Chapter 7 Liquidation Overview
The purpose of a Chapter 7 is to obtain a discharge or a wipe out of debts and to allow the debtor to obtain a fresh start. When you file Chapter 7, your assets are subject to liquidation; that is, a bankruptcy trustee, can investigate your ownership of assets and sell assets that are not protected by bankruptcy exemptions. Most individuals do not own any assets of significant value that will be sold.Protecting Assets in Chapter 7
Thus, assets and the protection of those assets are two key issues for Chapter 7 bankruptcy filers. In Georgia, the following exemptions are commonly used:
- Georgia Homestead Exemption: $21,500.00
- Georgia Motor Vehicle Exemption: $5,000.00
- Georgia Wild Card Exemption: $600.00, plus up to $5,000.00 of the unused portion of the homestead exemption.
- Georgia Household Goods Exemption: $5,000.00
- Georgia Jewelry Exemption: $1,000.00
- Georgia Personal Injury Exemption: $10,000.00
- Georgia Retirement (401(k), IRAs) Exemption: No limit.
Chapter 7 filers are subject to an income test that compares the debtor’s income to the average income of the same household size in the debtor’s area. Debtors who make less than that threshold income automatically qualify to file Chapter 7 (unless they have filed Chapter 7 within the last 8 years preceding the filing). Businesses or individual debtors whose debt is primarily business debt are not subject to the means test.
Debtors who earn more than the threshold income for a Chapter 7 may still file Chapter 7 by taking allowable deductions for necessary expenses such as taxes, health insurance, health care costs, car expenses, living expenses, childcare, or most other expenses necessary for the support and well-being of their families. These debtors take these deductions to show that they do not have disposable income with which to repay debts.Debts Not Discharged in Chapter
Chapter 7 does not discharge alimony, child support, certain taxes, and student loans. Further, creditors can object to debts as non-dischargeable based on elements such as fraud, criminal acts, or embezzlement. Such objections must be filed within 90 days of the bankruptcy filing.Chapter 7 Timeline
For no asset bankruptcy filers, Chapter 7 bankruptcy cases in Atlanta, Georgia normally take from 4 to 6 months from the date of filing to the date the discharge order is issued. For debtors who file and have assets that can be liquidated by the bankruptcy trustee, the process of closing the case out can take years. However, the debtor still obtains a discharge order from the court within the normal time-frame.