Most people have a general idea of what happens in a civil lawsuit, a divorce, or a criminal case. However, because the bankruptcy filing rate has been so low since 2008, not many people have gone through this process. As a result, many folks do not know what happens in a Chapter 7. The lack of knowledge fuels bankruptcy-phobia. People usually fear the unknown.

In Monopoly, bankruptcy ends the game. In the real world, bankruptcy gives distressed debtors a fresh start. Keep reading to learn some of the nuts and bolts of Chapter 7.

IT is very difficult to face the unknown by yourself. So, there mere presence of a Georgia bankruptcy lawyer makes the process much easier. Moreover, attorneys do much more than file forms. Attorneys also give you solid legal advice throughout the process, advocate for you during court hearings, and speak up for you during the critical meeting with the bankruptcy trustee.

Automatic Stay Under Georgia Law

Generally, as soon as debtors file their voluntary petition, Section 362 of the Bankruptcy Code takes immediate effect. The Automatic Stay prohibits all forms of adverse creditor actions, such as:

• Foreclosure,
• Wage garnishment,
• Repossession,
• Collection lawsuits, and

The Automatic Stay usually lasts until the judge closes the bankruptcy, which is typically about six months after the petition is filed. If the debtor has filed bankruptcy in the last six months or directly threatens the collateral (e.g. I plan to drive my car off a cliff), the Automatic Stay only applies in limited situations.

Section 362 of the Bankruptcy Code does not just stop pending adverse action. It also prevents creditors from undertaking such actions. And, after the judge closes the bankruptcy, if creditors still want to take adverse action, they usually must start over from the beginning.

The 341 Meeting in Athens, GA

The meeting with the bankruptcy trustee (person who oversees the bankruptcy for the judge) usually happens about six weeks after debtors file their petitions. This meeting is deceptively low key, especially in a Chapter 7. The meeting usually occurs in an office building instead of a courthouse. Additionally, the biggest item on the agenda is usually verifying the debtor’s identity and purpose.

As a result, many do-it-yourself filers, and even some Georgia bankruptcy lawyers, do not diligently prepare for this meeting. If that happens, things could go very badly for the debtor.

Debtors have a duty to cooperate with the trustee. This obligation includes providing requested documents timely and without arguing or complaining. These documents vary in different jurisdictions, but they normally include:

• Valid government-issued photo ID,
• Social Security card,
• Recent tax returns,
• Home ownership or rental documents,
• Most recent paystubs, and
• Recent bank statements.

If the debtor does not timely and politely produce these documents, many trustees assume the debtor has something to hide.

Sometimes, trustees request documents solely for due diligence purposes. Most often, however, they are looking for evidence of bankruptcy fraud. Some bankruptcy fraud badges include large purchases made immediately prior to bankruptcy, preferential creditor payments (e.g. paying three months of rent in advance), and unusual financial activity, such as shuffling money among accounts, prior to the bankruptcy.

A Georgia bankruptcy lawyer must be ready to address any fraud badges and convince the trustee, who is the judge for most purposes, that the petitioner is an honest yet unfortunate debtor who deserves a fresh start under the Bankruptcy Code.

Debt Discharge in a Chapter 7

Assuming the trustee sees no evidence of fraud, the judge usually discharges most unsecured debts about three or four months after the meeting. Unsecured debts include things like:

• Credit cards,
• Payday loans,
• Signature loans, and
• Medical bills.

“Discharge” means the judge eliminates the legal obligation to repay the debt. The collateral consequences of that debt remain. So, if the IRS filed a lien against Mary before she filed bankruptcy, that lien remains even if the judge discharges the debt.

Back taxes are an example of priority unsecured debts. Student loans are another example. These debts are only dischargeable in certain situations. Generally, taxes are dischargeable if they are at least three years old and student loans are dischargeable if the debtor has an undue hardship.

Get a Fresh Start, Contact a Bankruptcy Lawyer in Athens, GA

What happens in a Chapter 7 bankruptcy is that you get a fresh start. For a free consultation with an experienced Georgia bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. We routinely handle matters in Clarke County and nearby jurisdictions.