Deciding whether or not to file for bankruptcy is a significant decision that comes with its share of challenges. Yes, there is a downside to filing bankruptcy in Georgia. Although, when you hire a certified, experienced bankruptcy attorney, this downside is significantly shorter, less complex, less stressful, and less uncertain.
To put it literally, bankruptcy is a legal device designed to provide individuals and businesses with a fresh financial start when consumed by overwhelming debt. There are different chapters of bankruptcy to consider based on your unique financial circumstances and the type of debt you owe.
While bankruptcy in Georgia offers a debtor a path to financial relief, it’s crucial to understand the potential downsides to decide if bankruptcy is right for you. Let’s explore what the downside is to filing for bankruptcy in Georgia. You will learn about its impact on your credit score, possible loss of assets, responsibilities of co-signers, unintentional consequences, and alternatives to bankruptcy to consider. Again, working with legal counsel will diminish these drawbacks.
Common Chapters of Bankruptcy in Georgia:
- Chapter 7 Bankruptcy: This is frequently known as the liquidation bankruptcy because it allows eligible individuals to discharge their debts by liquidating non-exempt assets to repay creditors.
- Chapter 13 Bankruptcy: This is commonly called reorganization bankruptcy because it enables individuals with regular incomes to create a repayment plan to pay off their debts over three to five years.
- Chapter 11 Bankruptcy: This is generally known as business bankruptcy but is also a reorganization bankruptcy because it allows large and small business owners to pay creditors back through a debt repayment plan.
Eligibility Criteria for Filing Bankruptcy in Georgia:
Before you can file for bankruptcy in any state, you must meet specific eligibility criteria for that state. Below is about a Georgia filing.
- Means Test:For Chapter 7 bankruptcy, you must pass the means test. This compares your income to the median income of Georgia to determine eligibility.
- Income and Limits:Chapter 7 and 13 bankruptcy have specific income limits. A bankruptcy attorney can help you assess your eligibility.
- Debt Limits: The bankruptcy debt limits are different in every state. In Georgia, it remains the same for every county. You might need to explore other bankruptcy options if your debts exceed certain limits.
Before filing bankruptcy in Georgia, it is crucial to speak with an experienced bankruptcy lawyer who can guide you through the process and help you understand the potential consequences for your credit score and overall financial situation.
Contact CMC Law today for a free bankruptcy evaluation.
Understanding What is the Downside to Filing Bankruptcy in Georgia?
Credit Impact
Bankruptcy negatively impacts your credit score and can remain on your credit report for up to ten years. Post-bankruptcy, you will have to rebuild your credit. Obtaining future credit may be difficult; lenders can consider your bankruptcy a risk when evaluating your creditworthiness. Although, the upside is that filing for bankruptcy initiates an automatic stay. This prevents creditors from pursuing collection actions against you, which offers immediate debt relief.
Selling Assets
In Chapter 7 bankruptcy, non-exempt assets such as real estate, vehicles, investments, valuable collections, and luxury items may be liquidated to repay creditors. However, bankruptcy exemptions protect certain assets, allowing you to retain essential property. Common Georgia bankruptcy exemptions include homestead exemptions (which protect a certain amount of equity in a primary residence) and personal property exemptions like clothing, household goods, and tools of trade.
Losing Valuable Possessions (Rare, but Does Happen):
Individuals may be required to surrender valuable possessions that exceed the exemption limits if the asset’s value is significantly higher than the exemption amount. However, these instances are uncommon; most individuals filing for bankruptcy retain their essential assets, especially with the guidance of legal counsel.
Repayment Plan
Georgia courts require your Chapter 13 repayment plan to adhere to a court-approved.
Mortgage Loan or Other Loans
Bankruptcy may impact your ability to rent a home, qualify for a mortgage or specific jobs, or secure affordable insurance rates.
Professional License Impact
Certain professions, such as lawyers, doctors, and financial advisors, require individuals to maintain sound economic standing. Bankruptcy could affect your ability to obtain or retain professional licenses or employment status.
Consult with an experienced bankruptcy attorney who can guide you through the process and help you understand the potential impact on assets, employment, and other factors.
Filing Bankruptcy in Georgia Requires Co-signer Responsibilities
If you are co-filing for bankruptcy in Georgia with a spouse or someone else, your co-signer could be affected. A co-signer has agreed to be responsible for a debt if the primary borrower fails to make payments.
Bankruptcy co-signer debt liability can vary depending on the type of bankruptcy filed.
Chapter 7
The co-signer may still be held responsible for repaying the debt in full. Chapter 7 eliminates the primary borrower’s liability, not the co-signer’s obligation. If the co-signer fails to repay the debt, creditors can pursue legal action against them.
Chapter 13
Co-signers are generally protected from creditors if the primary borrower adheres to the court-approved repayment plan. This can relieve co-signers as long as the primary borrower makes timely payments.
Fortunately, there are steps you can take to protect co-signers in bankruptcy.
- The primary borrower (the debtor) must reaffirm the debt (agrees to remain personally liable for the debt). This allows the co-signer’s responsibility to stay intact, and the creditor cannot pursue the co-signer for repayment.
- Allow for a co-signer release. This allows the co-signer to be released from their obligation once certain conditions are met, such as a consistent payment history or a specific period since the debt was incurred. However, co-signer releases are not always granted and depend on the lender’s policies.
Anyone co-filing bankruptcy in Georgia should consult with an experienced bankruptcy attorney to explore their options and understand their rights.
Contact CMC Law now to work with the top Atlanta bankruptcy attorney. Charles M. Clapp will guide co-signers through bankruptcy, protect their interests, and help them make informed decisions.
Remove the Downside to Filing Bankruptcy in Georgia with Legal Counsel
It is important to explore alternatives to bankruptcy before making such a significant decision, and a lawyer specializing in bankruptcy and debt will offer enormous support and relief.
Is Bankruptcy the Best Decision for Me?
Bankruptcy should be a last resort. Before filing, it is wise to explore other options, such as negotiating with creditors, creating a budget, or seeking assistance from credit counseling agencies.
Debt Management and Consolidation:
A debt management plan involves working with a credit counseling agency to create a repayment plan that suits your financial situation. Consolidation loans, on the other hand, combine multiple debts into a single loan with a lower interest rate. These options can help you regain control of your finances without bankruptcy.
Seeking Professional Advice Before Making a Decision:
Consult with a bankruptcy lawyer experienced in debt management who can provide valuable insights. They can assess your unique financial situation and recommend the most appropriate action. Professional advice can help you understand the potential downsides of filing for bankruptcy in Georgia and explore alternative solutions that may suit your needs.
Filing for bankruptcy can give individuals a fresh start and relief from overwhelming debt. However, it is important to be aware of the potential unintended consequences that may arise from this legal process. Understanding these consequences with the help of a bankruptcy lawyer can help you decide what is the right choice for your financial situation.
Contact CMC Law today to get started or request a free bankruptcy evaluation.