Though bankruptcy is considered a last resort for individuals and married couples who have gotten themselves into financial hot water, it can be a positive move. For many, it can mean a fresh start and a resolution to take responsibility for budgetary concerns and rein in excessive spending. At The Dolhancyk Law Firm, P.C., we are here to help you figure out the most effective way of dealing with your debt problems.
Reasons for Filing Chapter 13 Bankruptcy
There are several common reasons that individuals or married couples, in spite of having a steady income, get into financial trouble serious enough to require filing for Chapter 13 bankruptcy. These may include a prior period of unemployment, high medical bills, marital or other family problems, and/or excessive credit card spending. Credit card debt is often a large part of the problem because, unless each card is paid off in full each month, the exorbitant interest rates make debt pile up rapidly.
Eligibility for Chapter 13 Bankruptcy in Georgia
In Georgia, you must meet several requirements in order to file for Chapter 13 bankruptcy, including:
- Participating in a credit counseling session with an approved debt counselor
- Proving a steady source of income and submitting your W-2 or 1040 tax form
- Demonstrating that you have secured and unsecured debt within the legal limits
- Taking a “means test” to demonstrate that you cannot repay your debts without filing
- Providing a financial statement including all current disposable income
Chapter 13 Bankruptcy is available only to individuals and married couples. It cannot be used by businesses, stockbrokers or commodity brokers.
When you are considering filing for Chapter 13 bankruptcy, it is important to work with a qualified local bankruptcy attorney because although some of the rules governing bankruptcy are federal, others are specific to the state of Georgia. Alex Dolhancyk is well-prepared to make you aware of every step that has to be taken to go through a successful Chapter 13 bankruptcy proceeding. He will also assist you in coming up with a repayment plan that will satisfy the bankruptcy court, the court that has to approve the plan before it can be implemented.
Advantages of Filing for Chapter 13 Bankruptcy
Generally speaking, the advantage of filing Chapter 13 bankruptcy, rather than Chapter 7, is that in the former you get to keep your property (even your non-exempt property) in exchange for actually repaying all or most of your debts during a 3 to 5 year period.
The repayment plan that you work out with the help of your bankruptcy attorney must include monthly payments of set amounts to each of your creditors. The crux of the matter is, of course, how much your monthly payments will be. You will have to pay your unsecured creditors the value of the property you would be losing if you were filing for Chapter 7 bankruptcy. This means you will be living on a tight budget during the years of bankruptcy in exchange for being able to retain your home, your car, and your other property. Also, assuming you pay on time precisely according to your repayment plan, once you successfully complete the plan, the bankruptcy court will discharge (forgive) any remaining debt.
While many people considering filing for bankruptcy cannot afford to file for Chapter 13, if you can do so there will be a number of benefits. Besides your ability to retain your property while clearing your debs, other benefits include:
- Even though debts are not canceled, they can be reduced
- Filing protects you from collection efforts and wage garnishment (an “automatic stay”)
- Some debts will be considered dischargeable, such as debt incurred through fraud
- When your plan repays a debt in full, any co-signers are immune to creditor harassment
- During the period that your plan is in effect, the bank cannot foreclose on your home
- You have more time to pay non-dischargeable debts, like taxes or back child support
- You can stop interest from accruing on your state or federal tax debt
- You can pay different classes of creditors different percentages of payment
To clarify the difference between Chapter 13 and Chapter 7 bankruptcy: the latter
Is a liquidation whereas the former is a reorganization. Though both types of bankruptcy affect your credit score in the same way and remain on your record for 10 years, future lenders are more apt to look favorably on a Chapter 13 bankruptcy.
How will your repayment plan be structured?
With the help of a capable bankruptcy attorney, your repayment plan will be drawn up and submitted to the court. You and your attorney will have to demonstrate how much money you will have left each month after paying necessary (reasonable) monthly expenses. Your plan must then indicate how you will distribute that remaining money among your creditors.
Tax payments and child support payments will always be the first priority. Unsecured debts, such as credit card debt and medical bills, will be paid also, but usually only in part. According to the plan worked out and accepted by the court, you may be able to pay off these debts for as little as 10 percent of their actual value.
Your payment plan must also:
- Be filed in good faith
- Pay creditors at least as much as they would have received in a Chapter 7 bankruptcy
(Usually, this amount will equal the value of all of your nonexempt property)
- Use all of your disposable income for at least 3 years
Once your payment plan is submitted and accepted, you must begin making payments. In most cases, these payments are withdrawn directly from your wages.
Georgia Bankruptcy Exemptions
In Georgia, as in other states, there are exemptions that can be used when you file for Chapter 13 bankruptcy. These exemptions protect your home, your car, your retirement account, and certain other kinds of property from your creditors. It should be noted that there are federal, as well as state bankruptcy exemptions, but while in some states you can choose between using state and federal bankruptcy exemptions, in Georgia you must use state exemptions. Even in Georgia, however, you are entitled to use non-bankruptcy federal exemptions to protect your disability benefits and any federal or military retirement accounts you may have.
Common exemptions in Georgia are:
- Motor vehicle
- “Wild card” exemption, typically used to keep checking accounts
- Household goods exemption
There are a number of other exemptions possible in Chapter 13 bankruptcy cases in Georgia. Your bankruptcy attorney will carefully go over these with you and explain which are applicable in your case. In most circumstances, you will be able to protect work tools, child and spousal support payments, recovered funds from personal injury and wrongful death suits, insurance proceeds, unemployment, Social Security, disability and public assistance payments.
Double Exemptions for Married Couples in Georgia
One advantage to filing a joint bankruptcy in Georgia is that you and your spouse can double your exemption amounts. This stipulation only applies to property that is jointly owned. It does not cover, for example, a car that is owned by only one of the spouses.
Procedural Matters of a Chapter 13 Bankruptcy
Once you have filed for Chapter 13 bankruptcy, the court will appoint a trustee to oversee and control your debts and any property not covered by Georgia exemptions. The trustee will see to it that each of your creditors is paid as much as possible by comprehensively reviewing your assets and all paperwork involved. This trustee can challenge any aspect of your payments on an ongoing basis.
There will also be a meeting, known as a §341 meeting, of your creditors which you will be required to attend. If any of the creditors has an objection to your repayment plan, it will hopefully be negotiated and resolved at this meeting; if not, a judge will make a final decision.
You will also have to attend a hearing before a bankruptcy judge to have your repayment plan confirmed. Assuming that you make your payments consistently and on-time, and complete debt counseling, the dischargeable debts you owe at the end of your bankruptcy period will be discharged.
As you can see, filing Chapter 13 bankruptcy is a complicated undertaking. Nonetheless, it may be your salvation, providing a new, healthy beginning to your financial life. Having the assistance of The Dolhancyk Law Firm will be invaluable. The Dolhancyks are a highly qualified, compassionate legal team with the experience and skill to see you through this difficult period with as little stress as possible. You can reach them by phone or through the contact form on their website.
The Dolhancyk Law Firm serves clients throughout Peachtree City, Newnan, Fayetteville, Fayette County, Coweta County, and Spalding County.