If you are looking into bankruptcy as a legal option for resolving debt, chances are you have heard a lot about both the good and the bad. There are two sides involved with any important decision, and moving forward with bankruptcy is certainly a momentous life event. You cannot make informed choices without weighing the impacts, during the case and into your future. For anyone in debt trouble, a critical first step is to look at the pros and cons of declaring bankruptcy in Georgia.

Unfortunately, many people tend to put too much focus on the downsides of bankruptcy. With Chapter 7 and Chapter 13, there are implications for your credit. However, you cannot overlook the benefits of filing bankruptcy and how a clean slate will impact your future. To get control over your debt and look forward to financial opportunities, a fresh start is often necessary.

 

Because bankruptcy laws and legal requirements are complicated, it is wise to retain legal counsel to assist with a Chapter 7 or Chapter 13 case. You are in a better position to leverage and pros and avoid the cons with a Georgia bankruptcy attorney at your side. Plus, some general information about the process will help clarify the benefits that sometimes get overlooked.

 

Bankruptcy Pros and Cons

There are two types of bankruptcy available for individual debtors and married couples, Chapter 7 and Chapter 13. They each carry their own benefits and drawbacks, but it is also useful to review bankruptcy in general. For instance:

 

• One advantage is that you are able to discharge all qualifying debt through bankruptcy. Though there are different rules and requirements for Chapter 7 and Chapter 13, they both can help you become debt-free.

 

• Another plus with bankruptcy is that debtors are free from creditor harassment and legal actions as soon as you file your petition. There is an automatic stay with both Chapter 7 and Chapter 13. Creditors cannot pursue lawsuits or other remedies to collect your debt.

 

• The downside with bankruptcy is that there is a hit to your credit, so you can expect your score to drop. The details will vary according to your circumstances, as well as whether you file for Chapter 7 or Chapter 13.

 

• When considering your options, look at how long it would take to pay off your debt without filing bankruptcy. Chapter 7 or Chapter 13 may lead to a faster time to discharging all qualifying debt.

 

Comparing Chapter 7 Factors

With Chapter 7, you can discharge debt by meeting the strict eligibility criteria. Your debt will be wiped out at the end of the case, but keep in mind that the bankruptcy trustee has the authority to liquidate. Your assets could be sold to pay your debt to creditors. Aside from these basic facts, some pros and cons of Chapter 7 include:

 

• Those with higher income may not qualify. Your earnings must be below the state median income with respect to a household of your size. Alternatively, you could meet the criteria of the Means Test, which reviews the impact of monthly bills on your finances.
• Though assets may be sold in Chapter 7, you have the advantage of using exemptions. You are able to protect equity in your home, vehicles, and personal belongings, up to a certain limit.
• A Chapter 7 bankruptcy case can be resolved in approximately 4 to 6 months, assuming there are no mistakes or complications. Chapter 13 cases take several years.
• The filing fees for a Georgia Chapter 7 bankruptcy case are somewhat high at $338. However, some debtors may qualify for a waiver to avoid these costs.
• It is a downside that a Chapter 7 case will be on your credit report for 10 years after filing, but the advantage is that you can begin rebuilding credit right away.

A Look at Chapter 13 Pros and Cons

With Chapter 13 bankruptcy, you discharge debt through an arrangement that reorganizes and restructures your debt. When all debts are combined and reduced, they form the basis of your Chapter 13 debt repayment plan. Some of the pros and cons about Chapter 13 include:

 

• There is no liquidation with this type of bankruptcy, which is an advantage over Chapter 7. You are satisfying your debt to creditors via your debt repayment plan.
• The criteria for Chapter 13 are relaxed, though your income is still a factor. This is because you must have a job to qualify, and your earnings serve as the source to stay current on your debt repayment plan. 
• You will be required to pay your debt repayment on a monthly basis for at least 3 to 5 years. Therefore, Chapter 13 carries the disadvantage of being a longer case until conclusion.
• When you submit your Chapter 13 bankruptcy petition, you must pay a filing fee of $313.
• With Chapter 13, you can discharge business debt for which you are personally responsible. It may be possible to keep your business and eliminate a personal guarantee, for instance.
• Chapter 13 will remain on your credit for a shorter time compared to Chapter 7, at just 7 years after the date you file.

Treatment of Debt in Chapter 7 and Chapter 13

Both types of bankruptcy are able to clear qualifying dischargeable debt from your finances, so there are some debts that you will not be able to eliminate. One factor is whether the debt is secured or unsecured. Chapter 7 and Chapter 13 aim to wipe out unsecured debt, such as credit cards, personal loans, medical bills, and lines of credit. These are debts in which you did not provide a security interest to the bank. 

 

Secured debt cannot be discharged in bankruptcy, because the nature of the arrangement gives collateral to the lender. A mortgage is an example of secured debt, as you are pledging your home as a security interest. If you default, the bank can pursue foreclosure proceedings, eventually gaining the legal power to sell it.

 

In addition, there are some debts that you cannot discharge because of bankruptcy rules, tax laws, and other factors. With Chapter 7 and Chapter 13, you are unable to wipe out:

 

• Court-ordered child support and alimony;
• Certain types of taxes;
• Tax liens;
• Designated fees and fines to government; and,
• Lawsuits related to DUI accidents.

Myths About Bankruptcy

As you are considering the pros and cons of declaring bankruptcy in Georgia, you should base your decision making on facts instead of misinformation. There are many misconceptions about Chapter 7 and Chapter 13, and they could be damaging if you move forward without accurate details. To clarify some important points, it is useful to debunk the myths:

 

• Myth: You can only stop creditor calls with bankruptcy. This is not true because the automatic stay prohibits all types of creditor efforts to collect debt. They cannot file a lawsuit, garnish your wages, attach property, or pursue a foreclosure action.
• Myth: You can cease foreclosure through the bankruptcy automatic stay. Unfortunately, you can only temporarily stop a lender from foreclosing on your home. The bank can request that the bankruptcy court lift the stay, allowing it to proceed with foreclosure.
• Myth: You have to file Chapter 13 if you don’t qualify for Chapter 7. Not true, since you might opt for Chapter 13 because of the pros. There is no liquidation, the fees are lower, and the case is removed from your credit in a shorter time.
• Myth: The bankruptcy trustee will always sell everything you own for Chapter 7. This is a misconception because the trustee will likely not liquidate assets that would not bring a profit. Chapter 7 can be a no-asset case, in which you would be able to keep your property.
• Myth: Building credit is an uphill battle after bankruptcy. Fortunately, you have many options to increase your score when you create a positive track record of payments for monthly bills. A secured credit card is also a good investment to rebuild credit.

Basic Steps with Bankruptcy Cases

Once you compare the benefits and drawbacks of bankruptcy, you can see that Chapter 7 or Chapter 13 are smart solutions for many debtors. A bankruptcy lawyer will guide you on making the right decision for your goals and needs, and you can count on assistance with many of the preparations. You will need to gather and organize many financial documents, including all information about your assets, debts, income, and expenses. Plus, it is necessary to complete a credit counseling course within 180 days before you file for Chapter 7 or Chapter 13.

 

When the time is right to file, trust your Georgia bankruptcy attorney to manage the process and essential tasks. Some of the steps include:

 

• Preparing the Chapter 7 or Chapter 13 bankruptcy petition;
• Filing your petition, along with filing fees and relevant schedules;
• Helping you prepare your proposed Chapter 13 debt repayment plan, which must be filed early in the process;
• Attending the 341 meeting of creditors with you, where creditors will request clarification and confirm details about your bankruptcy petition; and,
• Wrapping up your bankruptcy case and obtaining the final discharge order.

Speak to a Georgia Bankruptcy Lawyer About the Benefits

After reviewing the pros and cons of declaring bankruptcy in Georgia, you can see that Chapter 7 or Chapter 13 may be a solution for your debt issues. Your decision should come down to the options that best suit your situation and goals, and you can trust Morgan & Morgan, Attorneys at Law, P.C. to advise you. Please contact our offices in Athens, GA today to speak to a Georgia bankruptcy lawyer. We are happy to schedule a no-cost consultation to review your circumstances.