There are different types of bankruptcy because, although debt has a common cause, there are different effects. If you’re wondering what’s the difference between chapter 7 and chapter 13 bankruptcy, the short answer is it that depends on your situation.

Frequently, when job loss or another situation dries up an income stream, people turn to credit cards. As a rule of thumb, if more than 10 percent of your income goes to credit cards and other unsecured debt, you have more debt than you can pay off. That’s especially true if the 10 percent is barely enough to make minimum payments.

In other situations, lost income forces families to skip secured debt payments. In Georgia, banks can legally begin foreclosure proceedings after only one missed payment. Furthermore, in the Peachtree State, banks do not need court orders to seize homes. Therefore, unless you file bankruptcy, you may never get to tell your side of the story.

Debt issues do not just mean financial problems. Frequently, the stress and anxiety over debt problems is worse than the debt itself.

These issues are often not very clear cut. For example, debt forces many families to over-use credit cards and also skip payments. So, it’s important for a Georgia bankruptcy lawyer to evaluate your situation. Only an attorney can give you reliable legal advice about all your bankruptcy and non-bankruptcy debt relief options.

Breaking Down a Georgia Chapter 7 Bankruptcy

The Automatic Stay is perhaps the most important component of a bankruptcy case. Section 362 of the Bankruptcy Code does more than give you a day in court. This provision immediately stops adverse creditor actions like:

• Repossession,
• Wage garnishment,
• Eviction,
• Utility shutoff,
• Foreclosure, and
• Bank account levy.

Generally, the Automatic Stay takes effect immediately and stays in effect until the judge closes the case.

Furthermore, Chapter 7 quickly eliminates credit cards, medical bills, and other unsecured debts. When the judge discharges these obligations, you no longer have a legal obligation to repay them. Instead, you have the option to pay them, which is a much different thing.

Procedurally, after debtors file their petition and schedules, a trustee (person who oversees the bankruptcy for the judge) reviews tax returns and other financial documents. The trustee also reviews your Social Security card and some other identifying documents. Assuming your Georgia bankruptcy lawyer is fully prepared and all goes well at the 341 meeting, the judge typically issues a discharge order without requiring a hearing.

Chapter 13 Bankruptcy in GA

In many ways, Chapter 13 is like Chapter 7 with a bonus. So, wage earner plan bankruptcies are a bit more complex.

The same basic rules apply. At the end of the bankruptcy, the judge discharges most unsecured debts. The Automatic Stay is in play as well. But in a Chapter 13, the Automatic Stay lasts for up to five years.

During this time, debtors make monthly payments which erase secured debt delinquency and take care of other allowed claims, such as attorneys’ fees. In most cases, banks must go along with this income-based repayment plan. That’s even true if a mortgage bank or other lender served you with an acceleration notice.

The trustee helps the debtor set up payment arrangements. So, you do not have to talk to your creditors. The trustee and your Georgia bankruptcy lawyer handle the details. All you have to do is write a check.

“Chapter 20” Bankruptcies in GA

Many jurisdictions allow debtors to file informal Chapter 20 bankruptcies. A Georgia bankruptcy lawyer files a Chapter 13 immediately after the judge closes a Chapter 7.

Assume Janet files a pro se Chapter 7 because she has some credit card and income tax debt. Largely because she does not have a Georgia bankruptcy lawyer, the judge discharges the credit card debt, since credit cards are simple unsecured debt. But the judge does not discharge her taxes, since these obligations are priority unsecured debt.

Janet could probably team up with a Georgia bankruptcy lawyer and file a Chapter 13. Since she filed back-to-back bankruptcies, she is not eligible for a Chapter 13 discharge. But she does not want or need a discharge. She only needs the Automatic Stay to remain in effect, so she can pay off her tax debt free from IRS harassment.

Chapter 7 and Chapter 13 cater to different kinds of debtors. If you’re asking what’s the difference between chapter 7 and chapter 13 bankruptcy, you may  be ready for a free consultation with an experienced Georgia bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. Our main office is conveniently located in Athens.