Filing for Chapter 7 bankruptcy?
The process can feel confusing and daunting, but it doesn’t have to! Talk with a Georgia bankruptcy attorney for free today.
What does filing for Chapter 7 bankruptcy mean for you? What are the requirements to file for Chapter 7 in Georgia? How will filing for Chapter 7 impact your life, your finances, your choices moving forward?
You may be asking yourself these exact questions right now. Here at Gerber & Holder Law, our attorneys have certainly heard these and many other similar questions before. Filing for bankruptcy can be a confusing and frightening process—starting with figuring out which type of bankruptcy is best for you.
If you’re considering filing for Chapter 7 but aren’t sure whether or not it’s the right move, we invite you to talk with one of our knowledgeable legal experts—for free—to find out what the process is like and how your life will change. We specialize in bankruptcy filings in Atlanta and across Georgia. Our bankruptcy lawyers know the ins and outs of Chapter 7 petitions, 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.
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What is Chapter 7 bankruptcy?
When someone files for Chapter 7 bankruptcy, an assigned bankruptcy trustee collects and sells all of the debtor’s non-exempt assets and uses the proceeds to repay claim holders (creditors). Georgia’s bankruptcy law allows the debtor to retain some “exempt” property, but the trustee will identify and liquidate the debtor’s remaining assets to pay creditors.
In a Chapter 7 filing, the primary purpose is to dismiss certain debts so that a person may have a “fresh start” and is no longer beholden to the forgiven debts. In a Chapter 7 case, the forgiven debts (or discharge) is only an option for individual debtors, not corporations or partnerships. While a Chapter 7 case usually results in forgiven debts, not all types of debts are forgivable. Debts such as student loans or liens on a property may be exempt from bankruptcy.
Who qualifies for Chapter 7 bankruptcy?
The following criteria must be met in order for a person to qualify for relief using Chapter 7 bankruptcy in Georgia:
- The person must be an individual, a partnership, a corporation or another business entity.
- The filer must be subjected to a means test.
- No debtor can file for any chapter of the bankruptcy code unless they have undergone credit counseling from an approved counseling agency within 180 days of filing. (It’s possible that an exception in an emergency situation could be granted if the bankruptcy administrator decides there aren’t enough approved credit counseling agencies to assist the debtor.)
- Debt management plans developed during credit counseling must be filed with the court.
An individual cannot file Chapter 7 or any other type of bankruptcy if a prior bankruptcy petition was dismissed by a court within 180 days due to the debtor’s failure to comply with court orders, willful failure to appear before a bankruptcy judge, or if the debtor voluntarily agreed to drop the previous petition after creditors sought payback from the bankruptcy court to recover property that they themselves held the liens to.
Alternatives to Chapter 7 & bankruptcy
Traditionally, across the United States, people (debtors) who owe money to other individuals (such as friends or family) or institutions (banks, credit card companies, etc.) must be made aware that there are alternatives to filing Chapter 7.
For example, people who have business debt while operating a sole proprietorship, corporation or partnership have the ability to remain in business and not be liquidated. Folks who fall under these conditions should think about filing a petition for Chapter 11 bankruptcy instead.
It’s also important to note that those operating sole proprietorships could also be eligible for relief under Chapter 13 bankruptcy. Individual debtors who receive a regular income could seek out an adjustment of debts using Chapter 13, which offers an advantage to help shield debtors from having their homes foreclosed upon by granting a “catch up” period for past due payments.
Now, if a debtor’s monthly income is higher than the state median, bankruptcy code requires a “means test” to find out if a Chapter 7 filing is being abused. It’s presumed by courts that the abuse of Chapter 7 is taking place if the debtor’s aggregate monthly income over 5 years is more than $12,850, or 25 percent of the filer’s unsecured debt, so long as the amount is at least $7,700.
It’s possible for the debtor to challenge the presumption of abuse by showing special circumstances to justify adjustments of monthly income or additional expenses. If the abuse claim isn’t successfully fought, the case will be shifted to be Chapter 13 with the filer’s consent, or dismissed completely.
The bottom line:
How to file for Chapter 7 bankruptcy in Georgia
The debtor seeking the Chapter 7 filing must do so with a bankruptcy court that operates in the area where they either live or operate a business. Additionally, you must provide the court with:
- A statement of financial affairs
- A schedule of up-to-date income and expenditures
- A detailed listing of assets and liabilities
- Details of current contracts and leases
Tax returns for the most recent year, previous years and any tax returns filed during the case are to be provided to the court-assigned case trustee. If you have mostly consumer debts, then you will have to provide further detailed documents, including:
- Evidence of credit counseling
- Copy of a debt repayment plan
- Proof of payment via employers received 60 days before filing
- Proof of monthly net income and any upcoming expenses post-filing
- Any outstanding college loan debt
Filing a petition
The following information must be provided on the bankruptcy petition for it to be successfully submitted:
- Listing of all creditors, including amounts owed and nature of the claim
- The amount, source and pay timeline of the filer’s income
- Full listing of all property owned by the filer (cars, land, homes, valuables, etc.)
- A detailed list of the filer’s monthly living expenses (food, utilities, shelter, transportation, clothing, taxes, medicine, etc.)
If you are married, your spouse must also gather the above information for the petition, even if your spouse is not filing for bankruptcy. The information is needed so that the court and trustee assigned to the case can appraise your entire household’s financial situation.
Some Chapter 7 filers may need to turn over a schedule of “exempt” property to the court, as Georgia’s bankruptcy code allows a debtor to shield some property from creditors. These exemptions exist due to federal law and sometimes state law, depending on where you wish to file. These exemptions are complicated due to the existence of both state and federal laws, so it’s recommended that you consult with an experienced bankruptcy attorney to better shield your exemptible assets.
Cessation of collections
Once your petition for Chapter 7 is accepted by the court, all debt collection attempts against you are required to stop. However, some collection actions may continue and sometimes the “stay” from the court only keeps collectors at bay for a short time. Once the stay is in place, creditors are not to continue suing you, extract wage garnishments or try to call with payment demands.
About 21 days after your Chapter 7 petition is accepted by the court, the assigned case trustee will convene a meeting of creditors. During this gathering, the trustee will swear you in under oath and both the creditors and trustee are allowed to ask your questions.
Needless to say, you must attend this meeting and answer the questions truthfully as they pertain to their financial situation and property. If the petition for Chapter 7 is filed jointly by both a husband and wife, they both must attend the meeting and give honest answers. Following this meeting, the trustee will tell the court whether the case contains any abuses of the “means” test.
You are encouraged to cooperate with the trustee assigned to your case. Their role in the questioning is mainly to make certain you are aware of the consequences of a successful bankruptcy, such as its effects on your credit rating and the impact on your future ability to seek alternative Chapter 7/11/13 bankruptcies. Bankruptcy judges are not permitted to attend the creditor meeting.
Liquidation of assets
If the motion for bankruptcy is granted, your case becomes an “estate,” and that estate becomes the temporary owner of your property. It’s from this estate that your creditors are paid as the property is liquidated. This liquidation of property is the job of the trustee.
The role of a trustee is to administer your bankruptcy case and liquidate your non-exempt assets. If it’s discovered that you have no exempt assets, the trustee normally files a “no assets” report with the court and creditors get nothing.
However, if there are assets, creditors must file a claim with the court within 90 days following the meeting of creditors to lock in their chances of securing some monetary payout.
There are 6 levels of Chapter 7 claims and each class is paid in full before the next level receives anything. This is a complex part of the bankruptcy filing. If there is any money or property left over after each class has received its portion, then it may be left to the debtor.
Discharge of debt
Once the creditor obligations are met, the debtor receives a “discharge” for any remaining debt in the case. This usually signals the end of Chapter 7 bankruptcy.
It’s important to note, however, that a court could revoke a Chapter 7 discharge at the urging of a creditor or the trustee assigned to the case if fraud is uncovered on behalf of the debtor.
Changing a Chapter 7 bankruptcy filing
It’s important to note that Georgia’s bankruptcy code allows a debtor to convert a Chapter 7 to a Chapter 11, 12 or 13—as long as the debtor is eligible and so long as the case hasn’t previously been converted to Chapter 7 from another Chapter. Basically, you cannot bounce back and forth between one chapter of bankruptcy and another.
How much does it cost to file for Chapter 7 bankruptcy?
Currently, filing for Chapter 7 involves a $245 case filing fee, a $75 administrative fee and a $15 trustee charge—for a total of $335. These fees must be paid to the Court Clerk at the time of filing, but it may be possible to pay these fees in installments. Failure to pay these fees could result in a case dismissal.
If the person filing for bankruptcy has an income that is 150 percent below the poverty level (usually defined as about $12,000 for an individual, $17,000 for 2 and $26,000 for a household of 4) and the filing fees can’t be paid (even in installments), the court may decide to waive the fees.
Is Chapter 7 bankruptcy the right step for you?
Deciding which type of bankruptcy is right for you depends on many unique and individual factors that are particular to your case. Going through a Chapter 7 bankruptcy can be complex, so we recommend you consult with one of our knowledgeable attorneys before making any big decisions.
If you’re looking for a knowledgeable Chapter 7 bankruptcy lawyer in Georgia, contact 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.