If you have incurred a large amount of debt that you know you do not have the ability to repay, you may be considering filing for bankruptcy. Filing Chapter 7 gives you the opportunity to eliminate most debts while filing Chapter 13 allows you to reorganize your debts.

In 2005, President George W. Bush passed the Bankruptcy Reform Act that made it somewhat more difficult to file for either type of bankruptcy. However, you still have the legal right to do so if you meet the filing qualifications for each. Attorney Charles Clapp will evaluate your financial situation when you meet for a consultation and advise you on whether filing Chapter 7 bankruptcy or filing Chapter 13 bankruptcy is in your best interests.

Filing Chapter 7 Bankruptcy

The Bankruptcy Reform act required each state to implement a means test to qualify for Chapter 7 bankruptcy. Each state creates an income guideline for this purpose. In Georgia, a single person cannot earn over $40,631 per year while a family of four cannot have an income greater than $68,085 annually.

If your income falls below the state median, you will need to complete paperwork listing your current debts, living expenses, income, and properties owned. This includes any property you have given away or sold in the past 12 months. You will also need to explain your spending habits for the same timeframe.

Chapter 7 bankruptcy eliminates most medical and consumer debt as well as installment loans. Federal law typically prohibits the discharge of past due taxes, student loans, child support, and alimony from Chapter 7 bankruptcy. Once you have completed your paperwork, you need to meet with a credit counselor for future financial planning before you can receive a discharge. You will complete post-filing counseling as well. A record of Chapter 7 bankruptcy remains on your credit file for 10 years from the discharge date, which should occur within three to six months of your filing date.

Filing Chapter 13 Bankruptcy

If you prefer not to eliminate your debts or your household income is too high to qualify for Chapter 7, you can consider a Chapter 13 bankruptcy filing instead. This type gives you more time to pay your creditors than the current terms of your agreements with them allow. A judge will review your proposed repayment plan with input from your creditors. Once approved, you will make one payment to the bankruptcy court each month. A clerk will divide the payments among creditors according to your approved plan.

The bankruptcy judge will prioritize your debts to ensure that things like child support, tax payments, and wages owed to employees get paid. Secured accounts such as your auto loan and mortgage take second priority while a bankruptcy clerk splits any amount remaining among unsecured creditors. This would cover such things as credit card debt and medical bills.

A discharged Chapter 13 bankruptcy remains on your credit report for seven years. You will also need to complete pre-filing and post-filing financial counseling with this type.

If you’re ready to take the next step with bankruptcy, contact CMC Law to request a consultation today.