Chapter 7 Personal Bankruptcy in Georgia – 2026 Updates

The big picture: What a personal Chapter 7 actually does

A personal Chapter 7, sometimes called a “liquidation” or “straight” bankruptcy, gives an honest person a clean break from debt they can no longer realistically pay. When the case ends, the court issues a discharge: a permanent court order that releases you from the legal obligation to pay the debts that were wiped out. After a discharge, a creditor can never ask you to pay that debt again and can never take any action to collect it. See 11 U.S.C. § 727.

Personal cases can be filed by a single person, by one spouse, or by a married couple together. And despite the most common fear we hear, most people who file do not lose their belongings. In Georgia, a set of “exemption” laws lets the vast majority of filers keep all of their personal property, including their car and their home, while still erasing the debt. We cover those exemptions, and a major 2026 change to them, further down this page.

The moment your case is filed, the automatic stay takes effect and stops most collection activity cold — the calls, the lawsuits, the wage garnishments, the foreclosure clock. Most filers receive their discharge within three (3) to four (4) months. To go deeper, see our companion guides on Georgia Chapter 7 bankruptcy and what you need to know before you file.

The relief: Debts a Chapter 7 usually wipes out

For most people, Chapter 7 erases exactly the debts that are causing the stress. Here is the practical split between what typically clears and what typically survives – but read the survivors carefully, because the exceptions are where cases are won or lost.

A quick word on the surviving column: these are general rules, and several have important nuances. Support obligations like child support and alimony in bankruptcy are never wiped out, but the way other debts in a divorce decree are treated can be more complicated than people expect. And a debt you’d normally discharge can be challenged if it was run up right before filing — one of several things that complicate a bankruptcy case.

The part business owners miss:  The business-debt blind spot

This is the most overlooked benefit of a personal Chapter 7, and it costs current and former business owners dearly when they don’t know about it.

Here’s the trap. A corporation or LLC does not receive a discharge in a Chapter 7, only people do. So owners often assume that when their business fails, the business debts are simply stuck to them forever. That assumption is usually wrong.

If you signed for it personally, a personal Chapter 7 can erase your personal obligation to pay it, even if the business already closed its doors.

Most small-business debt comes with the owner’s personal signature somewhere on it. When that’s the case, the debt isn’t really the company’s debt, it’s yours. And your personal liability rides into your personal bankruptcy with you. Debts that commonly fall in this bucket:

• Personal guarantees on business loans, equipment financing, and commercial leases
• Merchant cash advances (MCAs) and “revenue-based” funding you personally guaranteed
• SBA 7(a) and similar loans where you signed as a personal guarantor
• Business credit cards opened in your name (nearly all carry personal liability)
• Vendor and supplier accounts you personally guaranteed
• Sole-proprietor and general-partner debt, where there is no liability shield at all

For a former owner, this is often the whole point of filing: the company is gone, but the personal guarantees followed you home. A personal Chapter 7 can clear them and let you move forward, and yes, you are allowed to start a new business after bankruptcy, before, during, or after the case.

The honest caveats. A few business-related obligations are built to survive even a personal discharge, and we’ll tell you up front rather than after you file:

• Payroll “trust fund” taxes — the income and payroll taxes you withheld from employees’ checks (and often sales tax you collected) are money you held in trust. Personal liability for these generally cannot be discharged.
• Fraud and misrepresentation — a debt obtained by knowingly false financial statements can be challenged as non-dischargeable. 11 U.S.C. § 523(a)(2).
• Breach of a fiduciary duty — money you were entrusted with and misused (for example, unremitted consignment or trust proceeds) can survive under § 523(a)(4).

These exceptions are narrow, and a creditor has to raise and prove them on a short deadline. But they are exactly the kind of issue you want analyzed before filing, not discovered afterward. For a fuller treatment, see our overview of Georgia business and personal bankruptcy.

Tax debt: when the IRS can be erased

It is a myth that tax debt can never be discharged. Income taxes, federal or Georgia state, can be wiped out in a Chapter 7, but only if every one of five (5) timing-and-conduct rules is satisfied. Miss one, and the tax survives.

It has to be an income tax

Only income taxes qualify. Payroll/withholding “trust fund” taxes, most sales taxes, and fraud penalties can never be discharged.

The return was due 3+ years ago

The return’s due date, including any extension you took, must be at least three (3) years before you file. 11 U.S.C. § 507(a)(8)(A)(i).

You actually filed it 2+ years ago

You must have filed the return at least two (2) years before filing bankruptcy. A late-filed return, or a substitute return the IRS filed for you, can disqualify the debt. § 523(a)(1)(B).

It was assessed 240+ days ago

The tax must have been assessed at least 240 days before filing. Offers in compromise and prior bankruptcies can pause and extend this clock. § 507(a)(8)(A)(ii).

No fraud, no evasion

The return can’t be fraudulent, and you can’t have willfully tried to evade the tax. § 523(a)(1)(C).

One more catch worth knowing: even when the tax itself qualifies, a recorded tax lien filed before your bankruptcy stays attached to your property. The discharge erases your personal obligation to pay, but you may still have to clear the lien before you can sell. Because these rules are technical, we routinely analyze tax debt alongside a CPA. The full walkthrough lives on our eliminating tax debts in bankruptcy page.

What you keep:  Georgia exemptions – and the new homestead law

Georgia is an “opt-out” state, which means filers here use Georgia’s exemption list rather than the federal one. O.C.G.A. § 44-13-100. These exemptions are the legal armor around your property: anything that fits inside an exemption is yours to keep. Most Chapter 7 filers in Georgia keep everything they own.

The exemptions most people care about

Beyond the home, Georgia protects the everyday property that lets a family keep functioning. The most commonly used amounts:

A useful quirk of the wildcard: if you don’t use all of your homestead exemption (e.g. – say you rent, or have little home equity) you can redirect a chunk of it to protect any property you choose. That flexibility is part of why planning before you file matters so much, and why a small mistake on a schedule can be one of the costlier ways people mess up a Georgia bankruptcy.

Know before you file – What Chapter 7 will not erase

Honesty about the limits is part of good counsel. A Chapter 7 is powerful, but it is not a magic eraser. The categories below generally pass through a discharge and remain owed:

• Domestic support — child support and alimony are never discharged.
• Most student loans — unless you can prove a high “undue hardship” standard.
• Recent or non-qualifying taxes — and payroll trust-fund taxes, always.
• Debts tied to fraud, theft, or fiduciary breach — including certain business obligations.
• Court-ordered fines, restitution, and most criminal penalties.
• Injury or death you caused while driving intoxicated.
• Debts you run up right before filing — recent luxury purchases and cash advances taken shortly before a case can be challenged. 11 U.S.C. § 523.

If one of these is your biggest debt, Chapter 7 may not be the right tool, or a Chapter 13 repayment plan may serve you better. That’s a conversation worth having before you commit to a path.

Eligibility – Do you qualify?

Most people who need Chapter 7 qualify for it. Three threshold questions shape the answer:

• The means test. If your household income is below the Georgia median for your family size, you generally qualify outright. If it’s above, a more detailed test looks at your actual disposable income — many higher earners still pass.
• Residency. You’ll need to have lived in Georgia long enough to use Georgia’s exemptions (generally the better part of two (2) years), which matters because of how generous the new homestead figure is.
• Recent filings & good faith. Prior discharges and the timing of recent debts can affect eligibility.

People reach this point for all kinds of reasons, a job loss, a medical event, a divorce, a business that didn’t make it. None of them make you a failure; they make you someone using a tool the law built for exactly this moment. If you’re weighing it, our page on good reasons to file bankruptcy may help, as will an honest look at the most common filing mistakes.

How the process works

From the filer’s seat, a straightforward Chapter 7 moves in a predictable rhythm:

Preparation & counseling

We gather your income, debts, and assets, run your exemptions, and you complete a brief required credit-counseling course.

Filing & the automatic stay

The petition is filed. The automatic stay immediately halts most collection, including calls, lawsuits, garnishments, and the foreclosure timeline.

The 341 meeting

A short, routine meeting with the trustee about a month later. Most are over in minutes, and the judge is not present.

Discharge

After a second short course and a quiet period for creditors to act, the court enters your discharge – usually within three (3) to four (4) months.

Complex cases — significant assets, a recent business, contested debts, can take longer and deserve a closer look. That’s where experienced counsel earns its keep.

Common questions

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