Bankruptcy in Georgia is the only form of debt relief that provides all debtors with an opportunity to settle their debts quickly and relatively easily. In this article, we will address common questions and what to expect from filing for bankruptcy, as well as the legal and financial ramifications of the bankruptcy process.

How do you discharge your debts in bankruptcy? What debts are dischargeable?  What are the alternatives to bankruptcy?

 

What Is Bankruptcy and How It Works in Georgia?

Bankruptcy is filed in federal courts and is governed by the Federal Rules of Bankruptcy Procedure. So, citizens of Georgia are subject to the same bankruptcy laws as those in other states around the country. So what exactly is bankruptcy?

 

Bankruptcy Definition

Bankruptcy is a process to admit to your inability to pay your debts. After you file, you become an ‘insolvent debtor’ and work with your creditors to organize your debts to help you become solvent again. If you cannot reorganize your finances, or if assets are insufficient, you can apply to the court for bankruptcy.

When a person or company becomes insolvent, they file for bankruptcy. There are two general types of bankruptcy used by individuals. These are known as Chapter 7 and Chapter 13. Businesses often rely on Chapter 13 bankruptcy to restructure their debts. Each of these contains relief for the debtor. If you’re experiencing financial troubles, you’re likely wondering what would happen if you declared bankruptcy.

Bankruptcy is a personal affair. You can file for bankruptcy yourself or file for the bankruptcy of your company. But there are common legal grounds for bankruptcy, like consumer credit debt, unpaid taxes, family illness, and disability.

 

What Are the Different Types of Bankruptcy in Georgia?

Individual bankruptcy, or personal bankruptcy, is classified into two main types. If you’re thinking of filing, contact an attorney or credit counselor who can offer advice on the process.

 

Chapter 7 Bankruptcy

In a chapter 7 bankruptcy (also known as straight bankruptcy), you can generally keep your exempt property, including your car, clothes, and furniture. However, the nonexempt property can be sold by a neutral third party who’s appointed by the court to handle your case, referred to as a trustee. As a result, your debt may be forgiven in part or its entirety.

It may take approximately six months for you to complete this type of bankruptcy. Depending on your state, you may have to meet income limits to qualify for Chapter 7 bankruptcy.

 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy may allow you to keep your property depending on your situation. Rather than having a trustee sell your property to pay off your debt, you can pay back some or all of your debt for three to five years. For this type of bankruptcy, you must have a regular income, but there are no income limits on who can file.

 

How Does Bankruptcy Affect Your Credit Score?

A bankruptcy filing will allow you to regain control of your finances by eliminating most of your existing debts. Despite this, many people are reluctant to declare bankruptcy out of fear of the consequences. In addition to the damage that bankruptcy can do to a consumer’s credit, another concern is how bankruptcy will affect their finances.

There can be a significant decrease in your credit score, but it depends on your score before you file. Further, many experts suggest that people with filed bankruptcy recover their credit scores faster than those without. You’re likely to remain in debt longer if you don’t file, and your credit score will suffer.

Here is an overview of what happens to your credit report and credit score during bankruptcy

 

Bankruptcy Filing Record

For a limited time, your bankruptcy will appear in the public records section of your credit report. Chapter 7 gives up to ten years from the date of filing, while Chapter 13 gives up to seven years from the date of filing.

 

Bankruptcy Accounts Status

There will also be notations of a bankruptcy filing on the accounts included in your bankruptcy filing. In the course of filing, account statuses will indicate “included in bankruptcy.” The status changes to “discharged in bankruptcy,” and the balance displays zero as soon as the bankruptcy is discharged.

 

When To Declare Bankruptcy

When you have debts you can’t repay, foreclosure on the horizon due to mortgage default, harassment from bill collectors, or all of the above might prompt you to declare bankruptcy.

Although filing for bankruptcy may reduce your debts, save your home, and keep bill collectors at bay, doing so can also harm your credit score in the long run. This can affect your ability to borrow in the future, raise the rates you have to pay for insurance, and even make it more difficult to find a job.

 

Things To Consider Before Filing for Bankruptcy in Georgia

If you are struggling financially but have sufficient resources to get back on track, there are other debt-relief options than bankruptcy.

The first step in repairing your credit is speaking with a nonprofit organization’s credit counselor. You will be provided with a free financial counseling service. They will review your finances and discuss the pros and cons of a debt management program, a loan consolidation, or even a settlement, all of which may be able to assist you.

Creating and living within a budget would be another step in the right direction. By taking on a second job or selling some assets, you can supplement your current income.

 

Before making a final decision, you might want to consider the following:

• Did I attempt to reduce the debt to manageable levels?
• Will my current situation continue, or will it improve soon?
• Finally, do I have a big bill to pay or a series of big bills on the way?

If you plan to file bankruptcy, you might want to hold off on paying that bill until you decide whether or not you wish to file.

 

Georgia Bankruptcy Process: What Happens Next After the Bankruptcy Process Begins?

Once you decide to file bankruptcy, you probably want to know which steps you have to take and how the process works. Below are the bankruptcy steps you need to know.

Step 1: Find an attorney who can help.

Step 2: Schedule a bankruptcy counseling session.

Step 3: Submitting the bankruptcy petition to the court.

Step 4: Accounting for liquidation or repayment.

Step 5: Enroll in debtor education classes.

Step 6: Discharge of the debt.

 

Pros and Cons of Filing for Bankruptcy in Georgia

 

Advantages to Filing for Bankruptcy

These are some of the positives that bankruptcy can do for you:

1. A bankruptcy filing automatically halts all debt collection efforts. A bankruptcy court does not cancel your debt but suspends your creditors’ collection efforts until the bankruptcy case is completed or the stay is lifted. In other words, no more:

• Property repossession
• Calls or letters from debt collectors
• Lawsuits on the debts
• Home mortgage foreclosures
• Wage garnishments

It’s important to keep in mind that an automatic stay against debt can’t stop the following:

• Proceedings in criminal cases
• Tax audits by the government
• Child support or alimony payment establishment, modification, or collection
• An order establishing paternity
• Co-debtors

2. The damage to your credit from defaults, repossessions, and lawsuits can be severe; hence bankruptcy can often be the easiest solution.
3. In case of a second financial disaster, before you are eligible for Chapter 7, you can file for Chapter 13.
4. Eventually, creditors will stop harassing telephone calls, letters, repossessions, refused charge authorizations, and lawsuits.
5. Some lenders specialize in lending to “bad-risk” borrowers (this is their term, but it’s unfair to call someone who has taken a major step towards recovery a bad-risk borrower).
6. Many of the items you own can be excluded from bankruptcy under state exemptions.
7. According to bankruptcy laws, people who file for bankruptcy must also receive some credit education. Using this opportunity, you can look back at what has happened and reset your financial and credit course moving forward. While utilizing this opportunity to its fullest extent, you’ll leave with a much better understanding of managing your finances.

 

Disadvantages to Filing for Bankruptcy

Bankruptcy also has some pretty serious repercussions, and as you would probably expect, these are some of the most notable ones:

1. The majority of tax debt is not dischargeable.
2. If you declare bankruptcy and do not rebuild your credit, your credit score will drop.
3. If you need to file bankruptcy again at a later date, you have to wait years between filings.
4. It will be challenging to qualify for a mortgage while bankruptcy is still on your record.
5. The credit cards currently held will be canceled.
6. A bankruptcy filing is a stressful and intimidating experience at first, and it may be uncomfortable explaining your financial situation to a judge, trustee, and attorney.
7. Once you file for bankruptcy, your name will be publicly available in court records.
8. When lenders see that your score is in the lowest percentile, your interest rate and terms increase. It becomes harder to borrow money. An unfavorable credit market may prevent lenders from giving you credit.
9. Additionally, some of your luxury possessions will be lost.
10. In particular, homeowners and auto insurance may be more expensive if you declare bankruptcy, as insurance companies highly value credit reports. Rate increases are much more justified with dispassionate statistics than with real claims. Consequently, even if you don’t have any claims, your premiums will rise.

 

Takeaway

Knowing how to file bankruptcy might be the most important thing you need to know about, but it also has potential consequences. It’s important to engage a trustee and make sure you are following all the necessary steps. Learn about how to file for bankruptcy and how to hire a bankruptcy lawyer with this bankruptcy guide.

 

Conclusion

An individual or a corporation can file bankruptcy, and it is a tool debtors often use to regain their financial footing. However, it is the last resort when other solutions have failed to solve the debt problems.

First of all, bankruptcy is not always necessary. For example, bankruptcy may not be necessary if you can negotiate with your creditors for reduced payments or settlement agreements to pay off the debt over time. Secondly, bankruptcy may affect many aspects of your life because it will stay on your credit report for up to 10 years.

Finally, before filing bankruptcy, it’s important to understand what type of bankruptcy you are eligible for and the benefits and drawbacks of each type.