August 13, 2020 / Jeffrey Kelly

As a general rule in Georgia, you are not legally liable for your spouse’s medical bills just by virtue of the marriage.  This question usually arises when one spouse has suffered an extreme trauma event like Covid-19 corona hospitalization, cancer, diabetes, heart attack or some other health catastrophe that forces a person to accumulate a large amount of medical debt.   

Earlier this year, I met with an elderly lady who, for purposes of this illustration, we will call Marjorie.  Marjorie worked all of her adult life building up her 401k account to over $300,000.  In addition, she received about $200,000 in life insurance proceeds that were left to her individually.  Her husband died a few years ago after an extended battle with cancer and left behind a mountain of medical bills.  Over the past couple of years, Marjorie blew through all of her savings making payments on medical bills for which she had zero legal liability.  Now, she has nothing left but her monthly social security check to live on.  I wish she had met with us sooner and I would have told her not to touch the 401k proceeds for sure and that the creditors had no claim to the insurance either.   

I have been practicing consumer bankruptcy for over 22 years.  I have seen it all.  You would not believe how many people needlessly spend their way into bankruptcy by trying to make payments on huge medical bills of a now deceased spouse.  And to add salt in the wound, most people don’t meet with a bankruptcy attorney until all the money is gone.   

What should a person do after losing a spouse? 

Losing a spouse is probably the worse experience of anyone’s life.  As a consequence of the emotional toll, it is also the worst time to make major financial decisions. 

The first legal step that a person should take after losing a spouse is to meet with an attorney that specializes in wills and estates.  While I don’t practice in this area, I know many great attorneys who do and I am happy to help you find one that is close to you.  The purpose of meeting with an estate planning attorney is to determine whether or not the deceased spouse’s estate needs to be probated.   

The second step is to meet with a financial planner to map out the future of what economic life will look like going forward.   

Take advantage of a free consultation with us. 

In the event that there are outstanding debts, my law firm offers a free initial consultation to discuss bankruptcy options.   

Debt collectors are extremely skilled at guilting surviving spouses into paying the medical bills even though the surviving spouse has no legal liability.  Debt collectors also have the super natural ability to call right after the life insurance check hits your mail box.  In most cases, any life insurance proceeds you receive are not exposed to any of the deceased spouse’s debts.     

The magic question.  

Anytime there is a question about whether or not you are liable for the debt of your spouse, you should ask the creditor, “Can you show me the contract where I signed and agreed to be liable for this debt.”  If they cannot produce any proof of your signature on a guarantee, you are not liable in the state of Georgia.   

We do virtual appointments 

During this Covid-19 crisis, you can meet with me or one of my associates virtually by phone or we can use a video conference software like Zoom.  The worst thing a person can do is ignore the problem.  It will not go away by itself.  Call us today 770-881-8449.   

No one can incur any new debt in an active Chapter 13 case without permission from the Bankruptcy Court.  To obtain permission, a hearing must be set down and all creditors in the case must be notified of the debtor’s intent.  At the hearing, the trustee will have questions and may or may not oppose your request to purchase a new car.  Your bankruptcy attorney will present your case and then the Bankruptcy Judge will decide whether or not she wants to sign an order allowing it.  Typically, this process can take from 30-45 days.   

If you truly don’t have any alternative source of transportation and the proposed payment, interest rate, and amount to be incurred are reasonable, most Bankruptcy Courts will approve the purchase of your new automobile. 

If you are wanting to purchase a new car because you are just tired of your old one, you need to wait until the end of your case before purchasing another one. 

You must have an acceptable reason to purchase a new car in an active Chapter 13. 

“My old car won’t run anymore and I need a way to get back and forth to work” is a good reason.  “I just want a new car because I’m tired of my old one” is a bad reason.   

If you have an extra car listed in your bankruptcy case, a trustee is going to ask why you need a new one.  If all of the cars have broken down since your bankruptcy case was filed, it is a good idea to amend schedule B of your bankruptcy petition to reflect the current status of old vehicles.   

The Myth of the Buy-Here Pay Here 

If a “buy-here-pay-here” car lot tells you that they don’t care about court permission and that they will gladly sell you a car, they are wrong.  You must have court permission to obtain new consumer debt.  It does not matter that the buy-here pay-here auto lot does not report on your credit.  If you violate this rule, your bankruptcy case could be dismissed or in a worst-case scenario, you could be sanctioned by the Bankruptcy Court.   

What do you do if you cannot obtain financing or if the Bankruptcy Court says no? 

If you are in a situation where no one will finance because you are in an active Chapter 13 case and you desperately need a new vehicle, what do you do?  The answer is that you can voluntarily dismiss your Chapter 13 bankruptcy case.   As a general rule, this is a terrible idea because you lose all of your bankruptcy protections as soon as your case is dismissed.  Garnishments, foreclosures and other collection activities can restart.  However, some people absolutely must have new transportation or else they lose their jobs.  In a best case scenario, the creditors will leave you alone long enough to buy another car and then you can refile later if everyone comes piling down upon you again.   

The bottom line is that if your car is about to give out and you are in an active case, call your bankruptcy attorney as soon as you can.  

Below is a quick article to help you in deciding whether bankruptcy can help your financial situation, some points to consider, and where to contact an attorney for help.

Chapter 7 vs. Chapter 13

We could spend quite some time going into the differences between Chapter 7 and Chapter 13 bankruptcy, but for the purposes of understanding the advantages of filing, we will just need a quick overview.

Chapter 13 (repayment)

Chapter 13 is designed to help you “catch your breath.” Chapter 13 is the longer of the two filings to complete, but stays on your credit report for a shorter period of time.

This is the most common type of filing for someone who, for example, unexpectedly lost their job for an extended period of time and is now trying to stop a foreclosure.

This would come through entering a mortgage arrearage and distributing past-due payments over a period of three-to-five years.

To figure out that monthly payment amount, I will propose a budget for you and a manageable monthly payment amount. Your payments will be paid to a trustee appointed by the court, and not directly to your creditors. This is so you can avoid making multiple payments to multiple creditors, and instead just make one monthly payment to your trustee.

In almost every Chapter 13 case, interest on credit cards and other unsecured debt is completely frozen.

Chapter 7 (liquidation)

Chapter 7 is designed to help you get a “fresh start” to your debt and finances. This is the most common type of bankruptcy for someone who has an unmanageable amount of medical or credit card debt, as it cleans the slate of these expenses.

Compared to Chapter 13, this type of bankruptcy is shorter to complete but stays on your credit record for longer.
It must also be noted that to qualify for Chapter 7 bankruptcy, you must meet certain income requirements. If your income is higher than allowed, then Chapter 7 may not be an option for you. To know for sure in your situation, you need to get me copies of your paystubs for the last six months so that I can determine where you land on the means test.

Unfortunately, in both cases your credit score will take a hit. While this is unavoidable, it does not outweigh the benefits of filing for bankruptcy.

Bankruptcy Advantages: Forgiven Debt and Buying Time

Federal Bankruptcy Law requires a “means test” to determine whether you qualify for Chapter 7 or Chapter 13 bankruptcy. When we meet with you to review your situation, we will apply these tests to your case to determine your best options.

Chapter 7 and Chapter 13 bankruptcy can have both pros and cons depending on your situation, but generally individuals who file are the ones who desperately need the benefits no matter the cost. Some benefits of bankruptcy include:

• Filing for bankruptcy will trigger an automatic stay, which is a legal term that means your creditors will need to stop collection action immediately. They will not be able to repossess your car, foreclose on your home, call you, send you collection letters or file a lawsuit against you.
• In some cases, bankruptcy might allow you to discharge certain debts altogether.
• In some cases, you can go through the bankruptcy process without losing any of your property, including your car and your home.
• You might be able to begin rebuilding your credit shortly after your bankruptcy case completes.

For struggling individuals, filing bankruptcy can offer necessary relief from impossible payment demands and harassing phone calls. Below are some of the top advantages to filing.

A Final Note on Automatic Stays

The automatic stay is a financial lifeline for many individuals. Essentially, the moment you file for bankruptcy you get protection from your creditors via the automatic stay. This means they cannot collect on their debt, cannot badger you with phone calls, and cannot take your vehicle away from you.

While it is normally active the entire duration of the bankruptcy, this can change under a few circumstances.

This first circumstance is if a creditor wants to pursue you after your case is filed, they can file a Motion for Relief from the Automatic Stay. If this is granted by the court, your stay will no longer be in effect and your creditors can begin collection attempts again.

The second circumstance is when you have filed for bankruptcy more than one time. Refiled bankruptcy cases have different rules that depend on the dismissal dates. If you want to know how your prior bankruptcy cases may affect a new filing, take advantage of a free consultation and get legal advice from an experienced bankruptcy attorney.

Contacting a Bankruptcy Attorney

I have been practicing law since 1998 and have over 22 years of consumer bankruptcy law under my belt.

I understand how important it is for individuals to get the financial help they need in times of trouble and I dedicated my law office to doing just that. With our experienced staff of attorneys, you can call anytime for a free consultation at (770) 637-1756 and start discussing the advantages and disadvantages to filing Chapter 13 and Chapter 7.

What does a botched divorce look like, exactly?

Most commonly, you see the caretaking parent revoking rights to many assets that would otherwise be awarded to them in exchange for keeping their home and children. This is neither fair or necessary in family law, but an unfortunate reality for many individuals who try to file for divorce on their own.

Adding insult to injury, this agreeableness usually results in that same spouse footing the bill for their own legal fees, adding to the burden of their monthly expenses they may or may not be able to afford.

As such, it’s important that you always retain a lawyer in your divorce case.

Setting an Example

So as to get through the following possible situations where a bad divorce may result in unexpected financial consequences later on, we are going to use a hypothetical situation.

Let’s say that you were divorced several years ago and agreed, along with your spouse, that you would keep the home you and your family lived in. This is usually followed by filling out a quitclaim deed (a document used to transfer the ownership of property from one individual to another).

After you and your spouse go separate ways, you might think your ties to one another are severed. Depending on your paper trail, this might not be the case.

When an Ex-Spouse Files for bankruptcy

After your separation, you or your spouse might find yourself in a challenging financial situation. There may be joint debts to contend with, unexpected filing fees, unmanageable living expenses, and a whole host of challenges that come after two individuals go through a financial separation.

Depending on the situation of you or your ex-spouse, it may be a good idea to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy depending on your needs. If you choose to file, this could help with bills by enacting an automatic stay (which prohibits debt collectors from collecting on your debts), restructuring your monthly payments to be manageable (such as in Chapter 13) or even completely absolve suffocating credit card debt (such as in Chapter 7).

However, be cautious. For individuals who filed for divorce themselves, choosing bankruptcy could have severe and unexpected consequences for their previous spouse, especially if their paperwork was not properly completed.

When an Ex Comes Back to Haunt You

This is when problems start to occur– potentially years down the line. These issues, commonly, fall into two categories: unfinished quitclaim deeds and cosigner debt.

Quitclaim Perils

In the above situation, many people are not aware that a step is missing: the quitclaim deed needed to be recorded in the local courthouse. Without this step, the deed is not active. Therefore, if your former spouse filed for bankruptcy, their creditors can consider your home a retrievable asset.

Signer and Cosigner

As the name suggests, cosigned debt is that which you are responsible for as a cosigner to a loan. Being a listed signer, you have an equal financial responsibility to the loan, even if you are not the one making payments. As such, if you are cosigned on a loan which you ex-spouse later defaults on, it will result in creditors coming after you.

Furthermore, this loan (and lack of ability to pay it) will show up on your credit report, as well.

When to Contact a Bankruptcy Attorney

No one wants to be stuck in a situation where they are being punished for their ex-spouses debt. Unfortunately, it happens more often that people recognize. If you find yourself in a similar bind, it might be time to contact a bankruptcy attorney.

Making a positive impact on the lives of others is why I opened up the Jeffery B. Kelly Law Office— I want to make sure each one of our clients leaves in a better position than when they came in and my staff feels the same.

Our team is effective and responsive to your questions, helping you file and complete your bankruptcy without having to worry about confusion or legal jargon. Give us a call today at 770-637-1756 to find out how we can help.

What Happens When You File a Bankruptcy Case?

A bankruptcy filing with the local bankruptcy court will start the process for you. A court-appointed trustee will work with you to determine the next steps in the process for your needs. Generally, you will petition the court to request your debt is either reorganized under Chapter 13 bankruptcy filing or discharged fully under a Chapter 7 bankruptcy. In either situation, the court will work to sell assets to pay off any debt. Then, they will send warnings to all of your creditors about your plans to discharge the debt.

After a period of time, the court decides whether or not to allow you to receive a discharge or provides you with steps to take first. In nearly every situation, you must prove you need to do so in order to maintain or improve your financial wellbeing. The process is not simple and should be taken seriously, but can offer you some financial help and peace of mind if you simply cannot repay your debts.

What About Collections?

When you file a bankruptcy request with the court, an immediate automatic stay goes into effect. This process means the court has paused all collection of your debt from anyone. Any collection action taken against you to this point is paused. And, your creditors cannot attempt to collect on the debt either. It will remain this way until the court determines if it will discharge the debt. If it does not do so for any reason, your creditors can continue to request payment.

What Type of Debt Is Discharged in Bankruptcy?

This depends on a variety of situations. It also depends on the type of bankruptcy you file. Here is a closer look.

Chapter 7 Bankruptcy Discharge

The filing of a Chapter 7 bankruptcy is designed to result in a discharge of most of the debts you list on your Chapter 7 bankruptcy schedules. If you file Chapter 7, you are stating to the court you are insolvent, which means you do not have the means to repay your debt or doing so would take a long time and be a financial burden for you.

However, there are a number of exceptions to a discharge.  For example, debts that may not be discharged in your Chapter 7 are most taxes, child support, alimony, student loans, court ordered fines and restitution, debts obtained through fraud or deception, and personal injury debts caused by driving while intoxicated or taking drugs.  Your Chapter 7 discharge may be denied entirely if you destroy or conceal property; destroy, conceal, or falsify records; or make a false oath.  Creditors cannot request you to pay any debts which have been discharged in your Chapter 7 bankruptcy.

A creditor can challenge a discharge of their debt by filing a Complaint to Determine Dischargeablity.  If the creditor wins the lawsuit against you, the debt not be discharged. If a creditor who was discharged in your Chapter 7 bankruptcy tries to collect from you after the discharge is granted by the bankruptcy court, you will have a claim against that creditor.

In this type of situation, the trustee will divide any type of assets you own that are not otherwise protected under the Bankruptcy Code to your creditors. For example, if you own two cars, it may force the sale of one of those cars. In doing so, the funds from the sale are then split amongst your creditors.

Then, all remaining debt is discharged. This means you do not have to repay it and creditors cannot move forward with any type of collection on it. An order of discharge gives you the legal right not to continue to make payment. This type of bankruptcy is best for:

• Unsecured debt such as a credit card or medical bills
• Personal liability such as a personal loan
• Other types of unsecured debt or secured debt you no longer wish to repay.

You will need to work through a financial management program after this occurs.

In some situations a debtor may choose to voluntarily pay back a creditor who was discharged in a Chapter 7.  I have seen this happen with clients who owe money to a doctor that they really like and want to continue to see after the bankruptcy case is closed.  The repayment of discharged debt must be completely voluntarily on the part of the debtor. Typically, a debtor will receive a discharge within four months of the filing of the case.  A person may receive a Chapter 7 discharge once every eight years.

In situations where a debtor has obtained a discharge by fraud, the bankruptcy court can order that the discharge be revoked.

Chapter 13 Bankruptcy Discharge

In a Chapter 13 case, the situation is a bit different. Here, you petition the court to request that it help to reorganize your debt to make it easier for you to repay. The court gathers information about your debts. It works through your creditors to develop a repayment plan. Most people remain in this repayment plan for three to five years. During this time, you make mandatory payments to the bankruptcy court. The court then makes payments on your behalf to the creditors.

Over time, you will pay down some of your debt. Some people repay all of it. However, at the end of this period of time, any remaining debt is discharged. This can help to reduce any liability you have to repay this debt.

This type of bankruptcy is best for some people including:

• Those who make too much to qualify for Chapter 7 bankruptcy
• Those who have a secured creditor, such as a car loan or mortgage, with too much equity they wish to maintain
• Individuals with a significant amount of assets (no assets are sold in Chapter 13)

You will also need to go through a financial management planning course here.

What About Your Credit Report?

Discharged debt is noted on your credit report. It will note “not paid as agreed” or “discharged in bankruptcy” on your credit report. It will remain this way for the next 7 to 10 years. You cannot remove this information.

However, over the next few years, your credit score will improve as you make better financial decisions. If discharging the debt helps you to become better at making financial decisions, it is best to use this method. It is important to work with your credit counselor and your bankruptcy attorney to understand the ramifications of filing for bankruptcy.

Can Anyone Stop the Discharge from Occurring?

Any creditor can approach the bankruptcy court and state that it does not believe the discharge should occur. This is a component of the bankruptcy process. They may find a discharge injunction with the court.

In short, this simply means the creditor does not feel the debt should be discharged. Most large creditors, such as credit card companies and lenders, are not likely to do this. However, smaller creditors may.

There are some situations in which the bankruptcy court can side with the credit, though. For example, if you lie on your bankruptcy filings, this can stop the process. In addition, if you took out the debt just before you filed for bankruptcy, this too may cause the bankruptcy case to be thrown out of the court.

What Type of Debt Cannot Be Discharged?

The bankruptcy case filing may result in your obligation to repay the debt continuing. There are some situations where you will want this to happen. For example, if you are not behind on your mortgage payments and you wish to maintain your loan long term, you can continue to do so as long as your creditor agrees.

Some debts legally cannot be discharged by the court. Here are a few key examples:

• Debt you owe for back child support
• Back taxes
• Retirement plan debt – loans you borrow from your plan
• Court fees
• Marital debts from a settlement agreement or divorce
• Fees from an HOA, Condo, or Coop

What Should You Do Now?

If you are considering the benefits of filing for bankruptcy, work with the Law Offices of Jeffrey B. Kelly. Our team can answer all of your questions. Call us for a free consultation.

As with most legal matters, the answers can be found by exploring the bankruptcy code and then discussing the situation with a knowledgeable bankruptcy attorney. Each state offers exemptions that may help some people who file for bankruptcy retain certain items. In Georgia, these exemptions are fairly clear, but can be confusing to those who do not regularly deal with them.

Exemptions Thoughts About Chapter 7 Versus Chapter 13 Bankruptcy

Before diving into Georgia bankruptcy exemptions, it is important to note that exemptions are generally more important to people contemplating Chapter 7 bankruptcy. Chapter 7 bankruptcy involves liquidation of as many assets as possible. Chapter 13 bankruptcy is more of a rearrangement of debts, which is a bit different. Still, even those who file for Chapter 13 bankruptcy may want to understand exemptions, just in case.

The basic Georgia-specific exemptions most bankruptcy filers care about are the homestead exemption, motor vehicle exemption, personal property exemption, support exemption, public benefits exemption, wage exemption, tools of the trade exemption, pension and retirement exemption, insurance exemption, and wildcard exemption.

Homestead Exemption

“Will I lose my home?” This is one of the first inquiries most people make when they start to realize bankruptcy may be the wisest way for them to get out from underneath years of mounting debt. While the thought of having to suddenly move can be scary, it can also be a practical way to pay off creditors. Nevertheless, the homestead exemption in Georgia allows some homeowners to keep their residences.

The state allows for an exemption of up to $21,500 per person or $43,000 if a couple files for bankruptcy together. That amount goes against the equity held in the house. For example, if married spouses file for Chapter 7 bankruptcy and own a home worth $150,000, they will need to know their equity stake. If it is $40,000, they are $3,000 under the joint homestead exemption. From a practical standpoint, that means they can probably hold onto their home. Plus, they can use the extra $3,000 to put toward the wildcard exemption, explained below.

On the other hand, if this same couple’s equity stake in their home was $80,000, they would need to sell it. After the sale, they would be able to hold onto $43,000 and the other $37,000 would be distributed among their creditors.

Wildcard Exemption

Although the name may sound strange, the wildcard exemption simply gives bankruptcy filers another chance to protect their assets. Georgia allows up to $10,000 in leftover equity money that is unused from the homestead exemption to be put toward another exemption. Additionally, it provides $1,200 to protect anything else. That is up to $11,200 that could go toward saving property.

Do many people actually use the full wildcard exemption? To be sure, it depends upon their situations. However, a large number of Chapter 7 bankruptcy filers decide not to hold onto their homes, or have minimal equity in the real estate property they own. Or, they do not own any real estate at all. Therefore, they can use the $10,000 plus $1,200 wildcard exemption to protect themselves in other areas.

Motor Vehicle Exemption

Like a home, a vehicle is an essential asset to most modern individuals and families. Having a working vehicle can be useful to get to and from work, or have the freedom to go to the grocery store or attend medical appointments when needed.

In Georgia, the motor vehicle exemption is up to $5,000 in equity. Again, this means that if the individual or couple has $5,000 or less of an equity stake in their vehicle, they can keep it. Of course, if the vehicle is a pricier model and they have more equity in it, they may need to get rid of it to pay down debt as part of their bankruptcy plan.

It is critical to note that the wildcard exemption has ramifications for motor vehicle exemptions, too. Someone who uses $10,000 or less of their homestead exemption equity allowance can put the amount toward saving their motor vehicle.

Personal Property Exemption

The antique piano inherited from a great-grandmother. The beautiful painting that’s actually worth several thousands of dollars. The leather living room set purchased in 1990 that still looks like new. Can these pieces of personal property be kept, or do they need to go?

The personal property exemption in Georgia is set at $5,000, which is a generous amount. Most items in homes have depreciated greatly over the years and are not worth very much in terms of resale value. Still, some personal belongings may command high rates on the open market. Plus, each item only has a cap of $300. Consequently, a musical instrument such as a baby grand piano may be worth $3,000. Although $3,000 is less than the $5,000 exemption, it is $2,700 more than the $300. That means it should be sold. From a realistic standpoint, though, an item that is worth $325 may cost more to sell than $25. In that case, the item usually stays in the bankruptcy filer’s possession.

It should be noted that jewelry can be protected up to $500 rather than $300. So are $7,500 in lost future earnings and $10,000 in personal injury lawsuit case recoveries. Burial plots are completely covered by the personal property exemption as long as the homestead exemption has not been used. And home health aids are generally protected in their entirety, no matter how much their resale value.

Support Exemption

Where does support, such as child support and alimony, fall into the picture when it comes to protecting assets during Chapter 7 bankruptcy? Georgia protects all child support and alimony proceeds that have been assigned by the court as necessary.

Public Benefits Exemption

Persons who have filed for bankruptcy are entitled to keep any unemployment compensation, workers’ compensation amounts, Social Security benefits, and related benefits. They should talk with their bankruptcy attorney in detail about the best way to save incoming benefit monies to avoid future debt issues.

Wage Exemption

How much of their wages do bankruptcy filers in Georgia have the opportunity to keep? The state caps the percentage at 75 percent of earned, unpaid weekly earnings. If the 75 percent of earnings is less than 40 times the United States’ accepted hourly minimum wage, the minimum wage amount will supercede the 75 percent of earnings.

Be aware that bankruptcy court judges can sometimes change wage exemptions for people who fall into very low income status.

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. These tools of the trade could be anything from a laptop to hammers and saws.

Pension and Retirement, and Insurance Exemptions

Retirement accounts including IRAs and 401(k) setups can be retained at their full value, regardless of whether an individual files for Chapter 7 or Chapter 13 bankruptcy. The same is true of pensions. However, only $2,000 of unmatured life insurance cash value equity can be kept by bankruptcy filers.

Answering Tough Bankruptcy Exemption Questions

Under the best of circumstances, filing for bankruptcy can be a complex process. If you are thinking about using bankruptcy law to help you either get a little breathing space or give you a fresh start, please contact the Law Office of Jeffrey B. Kelly at (770) 637-1756. During your initial consultation, you may want to discuss exempt property considerations, as well as other aspects of how bankruptcy may affect you and your family.

Hiring a Bankruptcy Lawyer Versus Filing Pro Se

When you file for bankruptcy without the help of an attorney, you are considered a pro se filer. Pro se filers often have the best of intentions, but may find the process much more difficult than they assumed it would be. There are a few reasons for this reaction:

• Emotions. It can be very challenging being the person filing for bankruptcy and also the one who has to walk alone through the bankruptcy process alone. Not only do you have to figure out how to do everything on your own, which can lead to mistakes and inefficiencies, but you have no one to ask for legal advice.
• Laws. The laws surrounding filing for consumer bankruptcy can be confusing, even for people who are well-versed in the legal profession. Plus, bankruptcy laws and regulations can change over time. A law firm that has a reputation for handling a lot of bankruptcy cases has a better handle on how to lawfully and correctly navigate the bankruptcy process.
• Continued guidance. After moving your bankruptcy case through bankruptcy court, you will be on your own. Many people forget that this can be a time when they are most apt to revert to the habits that contributed to their debt problems. Again, having a bankruptcy lawyer prepare you to handle this transitional period can be invaluable.

Are you concerned that you might not be able to afford an attorney to represent you? Discuss the possibility of a modest retainer followed by payment plans to help you get the assistance you need.

Signs You May Want to Consider Bankruptcy

At this point, you may still not even be sure that filing for Chapter 7 or Chapter 13 consumer bankruptcy makes sense for your situation. Some commonalities among people who end up taking advantage of bankruptcy as a means to reduce or eliminate most of their debts include:

• You can no longer keep up with your debts. Even with your income, you see no way to pay off what you owe.
• You are overwhelmed by constant calls from creditors demanding their money. This is leading to stress, depression, and other mental and physical problems.
• You had an unexpectedly large expense, such as a medical bill, that completely wiped out your savings. Now, you are swamped in consumer debt and cannot make ends meet.
• You went through a difficult life change, such as divorce. The bills keep piling up and you are unable to pay off everything fast enough.

These are all indicators that it may be worth talking to a bankruptcy attorney during a free initial consultation to see if Chapter 7 or Chapter 13 bankruptcy is a viable next step.

About Chapter 7 or Chapter 13 Consumer Bankruptcy

The two types of consumer bankruptcy available to individuals or married partners are Chapter 7 and Chapter 13.

Chapter 7 bankruptcy involves getting rid of most of your assets in order to pay down your debt and pay off creditors as much as possible. In a Chapter 7 bankruptcy case, you may very well lose your house and other property. However, Chapter 7 gives you a fresh start by getting you as close to zero remaining debts as possible. Despite the downsides to Chapter 7, it can be the right decision under specific circumstances.

Chapter 13 bankruptcy is a bit different because it is meant for people who just need extra time to pay off their debts. In other words, Chapter 13 is a good solution if you have a steady paycheck and simply need a way to reduce the amount you owe every month with each of your creditors. A bankruptcy attorney will work with you to develop a plan to negotiate new payment arrangements with creditors so you can get out of debt within about three to five years.

Whether you choose Chapter 7 or Chapter 13 bankruptcy, you should remember that your credit will take a hit for at least seven years. However, this can be a small price to pay in order to get yourself in a better financial position.

Getting a Fresh Start With a Good Bankruptcy Attorney

If you have been inundated with calls, certified letters, and emails from debt collectors from Georgia and beyond, do not despair. Bankruptcy may give you an opportunity to recover from even a serious financial crisis.

To schedule an appointment with a bankruptcy lawyer at the Law Office of Jeffrey B. Kelly, please call (770) 637-1756 to talk with a compassionate member of the team. You can also start the process to schedule a free, no-obligation consultation about bankruptcy by making a request online at our website.

Bankruptcy does not have to be the end. It can offer new beginnings and give you the breathing room you deserve. Contact our bankruptcy law firm with offices in Rome, Dalton, Kennesaw, Cartersville, Dallas, and Marietta, GA, today.

Although it is not for every person or situation, bankruptcy can be a legal way to get out of debt under the right circumstances. In fact, figures supplied by the United States government indicate that around three-quarters of a million bankruptcies are filed annually.

What Happens When You File for Bankruptcy

Bankruptcy proceedings allow you to finally catch your breath and get out from under debt that would otherwise keep piling up and drag down your credit ratings and reputation. When you file for bankruptcy, the majority of your debts will be reduced or eliminated. For instance, if you owe quite a bit on your credit cards, which is a type of unsecured debt, you may not have to pay it all back.

The downside to declaring bankruptcy is that your credit report will be affected for up to 10 years. However, bankruptcy can still be a prudent decision if you know there is absolutely no way you can keep up with the money you owe creditors.

Types of Bankruptcy

The bankruptcy code involves a few types of bankruptcy choices. The two pertinent to individuals and families are Chapter 13 and Chapter 7. When you first sit down with a bankruptcy lawyer to talk about potentially filing for bankruptcy, you will work together to determine which type of bankruptcy is best suited for your situation. Be aware that specific types of debt, such as student loans and mortgages, may not be completely wiped from your responsibility in Chapter 13 or Chapter 7. Still, your debt load will likely be reduced to a point where the remaining debt is easier to repay.

No matter which type of bankruptcy you decide is right for your needs, you can be expected to undergo a certain amount of credit counseling. Otherwise, the bankruptcy courts will not honor your request for this type of legal solution to your debt problem. Credit counseling can help you learn how to better manage your income and expenses for the future.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is one way of reorganizing and consolidating your debts without losing assets such your house or car. Under Chapter 13, you would create a repayment plan to get your debts in order and pay them off systematically.

In order to qualify for Chapter 13, you must have unsecured debt of less than $394,725 and secured debt of less than $1,184,200. Unsecured debt is debt that is not backed by the value of an asset. Secured debts, such as real estate properties, use the asset as collateral. Thus, secured debts can be seized in the case of default. Plus, you must complete your repayment plan within a pre-arranged number of years, usually no more than five.

Generally, Chapter 13 is best suited for those who have a steady income. In other words, they know how much money is likely to come into their household per month. This gives them a starting point for constructing a plan to pay the debt at a steady pace without incurring additional interest, in most cases. After the repayment plan is laid out, the bankruptcy courts will appoint a bankruptcy trustee to review it, negotiate the plan with all creditors, and either approve the plan or make recommendations for changes.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also a way to obtain debt relief, but it involves liquidation, not reorganization. Under Chapter 7, nearly all secured debts are sold. Therefore, individuals who file Chapter 7 typically have to leave homes they cannot afford and find another place to live. However, this may be the best decision, especially if there is no reasonable way to cover mortgage payments or payments that are already in default.

With Chapter 7, filers get a “fresh start” option. With the majority of their debt relieved, they can begin to build wealth. Even though most people who declare Chapter 7 have to walk away from their residences, cars, and other assets, they do get the chance to free themselves from the heavy weight and stress of debt.

All individuals thinking about filing for Chapter 7 bankruptcy will have to complete a Chapter 7 means test. This test examines income and expenses and is necessary to determine if someone is eligible for Chapter 7 bankruptcy. If the test shows that Chapter 7 is not a viable choice, Chapter 13 bankruptcy may be a wiser solution.

Filing for Bankruptcy

You cannot simply declare bankruptcy, file a few papers, and have your debts discharged. The process will take several months, during which time you will have to make many practical decisions. You can also expect to go through all of your expenses, income, and debts with different people, such as your bankruptcy attorney and credit counselors. Though the process can seem overwhelming at first, treat it as an opportunity to learn how to manage your money well for the future.

Remember that declaring bankruptcy as a means to debt management or discharge will affect your credit score for a long time. Choose an attorney who can help you determine how to find appropriate housing and make smart pre-filing decisions to ensure that despite the credit hit you will take, you will be ready for the reality of living without the ability to get loans, credit cards, or other secured or unsecured debts for many years.

Tips for Money Management After Declaring Bankruptcy

Regardless of whether you and your bankruptcy attorney choose Chapter 7 or Chapter 13, take the time to prepare to be a wise money manager in the coming years. Some ways to avoid bankruptcy later in life include:

• Constructing a weekly or monthly household budget and sticking to it.
• Avoiding sudden purchases, especially ones that are very expensive.
• Limiting non-essential expenses like travel, entertainment, and eating out.
• Finding ways to save a “nest egg” to support you in times of financial instability.
• Looking for lower-cost living options like buying discounted merchandise and services.
• Paying off credit cards every month rather than keeping a balance.
• Buying assets that are affordable.

Over time, you will learn how to better balance the money that is coming in and going out of your bank account. If you begin reverting to old habits, seek out advice from a credit counselor or someone who can help you overcome bad financial habits.

Choosing a Bankruptcy Attorney

Filing for bankruptcy is a very personal experience and one that can feel humbling or even embarrassing. For this reason, choose the right bankruptcy lawyer in Georgia who will give you counsel without judgment. Your objective should be to find an attorney who has extensive knowledge of federal and state laws, and who can provide you with the best representation through your Chapter 7 or Chapter 13 bankruptcy filing process.

At the Law Office of Jeffrey B. Kelly, each team member works diligently with bankruptcy clients to help them work towards the most suitable debt relief choice based on their information and circumstance. Contact us today by calling (770) 637-1761 and start the process with a free consultation. All initial meetings are held in strict confidence.

You deserve a life that is not marred by constant worry about creditors, repossessions, foreclosures, defaults, bounced checks, and debt collection agencies. Allow our team of legal bankruptcy professionals to become your trusted partner as you forge ahead without the burden of mounting debts.

There are many different types of bankruptcy available to people who find themselves in an overwhelming amount of debt and no other viable options. Two of the most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 debtors get their fresh start quickly, and Chapter 13 debtors repay their obligations based on what they can afford and not what the moneylenders demand. While both have their place, knowing the difference between Chapter 7 and Chapter 13 along with what each one entails will help you make the best decision as every situation is different.

Chapter 7

Chapter 7 bankruptcy is one of the most common types of bankruptcy declared, and it comes with the benefit of having all of your debts discharged upon filing. This means that you will be given a fresh start, as none of the debts that you have will continue after filing. Creditors are also required to cease contacting you as soon as bankruptcy filings begin to be processed by the court.

Exemptions in Chapter 7 Bankruptcy

Somewhere along the line, someone labeled this type of bankruptcy as “liquidation,” and the tag stuck. Most consumer assets are exempt from liquidation – see details for federal exemption and Georgia exemption. So, most all debtors in Georgia can keep their:

• House: Single filers can exempt up to $21,500 in home equity; joint filers may be able to double that figure. Moreover, up to $5,000 of the unused homestead exemption ($10,000 for some joint filers) can be applied to the wild-card exemption.
• Cars: Up to $5,000 in vehicle equity is also exempt. As a general rule, newer cars have almost no equity (and therefore they are of no interest to creditors) and older cars have almost no monetary value, so this exemption seems small but is actually quite generous.
• Retirement Accounts: Earned IRAs, 401(k)s, pension plans, and other nest eggs are all exempt regardless of their cash value.
• Income: 75 percent of current wages, and even more in some cases, are exempt, as are most public benefit and spousal/child support payments.
• Personal Property: Clothes, furniture, jewelry, and personal effects are all exempt up to certain limits.
• Any Other Property: Under Georgia law, debtors can exempt up to $1,200 of any otherwise non-exempt property; some joint debtors can exempt up to $11,200.

Because of these exemptions, “liquidation” is a misnomer, since most people have few, if any, non-exempt assets. Examples of unprotected assets include extremely valuable homes and vehicles, vacation homes, and inherited IRAs.

Even if an asset does not fall under a recognized or wild-card exemption, it is not automatically liquidated. The trustee (whose role is explained more fully below) has a duty to act in the best interests of the creditors and not a duty to seize as much property as possible. Assume Donny Debtor has a bass boat that he cannot exempt. Once the trustee factors in the bother and expense of seizing the boat, storing it, making necessary repairs, and listing it for sale, the trustee may well allow Donny to keep the boat.

Chapter 7 Bankruptcy Eligibility and Requirements

About six weeks after the voluntary petition is filed, the 341 Creditors’ Meeting takes place. This too is a misnomer, because the creditors hardly ever appear. In a Chapter 7, the trustee basically looks for red flags in the bankruptcy paperwork and ensures that the debtor is eligible for Chapter 7. In most cases, the discharge order follows about six on nine months later, and the case is over.

That eligibility comes from the Means Test, a relatively new addition to the Bankruptcy Code. Only people whose income falls below the average income for that geographic area can file Chapter 7. In Georgia, that figure is typically $70,325 for a family of four.

Prior to your petition being considered, the court will mandate that you go through credit counseling with an appointed financial advisor to ensure that no other options are available to you. Your assets and liabilities will be compiled by a trustee and assets you have will be sold off to pay down as much of the debt as possible, then the rest will be discharged.

Credit Score After Chapter 7

The major drawback to chapter 7 is the initial damage that will be done to your credit score after filing. Depending on where your score is, you may see a drop of up to 200 points in your score, and chapter 7 stays on a credit report for 10 years after filing has taken place. Chances are if you are in a position considering bankruptcy, your credit score could be damaged just as badly by missed payments if it has not already been. There are steps that you can take to help repair your credit score as well, such as attaining secured lines of credit or getting larger loans as your credit score begins to improve. In some cases, individuals can even get their score back to where it was before the bankruptcy within 5 years of filing.

Chapter 13

Chapter 13 Bankruptcy is often considered to be ideal for people who have a source of income and a desire to repay their debts, but because of life circumstances or high-interest rates are unable to do so.

Chapter 13 bankruptcy will re-structure debt instead of eliminating it as chapter 7 does. Most often, people considering this option are expecting a life change like a promotion or new job, and the debt is only difficult to manage for the time being. This plan will also allow for the debtor to keep most assets, as the debt will not be eliminated, simply made more manageable. The court will create a plan for the debtor to pay off the debts and will dictate the new terms of the loan. This can be a huge benefit to the debtor, as the creditors will not have a say in new interest rates or payment schedules. The debtor is also protected from any wage garnishments, lawsuits, or contact by the creditor.

Chapter 13 Exemptions and Eligibility

There is no eligibility requirement for the “wage-earner” or “repayment” plan, and the same exemptions apply. The main difference between Chapter 7 and Chapter 13 is the debtor’s financial goal. Liquidation is a great way to quickly get rid of excess debt and start over; the repayment plan gives debtors a chance to catch up on delinquent debt, like past-due mortgage payments, so they can still keep the property.

Chapter 13 Repayment Plan

Chapter 13 repayment plan normally lasts either three or five years. In addition to the voluntary petition, the debtor files a proposed repayment plan. Later, instead of simply reviewing the paperwork, the trustee essentially places the debtor on an allowance for the repayment period. After paying for monthly essentials, the debtor gives any excess money to the bankruptcy trustee for distribution among the creditors. Secured creditors (house, car, and so on) must be paid in full; unsecured creditors (credit card, medical bill, and so on) divide whatever is left. Any remaining unpaid unsecured debt is discharged.

Credit Score After Chapter 13

Chapter 13 will stay on an individuals credit score for 7 years after the filing and the initial impact to a credit score will not be as large. As with chapter 7, it is still possible to bring your credit score back up. However, this type of bankruptcy should really only be considered by individuals that will be able to make the payments on the re-structured debts.

Non-Consumer Bankruptcies: Chapter 11 & Chapter 15

Chapter 11 is almost exclusively used by corporations who want to continue business. Similar to chapter 13, debts will be repaid through a court-approved reorganization plan. For individuals who own shares in a company or even own their own business, going into chapter 11 is not the end of the company, merely an attempt to get back to profitability. Options vary for companies under chapter 11 on how to deal with the debt, whether that be a simple re-structuring or a discharge of some contracts and debts while others are repaid.

Chapter 11 reorganization is a very complex proceeding that few consumers file. In addition to the complexity, it is very expensive (the filing fee alone often exceeds $1,500), so while Chapter 11 is ideal for large or medium-sized companies that need to make major changes in order to return to profitability and also need the protection of the bankruptcy court, Chapter 11 is not really for consumers.

Chapter 15 is not really a consumer bankruptcy either, especially after the Second Circuit Court of Appeals in New York basically changed the eligibility requirements in 2014. Moreover, in most cases, only municipal governments can file Chapter 9. A fourth type (Chapter 12) only applies to a handful of family fisheries and family farms.

What Can I Do?

Both Chapter 13 and Chapter 7 involve an automatic stay, at least in most cases. While the case is pending, most creditors may not garnish wages, foreclose on property, pursue civil lawsuits, or otherwise attempt to collect on a debt without special permission from the bankruptcy judge.

Whatever situation you find yourself in, declaring bankruptcy does not necessarily mean the end of the world. Some situations of overwhelming debt call for extreme action like bankruptcy and your wellbeing is something to consider in these situations. If you cannot afford even basic necessities because of your debt, it may be time to consider bankruptcy.

Although you may be able to find bankruptcy petitions that you can file by yourself online, it is still the best option to contact a bankruptcy attorney in Georgia. Having someone experienced in bankruptcy can first help you evaluate if it is the best option first, and then help you with the petition itself. It is not uncommon for people to keep their most important assets when they have assistance in these cases.

How Can Chapter 7 Bankruptcy Help You Surrender Your Car?

Chapter 7 provides vehicle owners with an ability to get out from under a debt they can no longer pay or no longer want to pay. This means it allows you to surrender – or give up – your car so you no longer have to keep making payments on it. Once you file for bankruptcy, an automatic stay goes into place. At this point, you no longer have to keep making payments on your car. Your bankruptcy attorney will tell you if you will need to repay your debt at all. In most cases, the debt is forgiven.

Should You Give Up or Keep the Car?

In some situations, individuals want to give up the asset they own during bankruptcy, including vehicles of all types. This includes cars, trucks, recreational vehicles, collector’s vehicles, and any other style. For example, you may have a car you owe money on. You are still repaying the loan, but you do not want to keep doing so after the bankruptcy. It is possible, then, to surrender the car as a part of the Chapter 7 bankruptcy process. In doing so, the bankruptcy administrator takes possession of the vehicle, sells it, and distributes the funds to the listed creditors.

Key Advantages of Surrendering a Car

Making the decision to surrender a car takes careful consideration. There are a few advantages and disadvantages to doing so.

Stop Making Loan Payments

One of the most important benefits of surrendering a vehicle is you no longer have to make payments on it. You do not owe anything to the lender once the bankruptcy is complete. If you don’t need the car, this offers a key solution. It also eliminates the risk of auto repossession.

The Car’s Value Is Lower Than What Is Owed

For those who own a vehicle that is not worth as much as owed on it, this can provide an opportunity to get out from under an underwater debt. If you could not sell the car to recoup enough to pay back what you owe, this is an option.

Get Out of a Lease

For those who lease rather than own the vehicle, the same rules apply. It is possible to turn the leased vehicle back into the dealership. In doing so, you do not have to pay any excess mileage on the vehicle, fees for wear and tear, or other costs associated with the lease. Again, if the vehicle is facing excessive costs, this makes financial sense.

Improve the Budget Flexibility

Perhaps the most important reason to do so is to clear away the expense. The goal of bankruptcy is to make it easier to meet your financial goals and to be financially stable. If the existing car loan would make it difficult for you to make your home loan payment, for example, getting rid of it is beneficial. It’s important to plan for your financial situation after bankruptcy.

The Disadvantages of Surrendering a Car

Surrendering a vehicle has drawbacks, most importantly the loss of transportation. You no longer get to keep the car. It also means obtaining a new car may be a bit more difficult. Bankruptcy will make it harder to obtain a new car loan right away. And, when you do qualify, the loan will likely have a high-interest rate. Your credit score is likely to drop for some time after filing for bankruptcy.

What Should You Do Next?

When filing bankruptcy, your attorney will discuss your vehicle with you. Tell our attorney you want to surrender it. The Statement of Intention for Individuals Filing Under Chapter 7 Bankruptcy document is then completed. The court then must approve the repossession of the vehicle by the current car loan holder. The creditor is then able to sell the vehicle at auction to recoup its investment.

For those who own a vehicle with a cosigner, the situation is a bit different. The cosigner remains legally responsible for the balance of what is owed after the car is auctioned. For example, if you owe $3,000 on the vehicle and the creditor sells it for $2,000, the cosigner may be responsible for the remaining $1,000. Stipulations may apply.

Thinking About Filing Chapter 7?

Making the decision to file Chapter 7 isn’t want to take lightly. This is even a bit more challenging when you wish to surrender your vehicle. Investing in the right professional help ensure you follow the process required under bankruptcy law.

Contact us to learn more about your options, concerns, and how you may be able to keep or surrender your car during bankruptcy.