Deciding to file for bankruptcy can be a difficult to choice to make. It is important to remember that bankruptcy is a tool that is supposed to be used by those that need a fresh start. The main reason people file for bankruptcy is to get help with debts that have accumulated and can no longer pay in a timely manner. Bankruptcy allow a person to handle their debts either by making a payment plan or by getting their debts discharged (cancelled) entirely. Below is a brief discussion of the top ten reasons individuals file Chapter 7 and Chapter 13 bankruptcy case.
Job Loss and Reduced Income
In our changing economy, it is becoming a more difficult to get and keep a job in certain industries. If you are not making enough money to cover your expenses, your bills, insurance and other expenses can become increasingly difficult to keep up with, if not impossible. Filing for bankruptcy can provide you with debt relief while you look for new and/or better employment opportunities. Many people will file a chapter 7 case to surrender an automobile with a high monthly payment and totally eliminate all their credit cards and unsecured debt. For many people, this will more than close the gap between what they make in income and their necessary expenses.
Financial Harm Resulting from the Covid-19, Corona Virus
The Corona Virus that started in 2019 and continues into 2020 has put significant financial pressure on every aspect of the world’s economy. In the United States, the Corona Virus has caused millions of people to lose their jobs, millions of businesses to close, and a very significant reduction of income for almost all individuals, families and businesses. The small businesses most affected by the Corona Virus include restaurants, gyms, hair salons, barber shops, retail shops, and contractors. However, almost no business large or small has not been financially hurt by the Corona Virus, causing millions of people to be laid off, or have their hours drastically reduced. As a result, many individuals and businesses have maxed out credit cards, taken high interest loans, and at the same time fallen behind on past obligations. Filing bankruptcy is helping many people affected by the economic downturn and disruption to their finances by filing bankruptcy. Bankruptcy is providing these people with immediate relief from debts they cannot possibly be expected to pay, due to no fault of their own. In addition, business owners are able to file an essentially “reboot” their businesses and start to grow again. As this is an ever evolving situation, expect updates to this article in the coming months.
Your Home, and other Real Property
If it looks like the house you and your family live in is going to be foreclosed, filing for bankruptcy could delay or permanently stop the foreclosure. A chapter 13 bankruptcy will stop foreclosure and creditors by creating a structured plan for you to pay an affordable amount each month toward the home. A chapter 7 bankruptcy can delay / stop the foreclosure, and also get rid of much of your debt that may be preventing you from being able to pay your mortgage. However, if your home or other real estate has a very significant amount of equity, it may be considered an unprotected asset that can be sold and used to pay your creditors. However, in most cases equity is not an issue because Georgia has rather generous bankruptcy exemptions for equity in homes. In any event, if you own real estate, you should meet with an attorney experienced in Georgia bankruptcy law that has filed at least one thousand cases.
Threats of Losing Vehicles and Valuables
A concern for most people is saving valuable assets from being seized and repossessed by creditors. Many people file bankruptcy to stop their car from being repossessed. For example, a chapter 7 will stop an automobile lender from repossessing a car for two or more months, which may be time enough to catch up your car payments and reach an agreement with the lender. Also, if you are behind on car payments, filing a chapter 13 bankruptcy can consolidate your missed payments, which you would then pay to your trustee rather than the lender. In addition, furniture, consumer goods, jewelry, tools and other items that are secured by a debt can be protected from repossession by filing bankruptcy. The type of bankruptcy you file will determine what assets you can keep. It is important to speak with an experienced Georgia bankruptcy attorney so you can discuss the options for your vehicle and discuss other assets you want to keep.
Student Loans and Income Taxes
Getting an education is important, but sometimes those student loan debts will hold you back. It is important to know that filing for bankruptcy will not eliminate them, but your loans can be consolidated into a monthly payment plan through a easier to manage chapter 13 bankruptcy. The same goes for income taxes that are owed, in that they can be put into a chapter 13 payment plan. Also, older income taxes are frequently eligible for a discharge in a chapter 7 or chapter 13 case bankruptcy case. If you are interested in the possibility of discharging income tax debt, it is best to speak with an attorney experienced in this matter, as timing of the filing of the case is very important.
Having to choose on whether to pay a bill or helping the health of someone is indeed a very difficult choice. Unexpected and unmanageable amounts of debt can result from an unexpected illness or injury and negatively affect all areas of your life. Bankruptcy is often a very effective solution to deal with medial debt, while preserving the ability to still care for and help the most important people in your life. A chapter 7 can discharge virtually all medical, doctor and hospital expenses. In addition, most people do not have to discontinue their care of get new doctors after filing a chapter 7 case. While chapter 13 is also a good option, it has been our experience that most people with medical debt choose to file chapter 7 cases.
Divorce, Alimony and Child Support
A divorce can sometimes be quite expensive, along with the filing fee’s there is also the cost of finding a new home, paying alimony, paying child support and attorney fees. All of this can have a devastating effect on your financial situation. Divorce is a leading factor in many people filing bankruptcy. And a chapter 7 or 13 can provide options for you to eliminate mounting debts from your divorce and other expenses.
Credit Card and Other Unsecured Debts
Credit card and other forms of unsecured debt is one of the main reasons for bankruptcy. If you have accumulated an unmanageable amount of credit card debt, personal loans, and other forms of unsecured consumer debt there is hope in filing a bankrupt case. In addition, personal guarantees for other people’s debts or business related debts can usually be discharged in a bankruptcy case. There is the real possibility that it all unsecured debt can be discharged by filing a chapter 7 bankruptcy so long as you meet the requirements for filing a case. If a chapter 7 bankruptcy case is not a possibility, a chapter 13 case will usually be an option.
Harassment From Creditors
If you owe creditors any amount of debt, they will sometimes take a forceful approach when collecting debts or they may even try to collect more than you owe. This can include constant phone calls (at home and work), letters and threats of lawsuits and garnishments. Many people will choose to file a chapter 7 once they have found the constant harassment from creditor to be too much. Once a person filed for bankruptcy, the court ordered “automatic stay” will immediately stop creditors from making harassing phone calls, mailing you, or otherwise contacting you directly about any and all of your debts. See 11 U.S. Code § 362 regarding the Automatic Stay.
Lawsuits and Garnishments by Creditors
Once a creditor has filed a lawsuit and obtained a judgment against you, they can request a garnishment of your wages. If that happens, filing for bankruptcy can discharge (eliminate your responsibility for) put an end to the garnishment. While it is best to file for bankruptcy before a lawsuit and garnishment, you can still file well after being sued and being garnished. However, it is important to note that a judgment can result with a “judicial lien” on any real property you may own. While a “judicial lien” can be often be removed from home or other real estate as a part of a bankruptcy case, it is usually preferable to file before a judgment is obtained by your creditors. See Title 8, Chapter 12, Article 4 of the Georgia Code.
Getting a Second Chance / Fresh Start
A lot of people do not realize that negative items on your credit report can stay on there for many years until they are handled be either being settled or discharged through bankruptcy. The path to better credit can only begin when all outstanding debts and obligations are handled. Although a bankruptcy can show on your credit report for several years; more importantly after filing your credit score can start to improve starting immediately. Recovering from bankruptcy case is usually easier than many people would expect, so the bankruptcy “fresh start” cliché is very real for people that file.
Obtaining Experienced Legal Advice for Your Georgia Bankruptcy Case
If you are thinking about filing bankruptcy for yourself or your business, call us at 770-609-1247 to discuss how we can assist you in deciding what is best. The bankruptcy attorneys at Coleman Legal Group, LLC have filed hundreds of cases for client’s in many counties throughout the Northern and Middle Districts of Georgia. Contact >