It is stressful and challenging to live under the burden of crushing debt as you struggle to pay monthly bills and deal with harassing creditor phone calls. Even as you lower your budget to impractical levels to pay the minimum amount due, you soon realize that your payments only cover interest and late fees. The underlying debt remains and grows, and you feel powerless to advance your finances. Though you may be overwhelmed by the idea of considering the benefits of bankruptcy, it may be time to explore this option to address your debt.

You know the importance of reviewing the benefits whenever making an important decision in life, especially when it comes to your financial situation. Therefore, you must carefully review your options under Chapter 7 and Chapter 13, both of which are available for individuals and married couples. The advantages of bankruptcy in general, are significant, but there are also benefits with each type.

Another priority is consulting with an Athens, GA, bankruptcy attorney who can explain the process and how it will affect your future. Your outlook will improve when you consider the Top 10 benefits of filing for bankruptcy in Athens, GA.

 

1. Bankruptcy Discharges Debt

Chapter 7 and Chapter 13 are very different types of bankruptcy, with separate eligibility rules, procedures, and objectives. With Chapter 7, you can eliminate your debt entirely after the bankruptcy trustee liquidates any of your qualifying assets to pay off creditors. Under Chapter 13, you pay some of what you owe according to a debt repayment plan. Your debts are combined into one monthly amount that you can afford, which is far less than what you are paying with late fees, interests, and other charges. Plus, you will usually only pay back a percentage of the total.

The similarity between Chapter 7 and Chapter 13 is that they both discharge qualifying, unsecured debt at the conclusion of the process. Secured debts, like a mortgage or car loan, will remain.

 

2. The Automatic Stay Stops Creditors

When you file for Chapter 7 or Chapter 13, the bankruptcy court immediately imposes an automatic stay on collection activities by creditors. They are prohibited from:

• Calling or threatening;
• Filing a debt collection lawsuit;
• Garnishing your wages;
• Attaching bank accounts; and,
• Initiating or continuing foreclosure proceedings on your home.

There is an exception for foreclosure matters since a lender can petition the bankruptcy court to lift it just for the real estate. If the court grants the request, the bank could start foreclosure or continue where it left off with the process. Recall that the house is a secured asset, so the lender has a financial interest that cannot be affected by the bankruptcy process. You may gain a benefit by filing for bankruptcy before foreclosure.

 

3. Many Individuals Qualify for Chapter 7 in Athens

Chapter 7 wipes out your debt, which is a harsh remedy from the creditor’s perspective that has extended a financial benefit. Therefore, Chapter 7 rules on eligibility are designed so that only those individuals who truly need bankruptcy discharge can take advantage of it. To achieve this objective, there are two tests to determine whether you qualify. Fortunately, many filers will be eligible under one of the following income evaluations:

• You automatically qualify for Chapter 7 if your earnings fall below the state median income level in Georgia. The exact amount varies because it takes into account the household size.
• If your earnings exceed the state median income level, you may still be eligible through the Means Test. Your important monthly expenses are included when reviewing income, reducing your earnings to a level that meets the test.

 

4. Chapter 7 Allows Exemptions in Athens

The downside for some Chapter 7 filers is that their assets are subject to liquidation by the bankruptcy trustee, who can sell them to pay off creditors before discharge. However, bankruptcy is intended to help you get ahead with debt and seek a better financial outlook, not make you needy. Therefore, you can use exemptions in Chapter 7 to protect certain property. Note that you are required to use Georgia’s exemptions instead of those created by federal law. Under the rules, you can protect up to:

• $21,500 of the equity you hold in your home, which increases to $43,000 for married couples;
• $5,000 of the equity in your vehicle;
• $1,200 in any property, under the wild card exemption; and,
• Many other assets.

 

5. Chapter 13 Eligibility is Eased

One of the key benefits of Chapter 13 is that it is available to a broader range of individuals. For higher earners who do not fall below the state median income level or meet the Means Test, this may be the only option. Your earnings are still important but for a different reason. The one eligibility rule is that you have a job or other source of income.

You need employment with Chapter 13 because creditors want some level of confidence that you can stick to the debt repayment plan. The amount of your earnings is also critical when it comes to determining the amount you will pay monthly. You will include the details when you submit a proposed debt repayment plan to the court.

 

6. You Keep Assets with Chapter 13

Unlike Chapter 7, there is no liquidation of assets by the bankruptcy trustee in Chapter 13 since you are paying creditors through the debt repayment plan. This is an advantage to filers who have significant assets and equity. It is often a reason they opt for Chapter 13 even when they do qualify for Chapter 7. You can work out the debt repayment plan, pay for a 3 to 5-year period, and then you can discharge qualifying debt.

However, though you can officially keep assets in Chapter 13, you cannot use bankruptcy to avoid foreclosure of your home. The real estate is a secured asset, so the lender has an ownership interest in it. If you stay current on your mortgage, you can keep the home while working late fees and arrearages into the debt repayment plan.

 

7. You Can Catch Up with Debts That are not Dischargeable in Athens

There are many debts that cannot be discharged through either Chapter 7 or Chapter 13 bankruptcy, including:

• Child support;
• Alimony;
• Most types of taxes; and,
• Any judgment against you because of reckless conduct, such as a lawsuit from a DUI accident.

However, you should not be too quick to be disappointed, knowing you cannot eliminate these debts. You are still discharging a significant amount of unsecured debt, such as credits, medical bills, personal loans, and lines of credit. Without this burden in your life, you have more financial flexibility to pay debts that you cannot discharge.

 

8. You Learn from Credit Counseling

As part of the bankruptcy process for both Chapter 7 and Chapter 13, you must complete a credit counseling course within 180 days before filing your petition. The purpose is to determine whether it is feasible for you to pay off debt without bankruptcy while not falling further into financial distress. Plus, you need to take a debtor education course after you file and while your case is pending.

Through both of these courses, you will learn a lot about how credit works and strategies for avoiding getting into financial difficulties in the future.

 

9. Bankruptcy is a Plus Over the Alternative

It is true that a downside to bankruptcy is the hit to your credit rating. If you file Chapter 7, the case stays on your credit report for 10 years. With Chapter 13, your case will be part of your credit history for 7 years. This seems like a long time, but you need to put the duration into perspective. If you do not file bankruptcy, consider whether you can advance in 7 to 10 years.

You must pay all late fees and interest, which will continue to accrue as long as you have a balance due. Then, you must chip away at the underlying debt. Unless your salary changes, you receive an inheritance, or you win the lottery, you will be doing all this on an income that is already not enough to pay monthly bills. For some people, debt will follow them for decades.

 

10. You Will be able to Rebuild Credit

Another point about your credit score is that you can be working to improve it right away. If you have a mortgage after bankruptcy and pay as required, these payments are a plus on your report. Plus, you pay your cell phone, cable, utilities, and other monthly bills. A track record of in-full, on-time payments is a positive mark on your report, even when it appears alongside a bankruptcy case.

In addition, when the time is right, you can obtain a secured credit card or credit-builder loan. However, you must be cautious about interest rates with certain lending arrangements.

 

Contact an Athens, GA, Bankruptcy Lawyer to Discuss Options

If you are considering filing Chapter 7 or Chapter 13, this list of benefits of filing for bankruptcy in California should be helpful. However, to understand the full range of advantages for your personal situation, it is essential to speak to an experienced bankruptcy attorney. Our team at Morgan & Morgan, Attorneys at Law, P.C. can tell you more about how the process works, and we are ready to prepare all documents necessary to get it started. Please get in touch with our offices in Athens, GA today to set up a free consultation.

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