Filing for Chapter 7 or Chapter 13 bankruptcy?
Find out which is right for you. Atlanta attorneys at Gerber & Holder Law can help guide your bankruptcy filing from start to finish.
Taking control of your financial future by filing for bankruptcy can be one of the most difficult decisions.
But is it the best decision for you?
We know you aren’t approaching this decision lightheartedly, and we know all about the complications that can arise from filing Chapter 7 or Chapter 13 bankruptcy in the state of Georgia.
The attorneys at Gerber & Holder Law understand the struggles you’re going through during this time of uncertainty. We specialize in bankruptcy filings in Atlanta and across Georgia. Our bankruptcy lawyers know the ins and outs of Chapter 7 and Chapter 13 law, and we can fight to secure the best possible outcome for you and your family.
Schedule your free consultation and learn about how filing for bankruptcy works in Georgia.
Contact us today for your free consultation.
Types of bankruptcy
Here’s what you need to know about the different types of bankruptcy, as well as your rights and responsibilities in Georgia.
Chapter 7 is the most common type of bankruptcy in America, and it’s also referred to as a “straight bankruptcy.” By filing for Chapter 7, a person is able to eradicate most unsecured debts and some secured debts by giving up their assets. The difference between an unsecured vs. secured debt is that unsecured debts aren’t backed up with collateral, such as credit cards or personal loans. Secured debts, on the other hand, are debts like mortgages or a car loan.
In the U.S., qualified individuals and some businesses are eligible to file for Chapter 7, as are LLCs, partnerships or even corporations that have assets that can be sold off (liquidated) to cover debts. Once filing for Chapter 7 is completed, usually all collection actions against you should terminate, including any creditors seeking to garnish your wages, file a lawsuit against you or continuing to call to demand payment. If you continue to receive calls from creditors, tell your attorney. We can speak with them and get them to stop their harassing efforts.
Filing for Chapter 7 bankruptcy means a bankruptcy trustee is appointed to liquidate all non-exempt assets to pay creditors. Once all non-exempt assets are gone, any remaining debt is forgiven (or “discharged”). Basically, your assets are sold off to pay your creditors. The order of priority in which your debt is paid back is 1) unsecured debt, 2) priority secured debt and 3) non-priority unsecured debt. Filing for Chapter 7 usually involves completing many forms and a thorough review of assets by the trustee.
Following a waiting period of 30+ days after your petition for bankruptcy, a meeting is set up with your creditors. While under oath, you must answer all questions asked by the trustee. The details of this type of meeting can and should be discussed with your attorney beforehand so that you know what to expect. If your bankruptcy filing goes through and is successful, a discharge formally releases you from all personal liability of your debts included in the bankruptcy. You will need to work closely with your attorney to determine what debts you may still be responsible for.
Chapter 11 bankruptcy
The definition of Chapter 11 is when a corporation declares bankruptcy. You probably see it in the news quite often. Businesses of all sizes, from small mom ‘n pop LLCs (limited liability corporations) to large multinational corporations typically use this type of bankruptcy to develop a reorganization plan where owed debt is prioritized based on where the payments must be made in the best interest of the creditors—not the individual or company doing the filing. Filing Chapter 11 bankruptcy is more complex than filing for Chapter 7 or 13, and is rarely used by individuals.
Chapter 13 is the second-most common type of bankruptcy filed in the U.S., and it’s typically filed by individuals. The end goal of filing Chapter 13 is to eradicate your debt by establishing a repayment plan to pay back all—or a portion—of what you owe over 3 to 5 years. A person makes monthly payments to an appointed court trustee and that trustee dispenses the money to your various creditors. Following the end of the debt plan, any remaining unpaid debts are discharged.
One of the appeals of filing for Chapter 13 is that once filed, it automatically stops most collection actions, which usually means creditors cannot seek wage garnishments, file lawsuits against you or make calls with payment demands. Filing also helps save your home from foreclosure. But filers must keep paying their mortgage or the lending institution (bank) can begin foreclosure proceedings. You should also work closely with your attorney so they can communicate with creditors as the go-between to determine which debts you should continue to pay (if any).
Chapter 13 bankruptcy is recommended if you can pay some, but not all, of your debt. For example, if you have outstanding credit card or medical bill debt, filing for Chapter 13 can help to make payments more manageable and affordable. At the same time, it protects your property while buying you time to pay off some of your debts and attorney fees with a monthly payment plan.
Which type of bankruptcy is best for individuals—Chapter 7 or 13?
A frequently asked question is whether it’s better to file Chapter 7 or 13 as an individual. Generally, filing Chapter 7 is more affordable and can be a quicker way to get out of debt. It’s a good option if you have an income that is below the “means threshold,” you own little or no property, you have mostly unsecured debt such as personal loans, credit card debt or medical bills, and you cannot commit to a debt payment plan over the next 3-5 years.
Certain debts cannot be forgiven when one files for Chapter 7, such as student loans, owed income taxes or any court-ordered domestic support responsibilities (spousal/child support). If these are a factor, Chapter 13 may be your best option. That route is also best if you own a home or property you want to save from foreclosure. Chapter 13 bankruptcy could be the only option if your income is too high for Chapter 7 and you can afford to pay off some of your debt.
What does filing for bankruptcy do to your credit (and other aspects of your life)?
It’s true that filing for any form of bankruptcy can hurt your credit. Your credit score can drop well below 300, hovering in the 130 to 200 range after you initially file. You may find you are declined in the future from receiving a mortgage, loan or credit card. Declaring bankruptcy can follow your credit report for up to 10 years, depending on the type of bankruptcy filed.
But it’s important to emphasize that in the long run, filing for bankruptcy could actually help your credit score. This is because once completed, you can be in a better financial position in which you’re making on-time bill payments.
If you’re able to responsibly manage your finances moving forward, your credit score can vastly improve. But this takes time—possibly years. The sooner you declare bankruptcy and move on with your financial life (and make better financial decisions with good financial habits), the sooner your credit score can recover.
What happens when you file for bankruptcy in Georgia?
Bankruptcy is a legal function which can be an option for a person who can’t pay all or most of their bills. The proceeding can give a person a fresh financial start, and filing immediately puts a stop to all collections calls or mail notifications. You will be “off the hook” for many of your debts by going through bankruptcy, which is defined as a legal way to eliminate most or all of a person’s debts through a “discharge.”
Filing bankruptcy can bring a halt to any efforts to foreclose on your home, prevent a repossession of your car, or even force a creditor that has confiscated some of your property to return it. It will stop any wage garnishment and can restore any utility services that have been suspended.
How long does it take to file for bankruptcy in Georgia?
From start to finish, filing for bankruptcy in Georgia and going through the process could take anywhere from 4 to 6 months. There can be contingencies to this timeframe but, in general, that is the length of time it should take to finalize your bankruptcy claim.
What is the downside to filing bankruptcy?
Filing for bankruptcy doesn’t necessarily mean you’re completely off the hook for every debt you may have. Some debt, like student loans, are rarely forgiven through bankruptcy (though there are exceptions to this). You may also be required to pay child support or alimony, and certain taxes or debts not listed on your bankruptcy filing.
A person can only file for bankruptcy once every 8 years for Chapter 7, and once every 6 years for a Chapter 13. Following bankruptcy, your credit score will be wiped out, and it could take years to rebuild it to a point where a bank will grant you a loan—or even a credit card.
Do I need to hire an attorney to file bankruptcy?
It’s strongly recommended that you speak with a qualified attorney if you believe bankruptcy is the right path for you. While individuals can individually navigate the tricky seas of bankruptcy, having an attorney by your side can alleviate much of the stress, help you avoid common pitfalls and make certain that the “i’s” are dotted and “t’s” are crossed.
How much does it cost to file for bankruptcy?
It currently costs $306 in Georgia to file a Chapter 7 bankruptcy and $281 for a Chapter 13. This fee applies for individuals and couples filing jointly. If you decide to hire a bankruptcy attorney, their fee will be in addition.
Bankruptcy and the COVID-19 pandemic
The federal government’s stimulus package, known as the CARES Act, was designed to offer limited financial relief during the pandemic. However, this stimulus also contains a couple of important adjustments to laws that impact bankruptcy filings.
- The CARES Act makes it easier for businesses seeking to file Chapter 11 by loosening some filing requirements, raising the debt threshold so that more businesses qualify and reducing the costs of debtors once the 90-day filing requirement is met for their reorganization plan.
- The Act designates that government stimulus money is NOT part of the income calculations in qualifying for Chapter 7 or 13 bankruptcy filings. It also allows for other flexibilities with regards to a person’s plan payments due to coronavirus.
Is bankruptcy the right step for you?
The decision whether or not to file for bankruptcy is a deeply personal one. Going through a consumer-style bankruptcy can be complex, so we recommend you consult with one of our knowledgeable attorneys before making any major decisions.
If you’re looking for an experienced Chapter 7 or Chapter 13 lawyer in Atlanta, talk with a Gerber & Holder attorney today. Your first consultation is free and there’s no obligation to make any decisions right away. Simply come talk with us about your situation.
Our law firm has been involved in Atlanta bankruptcy proceedings for many years and we’ve helped get our clients back on their feet—both financially and physically when our clients are injured. Don’t try to navigate the complexities of Georgia bankruptcy law without a knowledgeable guide.