The modern world is built on debt. Few people today live by using cash or even debit cards. Credit cards make it possible to pay for the things we need while earning “perks”. Cars are too costly to purchase outright for most of the population, and buying a home means going into debt for decades to come.

As long as you’re able to balance your debts and repay your creditors, this way of life is fine. However, it’s all too easy to find yourself overextended. A single missed paycheck could be all it takes to create a cascade of problems – one missed payment means late fees that leave you short of making another payment, and so on. Before you know it, you’re struggling to keep your head above water as your debt level continues to rise.

There is help and hope, though. Filing for bankruptcy could be the right path for you, and there are options to suit your needs and goals. How do you know if you should make this decision? In this post, we’ll explore the benefits (and the drawbacks) of declaring bankruptcy in Georgia.

 

What Is Bankruptcy?

Before we dive too deep into the discussion of its benefits, it’s important to establish what bankruptcy is in the first place. According to the Georgia Department of Revenue, “Bankruptcy is a federal legal proceeding that helps debtors with financial difficulties get relief. The goal of bankruptcy is a fresh start through either discharge of certain debts, or repayment of debt through the bankruptcy.”

From that explanation, we understand that declaring bankruptcy offers a way to wipe the slate clean and change your financial situation. However, it’s not as simple as making a declaration. You’ll need to choose the right type of bankruptcy, hire a bankruptcy attorney, and then complete the often lengthy process.

Chapter 7 and Chapter 13 are the two types of bankruptcy most often filed by Georgia residents. Under Chapter 7, most of your debts are discharged, but non-exempt assets will be sold to repay your creditors. Under Chapter 13, some debts are discharged, but others will be put into a repayment plan that will span three to five years. Most of your assets can be protected here.

The goal of both types of bankruptcy is to help you find financial relief, although they work differently. It’s important to consider your options before choosing a particular type and work with an experienced bankruptcy attorney who can help you make an informed decision.

 

The Benefits of Declaring Bankruptcy in Georgia

Declaring bankruptcy in Georgia comes with many benefits (and a few drawbacks). Some of these are shared across both Chapter 7 and Chapter 13, while others are specific to one type or the other. In the section below, we discuss each benefit and whether you’ll find it with both types, or with either Chapter 7 or Chapter 13.

 

• Peace of Mind and Automatic Stay Protection – With both types of bankruptcy, you get an automatic stay that immediately puts an end to all communications from creditors and debt collectors. That means no more harassing phone calls, letters, or other forms of communication. It also bans creditors and debt collectors from taking most types of collections actions. This offers peace of mind and the breathing room that you need to begin focusing on getting your life back in order.

 

• No Lawsuits – Have you been informed that you are being sued by a creditor? Few things are as stressful as this. With both types of bankruptcy, you get an immediate stay from all lawsuits. Your creditors will be notified that you are declaring bankruptcy and all further repayment activities will be handled through that process.

 

• Keep Your Wages – Are your creditors taking money from your paycheck every pay period? Declaring bankruptcy puts a stop to most forms of wage garnishment, allowing you to keep your money. However, this does not work for child support or for federally-funded school loans.

 

• Keep Your Home – If you’ve fallen behind on your mortgage and the lender has started foreclosure proceedings, it can feel like your entire world is crashing down around your head. Both types of bankruptcy put the brakes on foreclosure proceedings. The lender will be required to go through the process with you. This allows you the peace that comes from knowing that you’ll have a roof over your head and that you will not lose your home to foreclosure.

 

• Eliminate Many Debts – With Chapter 7, many types of debts can be eliminated entirely without you having to make a repayment. However, for those debts to be eliminated, some of your non-exempt assets will need to be sold. The proceeds will be used to pay some of your debts. The good news is that most of your assets are exempt, including your home, your car, tools required for work, and many others.

 

• Keep Your Assets – With Chapter 13, you can keep most of your assets, including investment properties. The court will allow you to create a repayment plan that covers most of your creditors and spans three to five years.

 

• Eliminate Underwater Assets – Do you own an investment property and owe more than it is worth? With Chapter 13, you can relinquish ownership of the property back to the lender. If the value is less than the debt, the overage will be eliminated.

 

• Get a Fresh Start – With both Chapter 7 and Chapter 13, you get a fresh start and the ability to begin rebuilding your life. It’s about more than just not having to answer the phone every time a creditor calls – it’s about the incredible relief and reduction in stress that you’ll feel with your debt situation resolved.

 

The Drawbacks of Declaring Bankruptcy in Georgia

While there are many benefits to declaring bankruptcy in Georgia, there are also a few drawbacks that you’ll need to understand before deciding whether to move forward. These include the following:

 

• The Impact on Your Credit Score – Both Chapter 7 and Chapter 13 will affect your credit score, although Chapter 7’s effects last longer than Chapter 13’s. However, unpaid debts and collections activities will also damage your credit score, and forgoing bankruptcy means continuing to deal with harassing debt collectors.

 

• The Lingering Effects – Declaring bankruptcy will mean you are not able to work with many lenders for several years after the initial filing. This will make borrowing money and applying for credit cards challenging for some time after filing.

 

• Higher Interest Rates – The lenders that do work with you will charge you more in interest because you represent a higher risk than someone who has not declared bankruptcy (at least until the bankruptcy falls off your report after seven to 10 years).

 

• Lose Some Assets – If you file Chapter 7, you are likely to lose some (non-exempt) assets when they are sold to pay your creditors.

 

• Public Record – Your bankruptcy becomes part of the public record, which means that it will be available to anyone who wants to find it.

 

• Many Debts Cannot Be Discharged – You’ll find that many types of debt cannot be discharged through bankruptcy. These include child support, alimony, back taxes, many types of student loans, and damages awarded in criminal lawsuits, including as a result of DUI.

 

• Income Limits – There are limits on income for those who want to pursue Chapter 7. In some cases, you may earn too much for this type of bankruptcy, meaning Chapter 13 is your only option.

 

• Renting Becomes Difficult – If you’re a renter, you’ll find that getting approved for a new apartment or home is more difficult with a bankruptcy on your record. However, this will ease over time as the bankruptcy ages and you begin to rebuild your financial life.

 

• Employment Challenges – You may find it harder to land a good job, as employers are less likely to hire an applicant with a bankruptcy on their credit because of the risk it represents.

 

The Bigger Picture

There you have them – the benefits and the drawbacks of declaring bankruptcy in Georgia. While there are certain considerations that need to be made and repercussions that will affect your life after filing, the benefits usually outweigh the downsides. It’s also important to understand that the disadvantages vary a great deal from individual to individual. There is no one-size-fits-all scenario here – everything will vary based on your unique situation, the debts you’re seeking to discharge, and the effort you put into rebuilding your credit after declaring bankruptcy.

 

Is Bankruptcy the Right Choice for You?

Both Chapter 7 and Chapter 13 offer important benefits, including relief from harassing communications, the specter of foreclosure, wage garnishment, and so much more. However, it is important that you make an informed decision regarding the type of bankruptcy you file. Your decision should be based on a deep understanding of your needs and goals, as well as bankruptcy law and the implications of your filing for your assets, pension/retirement funds, and your future quality of life.

 

At Morgan and Morgan, we help Georgians just like you find relief from harassing creditors and debt collectors. We work with you to determine whether Chapter 7 or Chapter 13 would best suit your needs based on an in-depth consultation and evaluation of your unique situation. Contact us today to schedule your consultation or to learn more about the benefits of declaring bankruptcy in Georgia.