Circumstances regarding why and when to file and the reasons for filing Chapter 13 bankruptcy in Georgia over Chapter 7 or 11 are vast and wide-ranging. Each chapter of bankruptcy offers specific benefits but has limitations on why and how debtors can file. To best understand which bankruptcy chapter you should file for, consult with a licensed, experienced bankruptcy attorney.
Successful filing for bankruptcy Chapter 13 can be a vital step toward financial recovery for individuals facing substantial debt. However, it is impertinent to do your research and only work with a bankruptcy attorney with excellent ratings and vast, seasoned knowledge of bankruptcy law.
Take the time to understand the nuances and process of filing Chapter 13 bankruptcy. Educate yourself on common reasons for filing and why someone should file Chapter 13 (benefits compared to other chapters).
What is Chapter 13 Bankruptcy?
Chapter 13 is marked or known for its structured repayment plan, allowing debtors to reorganize and regain control of their finances while keeping their assets. This chapter is commonly nicknamed the “wage earner’s plan.” It is a favorable option for people with overwhelming medical bills, mortgage arrears, or other financial challenges (multiple debts). Someone can repay their creditors over three to five years based on their disposable income. This allows someone to dodge the liquidation of their assets, which is a common requirement in Chapter 7 bankruptcy.
Under the guidance of a bankruptcy attorney, Chapter 13 offers a structured approach to debt relief that can lead to a fresh financial beginning while retaining essential assets. Get a free bankruptcy consultation now from Atlanta’s top bankruptcy lawyer!
When/Why People Only Qualify for Filing Chapter 13 in Georgia
- Chapter 11 is generally for businesses and high-income individuals with more complex financial situations.
- Debtors must have a regular income because the repayment plan relies on future earnings.
- There are parameters on the amount of secured and unsecured debt that an individual can have, which are updated periodically.
- Not everyone is eligible for Chapter 7, including high-income earners and repeat filers.
- You don’t pass the means test for Chapter 7. The means test gives someone the authority to file certain bankruptcy chapters.
- Some debts are only dischargeable in Chapter 13, not Chapter 7 (such as a divorce property settlement).
Reasons for Choosing to File for Bankruptcy Chapter 13 in Georgia
- It can be a solution for individuals looking to repair their history of missed payments, such as mortgage or car loans.
- This bankruptcy chapter can prevent home foreclosure or car repossession. Chapter 7 may require asset liquidation. You can keep your property while adhering to a court-approved repayment schedule.
- An automatic stay is effective immediately upon filing, a legal protection that halts all collection activities, including lawsuits, wage garnishments, and creditor calls.
- Some people care about paying back debts as much as they can.
- Chapter 13 can strip off of under-secured mortgages.
- In states with harmful bankruptcy exemptions, Chapter 7 can lead to property loss (such as your house), whereas Chapter 13 won’t.
- Chapter 13 provides the ability to cure arrearages on secured debts and some ability to modify terms (particularly with vehicle loans).
- After you have completed your repayment plan, there is potential for debt discharge. (Any remaining unsafe debts, such as credit card balances or medical bills, may be eliminated.)
- This bankruptcy chapter is cheaper to file up-front (albeit more expensive over time).
- Chapter 13 can be dismissed voluntarily if you strongly believe your circumstances will change.
- You are protected for up to 5 years against non-dischargeable debts (e.g., student loans).
- It can better set up a student loan adversary proceeding than a Chapter 7. If the circumstances are right, you can convert from 13 to 7. However, specific eligibility measures must be met, such as proving that your financial situation has changed significantly since filing.
Filing Bankruptcy Chapter 13 in Georgia: The Process
- Find a credible bankruptcy attorney to take charge of your filing.
- Gather all necessary financial documents with the lawyer, including income statements, expenses, and a list of creditors.
- Complete a credit counseling This is required of all debtors and can only be done after all financial documents (evidence) are collected and before filing the bankruptcy petition with the court.
- File your bankruptcy petition with the courts in your state.
- A bankruptcy trustee needs to be appointed to oversee the case. (The trustee plays a foundational role in the Chapter 13 process by reviewing the proposed repayment strategy so that it meets legal requirements and facilitating communication between the debtor and creditors.
- The trustee attends the 341 creditors’ meeting and bankruptcy hearings, where they help address any questions or concerns regarding the repayment plan.)
- Pay your debt back monthly. The repayment timeline in a Chapter 13 bankruptcy typically spans three to five years, depending on the debtor’s income and the amount of unsecured debt.
Throughout the bankruptcy, the debtor makes monthly payments to the trustee. Only the trustee is allowed to distribute the funds to creditors, and it has to adhere to your approved plan. Once the repayment period is completed, any remaining unsecured debt may be discharged, giving the individual a fresh financial start.
Depending on the situation, you can either make the ongoing payments through or outside the bankruptcy or allow them to review “pro rata” payments. Most of the money can be directed to student loans, as this has been done. You can direct all payments to the principal rather than interest (allowing you to pay it down faster).
A bankruptcy discharge can provide a fresh start and help you rebuild your financial future without the burden of lingering debts.
What to Consider Before Filing Bankruptcy Chapter 13 in Georgia
Any chapter of bankruptcy can have a potential impact on your financial future.
- Credit score dip: This is one of the most immediate effects. Any bankruptcy filing can significantly drop your credit rating, hindering your ability to obtain loans or credit cards post-bankruptcy. Even though it remains on your credit score for up to seven years, its impact may lessen over time. Many people rebuild their credit successfully during this time.
- Restriction on financial flexibility: You must adhere to a court-approved payment schedule, which can affect your ability to budget for other expenses. It is crucial to evaluate whether this commitment aligns with your long-term financial goals with your lawyer, family, and friends you trust.
- Missed payments: Missing a payment can have serious consequences, including potentially dismissing your bankruptcy case. If you are in this situation, it’s vital to communicate with your bankruptcy attorney as soon as possible. They can help you explore options, such as modifying your payment plan or addressing any financial hardships that may have arisen.
- Bankruptcy alternatives: Alternatives to bankruptcy options like debt consolidation or negotiating directly with creditors can sometimes provide relief without the need to file for bankruptcy. Engaging with a qualified bankruptcy attorney can help you rank these alternatives from best to worst to determine the best course of action for your circumstances.
- Bankruptcy dismissal: If you are expecting a discharge, be careful. Essentially, you go back to being in the same situation as someone not in bankruptcy. Your creditors can sue if they want to, but it doesn’t happen automatically. You can also re-file a new Chapter 13 to avoid negative consequences if the circumstances are right, but there are implications regarding the automatic stay.
Don’t Risk Filing Bankruptcy Chapter 13 in Georgia Pro Se
The riskiest route in bankruptcy is filing pro se (without legal counsel). For one, you may not realize you are risking assets (property). An uneducated debtor may not understand the consequences of lost assets. Secondly, you could complete the means test wrong and not qualify for Chapter 13 when this is the chapter you should qualify for; the consequence is dismissal.
Charles M. Clapp, the founder of CMC Law in Atlanta, has helped many clients escape debt, stop wage garnishment, and more.
Contact CMC Law today for a free bankruptcy consultation or to get started on your filing.