Living with the burden of unpaid debt can be extremely stressful and scary. Bankruptcy laws, including the Chapter 7 bankruptcy, were created so that honest individuals who have over extended themselves can find a fresh start. For individuals being sought by debt collectors, who have unmanageable credit card debt or unpaid medical bills a Chapter 7 bankruptcy may be an appropriate remedy.
An initial self-assessment of assets can help determine if a Chapter 7 bankruptcy is right for you. To do this, add up all assets including bank accounts, retirement accounts, stocks, bonds, home equity, and any other real property. Then total all debts including credit cards, loans, medical bills, and overdue utilities. If the debts outweigh the assets, filing for bankruptcy can offer some relief.
Filing Chapter 7 bankruptcy distributes the individual’s assets to pay off as much debt as possible by to creditors. The debtor may be able to keep certain properties exempt from liquidation. 11 U.S.C. § 522. However, there is a provision in the bankruptcy code that allows states to create their own exemption laws so it is advisable to speak to an attorney within your home state. The “Georgia Exemption Law” was recently amended to be more lenient which is good news for Georgia debtors. O.C.G.A § 44-13-100.
Information That Must Be Disclosed for a Chapter 7 Bankruptcy
All bankruptcies are handled in federal court and are governed by the United States Bankruptcy Code. In order to file the petition, the debtor must provide the following to the court:
- A list of all creditors and the amount and nature of their claims (this includes debts that are non-dischargeable)
- The source, amount, and frequency of income. This includes all sources of income, including a non-filing spouse.
- A list of all property (this refers to the assets mentioned above), including but not limited to: real estate, cash, automobiles, investments, furniture, etc.
- A detailed list of all monthly living expenses, (i.e., food, clothing, shelter, utilities, taxes, transportation, doctor visits, medicine, etc.)
For a chapter 7 bankruptcy, the court charges roughly three hundred thirty five dollars ($335) at the time this articles was last updated in filing fees, and may allow these to be paid in installments. Additional attorney’s fees will apply. The petition for bankruptcy must be filed at the bankruptcy court that serves the area where the individual resides. The filing of the petition will automatically stop most collection actions against the debtor. This includes wage garnishment, lawsuits, harassing phone calls, and the filing of liens on property.
The 341 Hearing / Trustee Meeting
No more than two (2) months after filing, the debtor is required to attend a creditors’ meeting in which the debtor will answer questions about his personal finances under oath, usually only to an appointed person called a Bankruptcy Trustee. 11 U.S. Code § 704 It is very important for the debtor to cooperate by providing any records or documents that are requested. Following the creditors’ meeting, a report is made to the court as to whether the debtor is abusing the power to file bankruptcy. Fortunately for filers, approximately 99% of Chapter 7 bankruptcy cases go on to be discharged. Unless one of the creditors objects (which is rare in most cases), the debtor will receive a notice of discharge within ninety (90) days of the creditors’ meeting. A discharged debt is no longer subject to any legal action for collection.
How Long Will Bankruptcy Affect My Credit Score?
Once bankruptcy is complete it has long-term effects. The bankruptcy will stay on a credit report for ten years, but will generally on affect one’s credit score for two or three years. Although, the initial filing of a bankruptcy will give an individual a low credit score, the score is probably already low if bankruptcy is an option. Most credit scores will improve significantly within the first one and two years following the filing of a Chapter 7 bankruptcy. Most people find the relief granted by the discharge of debts is worth the long-term financial effects.
Although it is not an issue in the vast majority of cases, not all debts can be relieved by a Chapter 7 filing. Some debts are non-dischargeable meaning an individual will not be released from this debt by filing bankruptcy. There are nineteen (19) categories in the U.S. Bankruptcy Code that are non-dischargeable. 11 U.S.C. § 523. These categories include government funded student loans, criminal penalties, child support payments, and other secured debts. Additionally, the court can deny to discharge debts if the debtor fails to account for assets, hides property, or otherwise attempts to defraud his creditors. Other debts that can be denied are luxury purchases made within ninety (90) days of filing for bankruptcy. Likewise, any debts accrued after the filing will not be discharged.
Additional Frequently Asked Questions Answered
Chapter 7 bankruptcy can only be filed by an individual and will not extend to their non-filing spouses, partnerships or corporations. Chapter 7 bankruptcies are not the appropriate remedy for every individual. Most, if not all, the debtor’s assets are taken and sold to repay creditors. Therefore, if there is a small business with significant assets and no debts, or a family home that has very significant equity that the debtor wants to save, Chapter 7 is may not the best solution. However, in Georgia cases, the vast majority of filers never lose any assets because of the property exemptions afforded under Federal and Georgia law. There are several types of bankruptcy that can be filed and many variables that determine the best course of action. There is really no such thing as a “simple” bankruptcy case. It is highly advisable to consult an attorney to guide you through filing for bankruptcy.
The First Step to Financial Freedom From Debt
If you are facing insurmountable debt, give us a phone call to speak with one our our experienced and trusting bankruptcy attorneys. You can reach us at 770-609-1247 or by emailing us through this website.