Filing for bankruptcy is never a decision to be made lightly, but it is sometimes the best solution to debt problems. At The Dolhancyk Law Firm you can be sure that you will receive excellent legal advice concerning your financial problems and that you will be treated with compassion and respect. With over 30 years of bankruptcy experience, our attorney knows a thing or two because he’s seen a thing or two (yes, sort of like Farmer’s Insurance).
The laws concerning the types of bankruptcy are complicated. Hopefully, this article will provide you with some clarity about Chapter 7 bankruptcy.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is designed to permit an individual or married couple (or, in certain cases, a business) struggling unsuccessfully to keep ahead of heavy debt to wipe the slate clean. Otherwise known as “liquidation,” “straight bankruptcy,” or “complete bankruptcy,” Chapter 7 is the most frequently filed type of bankruptcy among individuals. Although for individuals and married couples, straight bankruptcy can provide a fresh financial start, businesses are only allowed to file Chapter 7 if they are willing to liquidate their assets and close up shop.
When Chapter 7 bankruptcy is filed by individuals it is called “personal” or “consumer” bankruptcy, whereas when it is filed by a business it is known as “non-consumer” or “business” bankruptcy. Chapter 7 bankruptcy proceedings usually take 3 to 6 months.
When married couples are considering filing for Chapter 7, they can either file individually or jointly. In most cases, it’s advantageous for them to file jointly since doing so will protect more of their property and discharge more of their debts.
Whoever is filing Chapter 7 should be working with a skilled bankruptcy attorney. Because the ins and outs of bankruptcy are complex, it is essential that you receive good legal counsel in deciding which steps are appropriate to take in your particular case. Beyond that, there are eligibility requirements, time limits, and types of filing that require the knowledge of an experienced lawyer.
Reasons for Filing Chapter 7 Bankruptcy
There are several common reasons that individuals or married couples get into financial trouble serious enough to require filing for bankruptcy, including:
- Extended unemployment
- High medical expenses due to severe injury or illness
- Build-up of excessive credit card debt
- Marital or other family problems
It should be noted that disabled veterans whose debts were incurred during active duty and people whose debts come primarily from the operation of a business get a “fast pass” to Chapter 7 bankruptcy.
What makes Chapter 7 bankruptcy especially attractive in some cases is that it liquidates assets to pay off as much debt as possible and discharges all dischargeable debt. This means that the debtor is no longer liable for a certain portion of his/her debts; this provides both financial and emotional relief.
Chapter 7 bankruptcy is typically filed when:  there is no hope of repaying existing debts  there are no cosigners to take over liability and/or  court action is about to be taken by creditors. When a Chapter 7 bankruptcy has been filed, a trustee is appointed by the court to gather the debtor’s non-exempt assets, convert them into cash and distribute them to the creditors in accordance with bankruptcy law. In most cases, this means that the debtor is released from personal liability for dischargeable debts.
Property Exempt from Chapter 7 Bankruptcy
When you file for Chapter 7 bankruptcy, even though some of your property may have to be sold to repay a portion of your debt, you are entitled to keep personal property that is deemed “exempt” under state or federal law. While in some states you are permitted to choose whether you want to follow federal or state bankruptcy exemptions, this is not the case in Georgia. In Georgia, you must follow the Georgia state exemptions.
Nonetheless, there are a number of non-bankruptcy federal exemptions you may use in addition to the Georgia bankruptcy exemptions. The federal non-bankruptcy exemptions protect items such as federal and military retirement accounts and disability benefits up to a certain amount. You are allowed to keep your retirement accounts, as long as you don’t cash them in. You are also permitted to retain child support, alimony, personal injury or wrongful death recoveries, and insurance policy proceeds.
Property commonly considered exempt in Chapter 7 bankruptcy cases in Georgia also includes:
- 100% of Social Security, IRAs, pensions and other retirement benefits
- $21,500 per individual or $43,000 per couple for homestead
- $1,200 “Wild Card” exemption, typically used to keep checking accounts (an additional $10,000 may also be available)
- $5,000 Vehicle exemption
- $5,000 Household goods exemption
- $500 Jewelry exemption
There are a number of other exemptions possible in Chapter 7 bankruptcy cases in Georgia. Your bankruptcy attorney will carefully go over these with you and explain which are applicable in your case.
Which debts are discharged in a Chapter 7 bankruptcy proceeding?
When you file for Chapter 7 bankruptcy, a distinction is made between secured debt and unsecured debt. Secured debt means debt attached by contract to property, such as a car loan. Unsecured debt is debt for which you have pledged no collateral, such as medical debt or credit card debt.
Some of your property may be sold in order to pay down your unsecured debt. Let’s say you owe a large amount of money on your car loan. In such a case you have three choices:  you may choose to allow the creditor to repossess the vehicle  you may continue to make your monthly payments, or  you may pay the creditor a lump sum equal to the current replacement value of the property. Most or all of your unsecured debt, however, will be wiped away.
Eligibility for Chapter 7 Bankruptcy
There are many parts to the decision concerning which type of bankruptcy to file, not all of them under your control. Not everyone can file for Chapter 7 bankruptcy. If your disposable income is considered high enough for you to schedule a Chapter 13 repayment plan, you won’t be permitted to file for Chapter 7 bankruptcy. Also, it is worthwhile to remember that In order to qualify for Chapter 7 bankruptcy, you must be able to prove that you received credit counseling from an approved agency within the 6-month period before filing.
Depending on the type of debts that are plaguing you, your bankruptcy attorney may offer you other options. If the bulk of your debt is medical bills, credit card debt, or other types of unsecured loans, Chapter 7 is a good option. If, however, you are over your head because of accumulated tax debt or back child or spousal support payments, Chapter 7 will not be helpful.
Ineligibility for Chapter 7 Bankruptcy
You will be considered ineligible to file for Chapter 7 bankruptcy if you:
- Have an income over an amount that will not pass the “means test”
- Have filed a previous Chapter 7 bankruptcy within the past 8 years
- Have filed a Chapter 13 bankruptcy within the past 6 years (ask our attorney for the exceptions to this rule!)
- Are perceived by the court as attempting to cheat your creditors
- Have filed for bankruptcy and had your case dismissed because you violated a court order or because your filing was considered fraudulent
You should be aware that your finances will make the court suspicious if an investigation reveals that you have:
- Given assets away to hide them from creditors or from the bankruptcy court
- Run up debts for luxury items when you were already in serious financial trouble
- Attempted to conceal assets during a divorce proceeding
- Lied about your income or debts on a credit application
If you are found to have deliberately hidden assets from the bankruptcy court or lied about any of the financial information you provided, not only will your case be dismissed, but you will very possibly be prosecuted for fraud. It is always best to be completely honest when dealing with bankruptcy matters.
Consult With a Chapter 7 Bankruptcy Attorney
Alex Dolhancyk, a knowledgeable bankruptcy attorney with 27 years of experience, is available to help you file for Chapter 7 bankruptcy or any other type of debt relief appropriate to your needs. You can count on him and his wife, who is a well-informed paralegal, to guide you through. The Dolhancyks can be reached by telephone or by filling out the convenient contact form on their website. Your initial consultation with them is always free.
The Dolhancyk Law Firm serves clients throughout Peachtree City, Newnan, Fayetteville, Fayette County, Coweta County, and Spalding County.