is Not

Bankruptcy is a federal, legal program that allows citizens to get out of debt without having to pay off their entire amount owed. Depending on the situation, borrowers might have to give up certain assets, may have to fall under a particular income bracket, or might have to make some payments for a few years. There are also particular debts that bankruptcy will never discharge, such as student loans and some types of tax debt.

Bankruptcy isn’t perfect. but it’s the best option out there when the alternative is having creditors hounding you day at night, your house being foreclosed on and your car repossessed, and your credit never recovering.

Bankruptcy stays on your credit history for about seven to ten years, depending on the type of chapter you file. This isn’t a pretty picture, either, but the good news is that if you’re facing bankruptcy then your credit was probably not great to begin with. Putting the final nail in the coffin won’t bring your point score down by that much more; however, it will make it a bit harder to get any type of loan until the bankruptcy falls off of your file.

Most lenders don’t want to offer a loan to someone with a history of bankruptcy because they are considered risky. But again, if this is a situation you’re facing, you probably aren’t being offered 0% APR loans left and right anyway. Better to rip off the Band-Aid and let the real healing actually begin.

As we said, some debts won’t ever go away. Student loans and tax debt will always follow you around. One of the smart ways that you can go about getting rid of this without feeling like you’re actually having to pay a huge amount of money is to use your tax refunds (if you get them). If one is due to you this year, file your taxes before filing for bankruptcy. Then you can pay a huge chunk of this debt off, which will lower your payments and make it easier for you to stay financially healthy as you’re recovering from bankruptcy.

If you have tax debt, your refund will automatically go toward this, but that’s good because you will have to pay this eventually. If tax debt continues to be ignored, your bankruptcy case could even be dismissed. Don’t get yourself out of one hole just to dig another.

Let’s look at the two types of bankruptcy chapters that the Georgia Department of Revenue allows citizens to file, so you can start thinking about which one is best for you.

Chapter 7 Bankruptcy in Athens

Chapter 7 bankruptcy is what most people want to file. This is the one that will get you out of the most debt without you having to pay any money back to your creditors. To qualify for Chapter 7, you have to be under Georgia’s median income level. (This amount changes often, so you’ll need to do some accurate research. Or, you can hire a tax attorney who can do the legwork for you.) If your annual income is under this level, you automatically qualify for a Chapter 7 filing.

If you don’t fall under the median income, you’ll need to pass the Georgia means test. You know how people are always saying, “On paper, it looks like I make a lot of money, but in real life, there just isn’t any left!”? Well, that’s sort of what the means test does. You put in your monthly and annual incomes, as well as the amount of unsecured and secured debt that you have. (Unsecured debt is things such as credit cards, car loans, and personal loans. Secured debt is medical bills, mortgage payments, and student loans.) Then you organize and list all of your monthly expenses. These include transportation, educational expenses, household necessities, groceries, medical bills, even clothing. If what is left over at the end of each month isn’t deemed to be enough to adequately pay off your bills, the means test will find that you still qualify for a Chapter 7 filing.

Once you qualify, you will file a bankruptcy petition. But it doesn’t all just magically go away. It’s a process that takes time, and a court has to rule with a judge making the final decision. However, once the petition is filed, every creditor you have is notified and an “automatic stay” comes into place. This means that they can no longer call or send letters demanding payment and that they cannot garnish your wages or move forward with repossessing your vehicles or foreclosing on your house.

Then, when the Georgia Department of Revenue gets notice, your credit accounts on your credit history will show that they are part of a bankruptcy file and they will be shown as having a zero balance. Whew! Now all you’ll have to worry about is those pesky student loans and/or tax debt. Think of them as a way to help you continue to make smart financial choices.

Chapter 13 Bankruptcy in Athens

Unfortunately, not everyone qualifies for a Chapter 7 bankruptcy. Some people have just racked up a great amount of debt and still do have the money to pay for it—they just haven’t learned how to use their money wisely or responsibly. Insert the Chapter 13 bankruptcy program.

If you are over the Georgia median income, and if your monthly expenses show that you have a significant portion of your monthly money that can (and should) go toward paying off your debt, then Chapter 13 will still help you out. Even though it won’t help you pay off everything, it will help you pay off some.

When you file a Chapter 13, you and the courts will come up with a plan to pay a certain amount each month for either three or five years, depending on your debt-to-income ratio. After you have successfully completed these years of payments, the rest of your debt will be considered forgiven. (Again, except for those pesky student loans and tax debt.) Better than nothing, right?

You’ll also be required to attend a credit counseling course, approved by the state of Georgia. This is a great part of the federal bankruptcy program, actually, because it will help you make a budget and learn smart financial habits. Then you won’t be faced with another bankruptcy a decade down the road.

The rest of the process follows along similar to a Chapter 7 filing.

Debt-Relief Programs – What to Look for and What to Steer Clear Of

As your debt has been piling up and your bills have been going unpaid, you’ve probably not only been getting calls from creditors but from debt-relief programs, as well. Not all debt-relief programs are bad, but they aren’t all good, either.

If, after you’ve explored the bankruptcy options, you decide that it isn’t the way you want to go, you might think about a debt consolidation or debt relief program. In the state of Georgia, these are legally monitored—and with good reason. Many programs are out there to scam citizens out of their money while promising freedom.

Legitimate, law-abiding programs are required to disburse your payments to your creditors within 30 days of you paying them. They are allowed to take out their fee (which is how they make money), so you need to make sure that the amount they’re removing from your payment still leaves plenty for your creditors.

These businesses also must have a separate trust account for the consumers’ funds, in addition to insurance coverage. These accounts and coverages are audited each year. You should be able to ask for proof that the business is up-to-date with the legal requirements before participating. They are required to keep copies of these documents on file with the Georgia Department of Law’s Consumer Protection Division.

If debt-relief programs do not follow these practices, they will be charged financial penalties, can be hit with a misdemeanor, and are considered in violation of the Georgia Fair Business Protection Act. You have the right to report any violations, as well as to take private legal action to recover any overcharges or money that was mishandled.

Final Thoughts

This might all seem like a hurricane of information that is hard to fully understand. That’s where a bankruptcy lawyer comes in! An educated, experienced professional like the ones based out of Athens, GA at Morgan and Morgan Law Firm can help you navigate the process. Our lawyers have done this countless times for Georgian citizens all over the state and will help you get your finances in order with understanding and respect—no shame. You deserve a healthy financial future and peace of mind. Morgan and Morgan will help you get there.

Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.