When you file bankruptcy in Georgia, you have two choices for filing. You can file a Chapter 7 petition, or you can file a Chapter 13 petition. While both forms of bankruptcy offer relief for debtors, it’s crucial to understand the difference between the two.

Briefly, Chapter 7 bankruptcy requires that the Trustee sell any asset not covered by Georgia bankruptcy exemptions. The proceeds from that sale pay the remainder of the debts associated with those accounts and other debts. Because assets are sold in this manner, Chapter 7 is often referred to as “no asset” bankruptcy.

How Is Chapter 13 Bankruptcy Different from Chapter 7?

Chapter 13 bankruptcy is a reorganization bankruptcy. Instead of all assets being sold by the Trustee, the petitioner submits a plan to repay some or all of the debts over time. Typically, the repayment period for Chapter 13 bankruptcy is three to five years.

With Chapter 13 bankruptcy, the petitioner can retain some, if not all, of the assets that aren’t exempt through bankruptcy exemptions. If the person filing Chapter 13 status completes the plan, the petitioner will likely be able to keep all their assets. In addition, the court will likely discharge other debts not paid through the plan. Of course, that’s provided they are dischargeable and are unsecured debts.

Another aspect of Chapter 13 bankruptcy is that the Chapter 13 debtor is required to submit a plan for repayment to the Chapter 13 Trustee before the first meeting of creditors. The petitioner is also expected to make payments based on their plan. Payments are required even before the court confirms the bankruptcy repayment plan.

Within the first month of petitioning for bankruptcy relief, the Chapter 13 Trustee will schedule the first meeting of creditors. This meeting isn’t a court hearing, but it is a formal meeting that allows the Trustee and the creditors to question the petitioner regarding their bankruptcy repayment plan. This meeting also allows the Trustee to more thoroughly inspect the repayment plan to determine if there are any issues before the confirmation hearing.

After the first meeting of creditors, a confirmation hearing will be scheduled. The hearing will take place a few weeks after the formal meeting with the Trustee and the creditors. If there aren’t any objections to the debtor’s plan, or if all objections have been satisfied before the hearing, the petitioner could be excused from the hearing. The bankruptcy attorney they have hired to handle their case will let them know if they are required to attend or not.

Eligibility for Chapter 13 Bankruptcy in Georgia

Chapter 13 bankruptcy eligibility is based on the amount of your secured and unsecured debts. Currently, your secured debts must be less than $1,184,200. Your unsecured debts must be less than $394,725. Occasionally, these amounts are changed based on the consumer price index.

Within 180 days before you file bankruptcy, you must attend credit counseling either as an individual or in a group counseling session. The Trustee can make exceptions to the rule to attend credit counseling, but unless that happens, you must seek the counseling services of an approved agency. If your counsellor helps you develop a debt management plan during credit counseling, you must file the plan with the court.

You can’t file Chapter 13 bankruptcy if you petitioned for bankruptcy within the last 180 days, and it was dismissed because you didn’t appear in court. You also can’t have a previous bankruptcy that was dismissed within the last 180 days because you didn’t comply with court orders.

Exemptions for Bankruptcy in Georgia

Exemptions are used in a Chapter 13 plan to keep your net equity from increasing your payment amount. There are federal and state bankruptcy exemptions. In the state of Georgia, you can’t use the federal bankruptcy exemptions. To use the state bankruptcy exemptions in Georgia, you must have been a resident of the state for at least 730 days.

Bankruptcy exemption amounts can change. The amounts for Georgia are found in GA Code §44-13-100. Before you calculate your Chapter 13 bankruptcy plan, you should ensure you have the current bankruptcy exemption amounts.

Non-exempt equity increases your monthly payment for your Chapter 13 repayment plan. For this reason, it’s essential to ensure you claim every allowable exemption. Remember, if both spouses have interest in the property and are filing a joint bankruptcy, the exemption amounts double.

Calculating net equity is not as difficult as it sounds. First, you must know the fair market value of your assets. Then you subtract the amount of a valid lien (a mortgage, for example) and the allowable bankruptcy exemption from that fair market value. If the resulting difference is zero or a negative amount, the asset will not affect your Chapter 13 payments.

Common Bankruptcy Exemptions in Georgia

Specific amounts used for exemptions in Georgia bankruptcy proceedings are changed occasionally. Remember your qualified bankruptcy attorney will know what current exemption amounts are or where to find them, so you use accurate numbers.

The Homestead Exemption is the one most people are concerned with. This exemption helps you determine whether you can keep your home while working through bankruptcy. The homestead exemption is determined by age and marital status. The division for age is 65 years of age, but currently under 65 and 65 or older can claim the same amount for this exemption. Currently, married people can claim $43,000 (if only one spouse owns the property), and single people can claim $21,500.

The next biggest thing that petitioners are concerned about is their car. In Georgia, there is a bankruptcy exemption for automobiles of $5,000.

Other exemptions affect your calculations but aren’t necessarily for large assets. The most common of those exemptions are as follows:

• Jewelry: $500
• Tools of the Trade: $1,500
• Wildcard: $1,200
• Personal Property: $5,000
• Special Exemption Handling: Wildcard: up to $10,000 on the unused homestead exemption

There are exemptions to certain retirement plans. Unemployment compensation and worker’s compensation qualify for exemptions. Disability and Social Security benefits are also listed under exemptions. Discuss with your attorney which common financial assets are subject to the exemption in your case.

How Debts Are Handled Under Chapter 13 Bankruptcy in Georgia

Chapter 13 bankruptcy handles debts differently than a Chapter 7 bankruptcy case handles them. With Chapter 7, any non-exempt assets are sold to satisfy your debts. With a Chapter 13 filing, some debts are paid in full through the plan, while others receive partial payments.

When dealing with debts for any bankruptcy plan, you must understand the difference between secured and unsecured debt. Secured debt is any debt you owe a creditor that has an asset as collateral for that debt. For example, your mortgage is a secured debt. Unsecured debts are those with no collateral attached, like medical bills or taxes.

Typical debts that must be paid in full through a Chapter 13 plan include priority unsecured debts. Examples of priority unsecured debts are alimony, child support, taxes, and administrative fees. Other unsecured debts such as medical bills, personal loans, and credit card debt may receive partial payment. Typically, back mortgage payments and car loan payments are included in Chapter 13 plans, too.

Factors Used When Calculating a Bankruptcy Repayment Plan in Georgia

A repayment plan for a Chapter 13 bankruptcy filing incorporates several factors. The most common considerations when crafting a repayment plan for Chapter 13 bankruptcy in Georgia are:

1. Your mortgage. If your mortgage payments are behind, you must catch them up through your Chapter 13 plan. Including your mortgage lets you keep your house, but you will still have to pay your mortgage in addition to your monthly bankruptcy payments.
2. Your car loans. Car loans are a case where you may have more than one option available to you. One of the options is qualifying for lower payments. Most people pay car loans through their Chapter 13 plan because it’s typically less expensive.
3. Unsecured debts. Priority unsecured debts like alimony and child support must be paid through your Chapter 13 repayment plan. Other examples of priority unsecured debts include back taxes, debts to the government, and fees owed to the Trustee.
4. Non-exempt assets. Some things are exempt from bankruptcy claims, while others are non-exempt. If you have non-exempt assets, you must pay an amount equal to the value or equity of those assets toward the payment to unsecured creditors.
5. Disposable income. Any disposable income you have must be paid toward paying off your unsecured debts.

No bankruptcy covers every debt. Priority unsecured debts are required to be paid in full regardless of the kind of bankruptcy you file. If you want to keep your home, you must catch your back mortgage payments up, so the mortgage is current. A Chapter 13 plan gives you a chance to pay these debts over time, usually in three to five years.

Consult a Seasoned Chapter 13 Bankruptcy Lawyer Today

Chapter 13 bankruptcy allows you to restructure your debts and continue to pay on them through a repayment plan to the court. With Chapter 13 bankruptcy, you are allowed time to repay debts. To make the most of a Chapter 13 bankruptcy filing, it’s essential that you learn better financial habits and pay all of your bankruptcy payments on time. The qualified attorneys at Morgan & Morgan can assist you with determining if filing Chapter 13 bankruptcy is the right choice for you.

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