Your situation may seem grim if you are concerned about timing for filing both bankruptcy and divorce in Georgia, but it is important to look at the positive outcomes. With Chapter 7 and Chapter 13, you may qualify to discharge debt and get a fresh financial start. Divorce is also a new beginning, and an especially positive one when you seek to leave your financial woes behind. However, these are two separate cases with distinct steps and applicable laws. There are strategies to consider with bankruptcy and divorce in Georgia, starting with which you should file first.

Timing with divorce does impact both Chapter 7 and Chapter 13 cases. Plus, individuals and married couples can be eligible for these types of bankruptcy. These and other important factors will impact the benefits available with each legal proceeding, and you want to capture as many as possible. For bankruptcy and the divorce process in Georgia, it is typically an advantage when you and your soon-to-be-ex can get along with respect to debts. 

 

Considering the potential complications, you have an edge with Chapter 7 and Chapter 13 when you retain knowledgeable legal counsel. A Georgia bankruptcy lawyer can advise you on how the laws affect your divorce and assist with filing essential documents. You can also read on for a helpful overview about bankruptcy and divorce. 

 

Overview of Chapter 7 Bankruptcy

Under Chapter 7 bankruptcy rules, you may wipe out qualifying debt if you meet the strict eligibility criteria. They are based upon your income, so keep in mind the following:

 

• You may automatically qualify for Chapter 7 if your pay falls below the state median income level for a household of your size.
• If you do not automatically qualify, you may still be eligible for Chapter 7 under the Means Test. Your income is still a factor, and your monthly expenditures are considered.

 

Even if you meet the eligibility criteria, there is another factor to note about Chapter 7 and divorce cases. The process aims to pay back your debt to creditors, specifically by liquidating your assets. Your real estate and personal property could be sold by the bankruptcy trustee. Married couples often own multiple assets jointly, and some could be at risk through liquidation. Fortunately, the bankruptcy trustee may not sell assets that would not bring sufficient value in a sale to benefit creditors.

 

Chapter 13 Bankruptcy Laws

Chapter 13 shares two elements with Chapter 7, and the most beneficial is that you are able to wipe out qualifying debt through the process. The second factor is that there is an effort to satisfy your debt to creditors through a debt repayment plan. First, your debts are combined and restructured. Then, they are combined into a single monthly payment amount you can afford.

 

The two types of bankruptcy are significantly different when it comes to the criteria to qualify. For Chapter 13, the only rule is that you must have a job. This is necessary because you must have a source of income to pay the debt repayment plan. However, even if you qualify for both, you might opt for Chapter 13 because there is no liquidation of assets.

 

You must complete the debt repayment plan over a period of 3 to 5 years, and you will end up paying far less than if you had not filed for Chapter 13. When the debt repayment plan concludes, your case is over and your qualifying debts are discharged.

 

Basics of Georgia Divorce

To initiate the case, the filing spouse files a petition stating the grounds for divorce under Georgia divorce laws and requesting that the court make determinations on several key issues involved with ending the marriage. There are two areas in particular that may affect your case if you are going through divorce and also considering bankruptcy.

 

1. Property Division: In Georgia, there is a distinction between marital property that the couple acquired together, as opposed to the separate property that each owned before getting married. The individual spouses keep separate property, while marital assets are divided according to the interests of equity. The parties are also allowed to agree upon property division, which could impact bankruptcy proceedings.

 

1. Alimony: In some divorce cases, one spouse may seek spousal support from the higher earning or more financially stable spouse. Alimony could be impacted by a party’s ability to pay, which is the central issue in bankruptcy. The financial resources of the parties are a factor when the court makes a determination on spousal support.

 

Bankruptcy v. Divorce Timing to File

In terms of which you should file first between bankruptcy and divorce in Georgia, consider a few scenarios and factors that might impact your decision.

 

• File Bankruptcy Before Divorce: This may be a fit for your situation if you would benefit from filing a joint bankruptcy petition that would discharge debt for both of you.
• File Bankruptcy After Divorce: You might want to wait until post-divorce if you would not be able to qualify for Chapter 7 under the income level or Means Test.
• File Bankruptcy Separately: When it makes sense for one spouse to file a separate petition for Chapter 7 or Chapter 13, the timing is less concerning. You can file at any time because you are acting as an individual.

 

Another factor to consider when you are looking at timing for bankruptcy and divorce is the length of the case. With a Chapter 7 bankruptcy, you may be proceeding for around 4 to 6 months. However, with Chapter 13, you need to keep in mind the debt repayment plan. You need at least 3 to 5 years to complete the case.

 

Debunking Bankruptcy Myths

As you consider whether to file bankruptcy or divorce first, you should review some information about the many forms of misinformation about Chapter 7 and Chapter 13. When you make decisions based upon false or inaccurate details, you could actually harm your rights and your bankruptcy case. Some myths about bankruptcy should be dismissed:

 

• Myth: You will lose property in bankruptcy. While the bankruptcy trustee does have the power to sell your real estate and personal property, this rule only applies to nonexempt assets. There are many exemptions available under Georgia law to protect your interests in items for the necessities of life. For instance, you can protect up to $21,500 of the equity in your home. 
• Myth: It does not matter if you file bankruptcy jointly or individually. This is not true because you gain benefits when you file as a married couple. Before you divorce, you can double the exemption amount for your home to $43,000 by filing together. Plus, you will pay less in filing fees when you submit a joint petition for Chapter 7 or Chapter 13.
• Myth: Property division in divorce is not affected by the timing of bankruptcy. Unfortunately, once you file for bankruptcy, the trustee takes control over your assets. There will be a stay on transferring real estate and personal property, so it cannot be divided until the case concludes.
• Myth: Alimony is not a factor for bankruptcy. This is a misconception because the amounts you receive as alimony could impact your eligibility for Chapter 7. Spousal support is considered income, which will be measured against the state median income or Means Test to qualify.

 

Types of Debt in Bankruptcy

When you are married, you may have incurred debt as an individual or together with your spouse. The distinction between individual and joint debt is important when looking at bankruptcy along with divorce. Chapter 7 and Chapter 13 will only discharge the debt of one spouse if the petition is for an individual. The other spouse will remain obligated.

 

In addition, you should understand how other forms of debt are treated in bankruptcy.

 

• Secured debt involves loans in which you have pledged an interest in an asset as collateral. The most common examples are your mortgage and auto loans. Secured debt cannot be discharged in bankruptcy, regardless of divorce or your choice between Chapter 7 or Chapter 13. 

 

• Both types of bankruptcy are suitable for wiping out unsecured debt, such as credit cards, medical debt, personal loans, and lines of credit.

 

• You can only eliminate qualifying, dischargeable debt through Chapter 7 and Chapter 13. You cannot wipe out alimony or child support, which could impact your timing with divorce. Do not expect that you can stop making these court-ordered payments simply by filing for divorce.

 

Legal Help with Bankruptcy Steps

Bankruptcy is a complicated process, which is made even more challenging when you also have to consider factors related to divorce. Having legal representation is crucial for help with decision making about Chapter 7 and Chapter 13, as well as advance preparations. Plus, your bankruptcy lawyer in Georgia will guide you through the essential steps in your case, including:

 

• Reviewing and organizing your financial paperwork;
• Completing the bankruptcy petition, along with all attached schedules;
• Helping you protect property by leveraging exemptions in Chapter 7;
• Assisting you to develop the Chapter 13 debt repayment plan;
• Representing you at the meeting of creditors; and,
• Completing all necessary tasks to obtain the final discharge order.

 

Contact a Georgia Bankruptcy Attorney for Details

The decision on whether to file Georgia bankruptcy or divorce first is definitely a personal one, so it is important to discuss your circumstances with an experienced lawyer. To learn more about your options with respect to Chapter 7 and Chapter 13, please contact Morgan & Morgan, Attorneys at Law, P.C. We can schedule a no-cost consultation at our offices in Athens, GA. After reviewing your situation, a Georgia bankruptcy lawyer will advise you on the laws.