If credit card companies had their way back in 2005, the answer to this question would be “no.” To end Chapter 7 abuses, such as a debtor putting a trip to the Moon on a credit card and then declaring bankruptcy, credit card companies wanted to end Chapter 7 altogether. Fortunately, lawmakers understood that most people file Chapter 7 because of high medical bills or other factors beyond their control. So, to placate the credit card companies, lawmakers developed the means test compromise.

Essentially, Chapter 7 gives people who need it a fresh financial start. Bankruptcy stops adverse creditor actions, like repossession and foreclosure. Bankruptcy also protects your most important assets, like your house, car, and retirement account, from creditor seizure. Our Athens bankruptcy lawyer can help you and your family maximize this fresh start by providing solid legal advice and aggressive legal representation.

Initial Qualifications for Chapter 7

Like most other legal proceedings, bankruptcy has both informal and formal qualifications. They are equally important.

First, the informal qualifications. Bankruptcy debtors must list their monthly income on Schedule I and their monthly expenses on Schedule J. In a Chapter 7 case, the debtor must usually be in the red each month. If that’s not the case, the trustee might question the need to file Chapter 7 at the creditors’ meeting.

Never try to manipulate figures and meet this informal qualification on your own. Intentionally submitting inaccurate information is a form of bankruptcy fraud. If the numbers do not add up, an Athens bankruptcy attorney can take appropriate steps to ensure that you qualify on this basis. This is one of many reasons it’s wise to consult with an attorney if you’re considering filing for Chapter 7 bankruptcy. They can help show that you meet the necessary qualifications, and they can help you avoid accidentally submitting inaccurate information that could otherwise result in significant legal woes.

The means test, the formal qualification for Chapter 7 bankruptcy, is the big one. Your annual household income must be less than the average amount. In Georgia, as of November 1, 2020, that amount is $91,161 for a family of four.

If your income is too high, an Athens bankruptcy lawyer can still work with you. Chapter 7 might still be an option. There are other options available as well, such as non-bankruptcy debt negotiation and Chapter 13 bankruptcy.

The Creditors’ Meeting

Next, the bankruptcy must survive the trustee’s scrutiny at the creditors’ meeting. The trustee is the person who oversees the bankruptcy for the judge. Frequently, debtors never personally encounter bankruptcy judges or even set foot inside their courtrooms.

First, the trustee must verify the debtor’s identity. That usually means providing a government-issued photo ID and a Social Security card. Alternatives are acceptable, but these two forms of documentation are best.

Second, the trustee examines the debtor’s financial profile. Part of this process includes examining documents, such as recent tax returns and bank statements. Debtors, who have a legal duty to cooperate with the trustee, should be prepared to produce these documents on demand. An attorney can help you gather all required documentation in preparation for this phase.

Part of this process also involves scrutinizing the bankruptcy paperwork and looking for red flags. For example, if a debtor drives a new car but makes no car payments, the trustee will probably ask some pointed questions.

Recovering from Bankruptcy and Athens Bankruptcy Attorneys

Finally, debtors must be able to bounce back from a bankruptcy filing. If this does not happen, debtors squander their fresh start, and no one wants that outcome.

Although the legal proceedings are over, an Athens bankruptcy lawyer still plays a significant role. Responsible credit use is one of the best ways to raise a credit score. Attorneys connect former bankruptcy debtors to lenders who are willing to work with people that have below average credit scores. The loan itself could be revolving debt, like a credit card, or secured debt, like a new car.

Other ways to potentially improve your credit after filing for Chapter 7 bankruptcy include the following:

Keeping the same job

Hopping from job to job won’t have a direct impact on your credit score. However, it can make creditors more reluctant to work with you. They simply want to know you have a consistent source of income. While taking a new job that pays more money might not make them wary of helping you out, moving from one job to another will.

Remember, part of rebuilding your credit after filing for Chapter 7 bankruptcy involves taking out loans with the intention of paying them back. To improve your chances of being approved for loans, maintain steady employment.

Work with a cosigner

If you’re struggling to get approved for loans or lines of credit after filing for Chapter 7 bankruptcy, you may be more likely to get approved if a cosigner will agree to work with you.

However, if you’re going to ask someone you know to be a cosigner, it’s essential that you be thoroughly confident in your ability to pay back the loans for which you’re applying. When someone is a cosigner, they’re legally bound to serve as a backup source of repayment. If you fail to pay back the loan, you could put your cosigner’s finances and credit in jeopardy. This will likely strain your relationship with them.

Carefully apply for new credit

When you apply for new credit, typically, a lender will take a close look at your credit score and history. If this happens too often, your credit score may actually suffer as a result.

 

This is another reason to work with an attorney in these circumstances. Our experts can help you identify lenders with whom you should apply for new credit. Without assistance from qualified legal professionals, you may apply for new credit blindly, damaging your chances of being approved in the future.

An attorney can also ensure that the lenders with whom you’re applying for credit and loans report your payments to the credit bureaus. It’s important to be aware that creditors and lenders aren’t required to do this. You don’t want to apply for credit, get approved, and keep up with payments, only to find that being responsible nevertheless has no positive impact on your credit score because your payments weren’t being reported.

Become an authorized user

If you can’t get approved for new credit and you can’t find a cosigner (or don’t want to put a cosigner into the position of being responsible for paying off your loans), becoming an authorized user of another person’s credit card or line of credit is another option that may be available to you. Just remember to only take this step if you know you’ll use this privilege responsibly. Additionally, you must confirm that payments made by authorized users will be reported to the credit bureaus.

It’s also worth noting that this method won’t raise your credit score dramatically. You need to manage your expectations when becoming an authorized user. However, as long as you responsibly make payments, this method certainly won’t cause any harm, and will help in some capacity.

Develop strong financial habits

Filing for Chapter 7 bankruptcy isn’t anything to be ashamed of. That said, you may find yourself in this position perhaps because you didn’t practice ideal financial habits in the past.

That’s okay. Some people are simply never taught to manage their finances. Luckily, you can always improve your financial habits.

After bankruptcy, you should specifically make a point of setting a budget every month. Do your best to account for all payments to creditors and lenders when doing so. Additionally, it’s best to set aside money for an emergency fund, in order to avoid falling behind on payments or being forced to use more credit than you should.

Understand your credit utilization ratio

Your credit utilization ratio is essentially the percentage of available credit you’re using at any given time. For example, perhaps you have two credit cards. Card 1 offers a line of credit of $5,000, and your current balance is $1,000. Card 2 offers a line of credit of $7,000, and your balance is $2,000. To determine your credit utilization ratio, you would add up both balances and divide the sum by the total credit available to you via both cards. In this instance, you would divide $3,000 by $12,000, giving you a credit utilization ratio of 25%.

You need to strike a delicate balance when using new credit after filing for Chapter 7 bankruptcy. On the one hand, you need to use some of your credit in order to pay your creditors and raise your credit score. However, a high credit utilization ratio can hurt your credit score and make other creditors less likely to work with you. An attorney can help you better determine how to properly strike this balance.

Review your credit report

Depending on the circumstances, you might also want to review your credit report with the help of an expert. While filing for Chapter 7 bankruptcy in Georgia will undeniably hurt your credit, sometimes, false or inaccurate information on a credit report can exacerbate an already tenuous situation.

Should I File for Chapter 7 Bankruptcy in Georgia?

No single blog post or article can tell you for certain whether filing for Chapter 7 bankruptcy is the best option given your situation. You should discuss this topic with a lawyer to learn if filing for bankruptcy is right for you.

In general, though, factors to consider when making this decision include the following:

Your Credit Score

Again, filing for Chapter 7 bankruptcy will harm your credit score. However, if your credit score is already quite low, the impact of filing for Chapter 7 bankruptcy may be fairly negligible.

The Amount of Debt

Your attorney will consider the amount of dischargeable debt you have and your ability to pay it off when determining if filing for Chapter 7 bankruptcy is an option you should strongly consider.

Your Property

In some instances, when a person files for Chapter 7 bankruptcy, the bankruptcy trustee may be able to sell some of your property to help pay off your debts. Keep this in mind if you own expensive property.

That said, some types of property and assets are exempt from being sold off after a person declares bankruptcy. If you’re not sure whether your property is exempt, consult with a bankruptcy lawyer.

Your Daily and Monthly Needs

If you’re in substantial debt, keeping up with your payments may interfere with your ability to make ends meet. It might be best to start anew by filing for bankruptcy if this is the case.

Potential Consequences

You might end up having your wages garnished or being sued for your debt. If you’re worried about these possibilities, discuss your options with a bankruptcy attorney in Georgia.

Potential Earnings

This is one of the most important factors to consider when deciding whether to file for Chapter 7 bankruptcy. You might not need to declare bankruptcy if you can genuinely pay back your debt in a reasonable timeframe. However, if you have good reason to believe you’ll simply be unable to pay off your debt over the course of five years, bankruptcy may be the best option.

Once more, none of this is meant to authoritatively determine whether you should or shouldn’t file for bankruptcy. These are merely issues to think about as you prepare to discuss your circumstances with an attorney. The more you prepare by considering various critical factors, the better the odds an attorney will be able to offer helpful advice.

Chapter 7 Bankruptcy: Don’t Lose Hope

Your feelings about filing for Chapter 7 bankruptcy may be complex. True, it’s helpful to know you’re starting off fresh, but still, you might wonder whether you’ll ever be able to have a strong credit score again.

These are understandable concerns. However, you must remember that it’s entirely possible to rebuild your credit after filing for Chapter 7 bankruptcy. In fact, it’s not uncommon for someone’s credit score to be higher a year after the bankruptcy process is complete than it was at the time they filed and qualified for bankruptcy. This is because being able to start off with a clean slate can make it easier for someone to stay on top of payments.

That said, there’s no guarantee your credit score will improve after bankruptcy. It’s much more likely to do so if you consult with a lawyer when you begin the bankruptcy process. Their insights can help you prepare accordingly.

Contact an Assertive Chapter 7 Bankruptcy Lawyer Now

Is Chapter 7 bankruptcy still available? Yes, it is available to those people who qualify. For a free consultation with an experienced Athens bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. at (706) 843-2905. Convenient payment plans are available.

 

This article was originally published on Decemeber 14, 2020 and updated on August 10, 2021.