Bankruptcy Exemptions in Georgia Can Protect Property
When my clients file bankruptcy in Georgia, they often want to know if they can keep their property in Chapter 7 or Chapter 13 bankruptcy. Bankruptcy exemptions in Georgia can protect property. The good news is that you can keep property, such as cars, homes, and bank accounts, in bankruptcy.
Bankruptcy filers, like all people who file bankruptcy in Georgia, are entitled to what are known as “bankruptcy exemptions.” The exemptions are provided by Georgia law and applied through bankruptcy law to allow people who file bankruptcy to protect their property. There are several popular exemptions, as outlined below.
Homestead Bankruptcy Exemptions in Georgia
If you own a home in Decatur, for example, and file bankruptcy, you are allowed a homestead exemption to protect up to $21,500.00 ($43,000.00 total if a married couple owns the home and files jointly) in equity as provided by O.C.G.A. 44-13-100(a)(1). Most debtors do not have home equity, especially in this economy. However, if you own a home and owe less on the home than the fair market value of the home, then you may have equity in the property and need to use the homestead exemption allowed under Georgia law in order to protect your home.
For example, if you owe $100,000.00 to the mortgage company on your house, and the Dekalb County tax assessor valued your home at $150,000.00, you could potentially have $50,000.00 in equity in the home. Under that scenario, you could use the $21,500.00 homestead exemption in a bankruptcy case in order to protect $21,500.00 in equity. Even with that homestead exemption, you would still have $28,500.00 in unprotected equity if you filed for bankruptcy.
Under such circumstances, you could either file Chapter 7 bankruptcy and allow the trustee to attempt to sell the home and use the proceeds to repay creditors, offer the Chapter 7 trustee a sum of money to purchase your unprotected interest in the home, or file Chapter 13 and repay unsecured creditors an amount equal to the unprotected interest (in this case, $28,500.00). Now, if your home were only worth $100,000.00, then there would be no equity in the home, and it would not be lost to the bankruptcy trustee (however, if you stopped paying the mortgage company, the mortgage company could foreclose).
Meeting with a bankruptcy attorney in Georgia will give you the ability to analyze if the Georgia homestead exemption protects your home before you decide if filing for bankruptcy is a good option for you.
Bankruptcy Exemption in Georgia for Vehicles
Most debtors in Georgia own at least one vehicle, and debtors often worry about whether filing bankruptcy could cause them to lose their cars. Fortunately, bankruptcy law also protects cars and other vehicles you rely on for work and daily life. Pursuant to O.C.G.A. 44-13-100(a)(3), a car has up to $3,500.00 in protection from sale or liquidation in a bankruptcy case. If a married couple files bankruptcy and each spouse owns a car, each may take a $3,500.00 exemption for his/her car.
The vehicle exemption is applied the same way as the homestead exemption. For example, you own a car that is worth $10,000.00. You owe $8,000.00 on the car. That means you only have $2,000.00 in equity. You may take $2,000.00 of the Georgia bankruptcy exemption for vehicles and apply it to your car. On the other hand, say you only owe $5,000.00 on the same car. That means you have $5,000.00 in equity and only have $3,500.00 to protect the car, leaving $1,500.00 in unprotected equity in the car. There’s no need to worry, as you may be able to use the wild card exemption and the unused portion of your homestead exemption to protect the remaining $1,500.00.
Wild Card Bankruptcy Exemption in Georgia
All debtors in the state of Georgia, have a “wild card” exemption under O.C.G.A. 43-13-100(a)(6) in the amount of $600.00 to apply to any type of property. In addition, debtors who do not use their entire homestead exemption can take up to $5,000.00 of the homestead exemption and apply it to any type of property.
For example, if you used only $5,000.00 of your $21,500.00 homestead exemption and had an additional $1,500.00 in your car to protect, you could cite the wild car exemption to protect your car in a bankruptcy filing.
The wildcard bankruptcy exemption is another way to protect your most important assets.
Pension, Retirement, and Life Insurance Account Exemptions in Bankruptcy
Under O.C.G.A. 44-13-100(a)(2.1), retirement accounts governed by ERISA (most 401Ks), Individual Retirement Accounts (IRAs), and other pensions are protected in full from liquidation in bankruptcy, as long as they remain undistributed. In other words, these accounts are fully protected when you file for bankruptcy, whether it is Chapter 7 or Chapter 13.
Thus, no matter how much you have in your employer-sponsored retirement account, it is fully protected as long as you keep the money in the retirement account. If you liquidate the retirement account, then it is converted to cash and is only protected up to the amount of the wild card exemption of $600.00 and the unused portion of the homestead exemption for maximum protection of $5,600.00 under Georgia bankruptcy law. So, the best thing to do is keep your retirement in its account to avoid losing your retirement savings in bankruptcy.
Now, you need to be careful about property, such as annuities or life insurance policies, that may seem like retirement accounts but are not protected retirement accounts. Regarding life insurance you have, up to $2,000 of unmatured life insurance in cash value equity can be saved.
Other Important Bankruptcy Exemptions in Georgia
Support Exemption
Georgia protects all child support and alimony that have been assigned by the court as necessary. Therefore, spousal support and child support are not exempted during bankruptcy.
Public Benefits Exemption
Someone who has any benefits listed above should consult with a bankruptcy lawyer regarding the best method of saving these benefits to avoid further debt. A debtor who has filed for bankruptcy in the state of Georgia is entitled to keep all:
- Unemployment compensation
- Workers’ compensation
- Social Security benefits
- All other related benefits regarding employment.
Garnishment/Wage Exemption
The state of Georgia’s limit on obtaining wage garnishments is 75% of unpaid, earned weekly income. However, if 75% of someone’s income earnings is 40 times less than the United States’ legal hourly minimum wage, this person’s minimum wage amount will displace 75% of earnings collected.
One thing that can work in your favor is sometimes a Georgia bankruptcy court judge can change wage exemptions for debtors who fall into a very low-income status (30%-50% of the median household income in Georgia). Currently, the median household income in Georgia is $67,730.
Tools of the Trade Exemption
For individuals who rely on specific equipment to conduct their work, Georgia allows for up to $1,500 in exemption. Equipment counts as anything that requires you to successfully do your job such as a laptop and tools.
Bankruptcy Exemptions in Georgia for Personal Items
Household Goods and Furniture Exemption
One of the most popular questions debtors ask is will the court or trustee come to my house and take my things? The answer is that the trustee technically can do that in Chapter 7, but it is most likely not. As with most property, there is an exemption for household goods and furnishings. In Georgia, that exemption is $5,000.00. Since you should be using garage sale value for such items in your home, it is unlikely that you own anything that exceeds the available exemptions for home goods and furnishings.
Jewelry Exemption
If you’re filing bankruptcy in Dekalb County and you’re worried about your jewelry, don’t worry because there is a $500.00 exemption for jewelry under Georgia law. In addition, if you have any valuable jewelry, you can use the wildcard exemption and the excess homestead exemption to protect the jewelry from liquidation.
Protecting Property Using Bankruptcy Exemptions in Georgia
If you live in Georgia and are interested in filing bankruptcy, one of your main concerns is probably whether you can keep your property in a bankruptcy case. The answer is probably yes. Even if you own property that is not fully protected by the Georgia bankruptcy exemptions, a bankruptcy attorney can assist you in determining what you can and cannot keep in crafting a Chapter 13 repayment plan that will allow you to keep all of your property, no matter how valuable it is.
If you have questions about protecting property or other assets under bankruptcy, you can work with the best Georgia debt and bankruptcy attorney. Charles M. Clapp, founder of CMC Law in Atlanta, can be reached at 404.585.0040 or by requesting a free bankruptcy consultation online.
Contact CMC Law anytime for questions and to get started with experienced legal counsel.