Families struggling with debt have many questions about bankruptcy, all of which answer the question of whether bankruptcy is right for them.

The following top 10 questions to ask a bankruptcy lawyer in Athens, GA help debtors decide if bankruptcy is an option for them:

• Can I Keep My House?
• Can I Keep My Vehicle?
• Can I Keep My Household Items?
• Can I Keep Personal Items?
• What Are the Differences Between Chapter 7 and Chapter 13?
• Are There Income Limits for Filing a Chapter 7 in Georgia?
• Are There Income Limits for Filing a Chapter 13 in Georgia?
• Is Child Support Dischargeable in Bankruptcy??
• Is Alimony Dischargeable in Bankruptcy?
• Are Student Loans Dischargeable in Bankruptcy?

Can I Keep My House in Athens?

In Georgia, whether you can keep your house in a Chapter 7 bankruptcy depends on your equity. As of 2023, Georgia’s homestead exemption allows you to protect up to $21,500 of equity in your home, ($43,000 if you’re a married couple filing jointly).

If your equity is less than or equal to the homestead exemption, you can typically keep your house in a Chapter 7 bankruptcy. However, you must continue making your mortgage payments. If you fall behind on payments after the bankruptcy ends, the lender can foreclose.

If your equity exceeds the exemption, the bankruptcy trustee can sell your house to repay creditors. But, if the trustee determines that selling the house would fail to result in a meaningful payment to unsecured creditors (after selling costs and paying off the mortgage), you might still be able to keep it. Consult with a bankruptcy attorney for advice on your specific situation.

The situation differs markedly when you file Chapter 13. Chapter 13 allows you to keep all of your property, provided the court approves your repayment plan and you comply with the terms. For this reason, Chapter 13 is often known as the “home saver” bankruptcy.

 

Can I Keep My Vehicle?

As with a home, whether you can keep your vehicle after a Georgia Chapter 7 bankruptcy is determined by your equity in the car and the motor vehicle exemption provided by the state. As of 2023, Georgia’s motor vehicle exemption allows you to protect up to $5,000 of equity in your vehicle.

If your equity in the vehicle is less than or equal to the motor vehicle exemption, you can keep your vehicle in a Chapter 7 bankruptcy. Still, you must stay current on your car loan payments. If you fall behind, the lender retains the right to repossess the vehicle.

If your equity in the vehicle exceeds the exemption limit, the bankruptcy trustee can sell the vehicle to repay your creditors. However, if the trustee determines that selling the vehicle cannot significantly benefit your unsecured creditors (after selling costs and loan repayment), you may be able to keep it. Always consult with a bankruptcy attorney for personalized advice.

In Chapter 13, you can keep all of your property, provided the court approves your repayment plan and you comply with the terms.

Can I Keep My Household Items in Athens?

When you file for Chapter 7 bankruptcy in Georgia, you can keep most of your household goods, but within limits. Georgia bankruptcy law includes the “wildcard exemption”, which covers any property type, including household goods.

Georgia’s wildcard exemption allows you to protect up to $1,200 in any property, plus up to $10,000 of any unused portion of the homestead exemption. The specific value of your household goods is usually determined by a yard sale or second-hand value, which tends to be low compared to the original cost.

Some common household items you can keep in a Georgia Chapter 7 bankruptcy include:

• Furniture
• Kitchen Appliances
• Clothing
• Personal effects
• Tools for work or school
• Computers

Can I Keep Personal Items?

In a Georgia Chapter 7 bankruptcy, the debtor retains most personal items. Georgia bankruptcy law allows for exemptions of personal property, protecting it from being sold to pay creditors. This includes a wildcard exemption that can be applied to any property, including personal items. As of 2023, the Georgia wildcard exemption offers up to $1,200 plus $10,000 of any unused portion of the homestead exemption.

The value of these personal items is typically based on their current market value or what you could reasonably sell them for now, rather than their replacement cost.

Common personal items that can usually be kept in a Georgia Chapter 7 bankruptcy include:

• Clothing
• Jewelry
• Household goods and furnishings
• Personal electronics
• Books and musical instruments

What Are the Differences Between Chapter 7 and Chapter 13?

Chapter 7 and Chapter 13 bankruptcies are the two main types of personal bankruptcy, but they function differently.

Chapter 7, often referred to as “liquidation” or “straight” bankruptcy, is designed for debtors in financial difficulty who don’t have the ability to pay their existing debts. In Chapter 7, the bankruptcy trustee sells non-exempt assets to pay creditors. Debtors may lose some personal assets, and their credit rating is typically impacted for several years.

Chapter 13, known as “reorganization” bankruptcy, is for individuals with regular income who wish to pay their debts to keep the secured property but are currently unable to do so. Chapter 13 enables debtors to keep valuable assets — like a mortgaged house or car — which they would have to forfeit in Chapter 7.

In Chapter 13, debtors propose a repayment plan to make installments to creditors over a three-to-five-year period. While a Chapter 13 bankruptcy stays on the credit report for ten years, Chapter 13s have less impact on FICO scores and credit eligibility.

Are There Income Limits for Filing a Chapter 7 in Georgia?

For Chapter 7, your income must be below the median income for a household of your size. If your income exceeds this threshold, you may still qualify if you pass the means test, which considers your disposable income and unsecured debts.

Are There Income Limits for Filing a Chapter 13 in Georgia?

Chapter 13 entails debt limits rather than income limits. To qualify, you must have a regular income and your secured debts cannot exceed $1,257,850 and unsecured debts cannot be more than $419,275, as of 2021. However, there are no specific income limits; instead, petitioners must show they have enough income to meet repayment obligations and living expenses under any proposed plan.

Is Child Support Dischargeable in Bankruptcy?

Child support is a priority debt, so, under federal law, it cannot be discharged through bankruptcy. This provision exists to ensure that children’s essential needs are prioritized and protected, regardless of a parent’s financial situation. Whether you file for Chapter 7 or Chapter 13, child support obligations remain intact.

However, bankruptcy can still help manage child support payments. For example, in Chapter 13, past due child support can be included in the debt repayment plan. While the debt remains intact, it is restructured and paid off over a three-to-five-year period, making payments more manageable. Additionally, by discharging other debts through bankruptcy, you may free up more income to meet your child support obligations.

Remember, it’s crucial to continue making child support payments during the bankruptcy process to avoid legal consequences. If you’re struggling with these payments, it may be worth exploring modifications to your child support order.

Is Alimony Dischargeable in Bankruptcy?

Alimony is a domestic support obligation. Therefore, it cannot be discharged according to federal bankruptcy laws, much like child support. This holds true for both Chapter 7 and Chapter 13 bankruptcy filings.

The purpose of this regulation is to ensure that individuals who depend on these support payments continue to receive them, regardless of the financial state of the person who is obligated to make the payments.

Even though you cannot eliminate alimony obligations through bankruptcy, it can provide some relief if you have other significant debts. By discharging other types of debt, you may free up more of your income to fulfill your alimony obligation. If you’re having difficulty making alimony payments, consider speaking with an attorney to discuss potential modifications to your alimony order.

Are Student Loans Dischargeable in Bankruptcy?

Under U.S. bankruptcy law, student loans are usually non-dischargeable, meaning they cannot be eliminated through bankruptcy. This provision is based on the rationale that student loans fund an education—an asset that, unlike a car or a house, cannot be repossessed. Therefore, discharging these loans could create a moral hazard where people take on education debt with the intent of later declaring bankruptcy.

However, there is a small window for discharging student loans through a provision known as “undue hardship”. To qualify, the debtor must prove that repaying the loan would impose an undue hardship on them and their dependents, which is often a difficult standard to meet. However, extreme cases, such as permanent disability, may allow for a student loan discharge.

For those struggling with student loan payments, there are options other than bankruptcy. Income-driven repayment plans cap your monthly student loan payment at a percentage of your discretionary income. Deferment and forbearance are options to temporarily stop making payments or to reduce your payment amount for a period.

In some cases, loan forgiveness programs may be available, especially for public service workers. It’s recommended to consult with a financial advisor or student loan counselor to discuss your options. For more information, visit the Federal Student Aid website.

Our Athens, Georgia Bankruptcy Attorneys Are Here to Help

Morgan & Morgan help Georgia families escape from the burden of unmanageable debt. You are not alone. Millions of people face financial hardship and bankruptcy every year. The key is to avoid delay. Decide if bankruptcy is the best option for you today.

Contact Morgan & Morgan for a consultation.

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