Chapter 7 Overview
Chapter 7 bankruptcy is a liquidation bankruptcy that allows you to wipe out most of your unsecured debt. Chapter 7 bankruptcy filers in Georgia often ask if they can keep their houses and cars in bankruptcy. Yes, you can even keep your house and your car in a Chapter 7. To qualify to file a Chapter 7 bankruptcy case in Georgia, you must have not filed a Chapter 7 bankruptcy less than eight years ago and must also meet an income test that is referred to as the “means test.” The means test uses median income for your household size as a threshold for qualifying to file Chapter 7. That is, if you and your spouse earn less than median income for your household size within the six months preceding filing, you qualify to file Chapter 7. Median income in the Atlanta, Georgia area for a family of 2 is $50,712.00 per year. Even if you do not earn less than median income for your household size, you may still qualify to file for a Chapter 7 in Georgia because deductions for mortgage payments, medical bills, health insurance, childcare, taxes, and other expenses are allowable.
In Chapter 7 bankruptcy in Georgia, a trustee is assigned to your case. The trustee is assigned to your case for the purpose of ensuring that all of your creditors are treated fairly. The trustee looks at the list of your assets and your liabilities to determine if you have any assets that can be sold to pay back creditors. If you do have assets that can be sold, the trustee will sell those assets and pay your creditors back on a pro rata basis with the proceeds of the sale. Although liquidation may be common in a business Chapter 7 bankruptcy, this type of liquidation normally does not happen in a typical consumer Chapter 7 case.
Liquidation is subject to what are called “exemptions” in bankruptcy. Although bankruptcy law is a federal law, each state may choose to use its own exemptions. In Georgia, a debtor in bankruptcy may exempt up to $21,500.00 for real estate in which the debtor resides under the homestead exemption. Georgia bankruptcy exemptions also protect vehicles, 401(k)s, IRAs, or other retirement plans, some cash, and household goods and furnishings in a Chapter 7 bankruptcy case.
You may wonder how a $21,500.00 homestead exemption can protect your house in a Chapter 7 if your house has a higher fair market value. The trustee will not be interested in selling your home if it does not have equity. For example, if your home has a fair market value of $100,000, and you have a mortgage in the amount of $110,000, then the mortgage company’s interest in the home exceeds the value of the home. Thus, if the trustee sold your home, the trustee would not receive a net profit. In that situation, you would not even need that homestead exemption to keep your home. Under the same scenario, if your mortgage was only $78,500.00, then you would have to apply the $21,500.00 homestead exemption to protect your home from sale.
In addition to making sure that your home is not subject to sale when filing a Chapter 7 in Georgia, you must be sure that your mortgage payment is current in a Chapter 7 in order to avoid foreclosure in Georgia. Mortgage companies will not normally foreclose on your home in a Chapter 7 if you keep your monthly payments current. Even if you are not current on your mortgage payments in a Chapter 7, you can work with your mortgage company outside of the bankruptcy case in order to modify your monthly payments or address the mortgage arrears. There are HUD-approved programs to help homeowners work on mortgage modifications to save their homes.
Another question you may have about bankruptcy is if you can keep your car in a Georgia Chapter 7 bankruptcy. The answer is yes. In a Chapter 7 bankruptcy, you can keep normally keep your car. If you own your car outright, then you will have to make sure that you have enough exemptions to protect the vehicle from sale by the trustee. In Georgia, the exemption for a car is $3,500 per debtor. If your car is worth more than $3,500, there is a possibility that you can apply an additional $5,600 exemption to keep your car in bankruptcy. If you have a car loan, you must keep your payments current in order to keep your car in bankruptcy. You may also be required to sign what is called a reaffirmation agreement to keep your car in bankruptcy. A reaffirmation agreement requires you to keep continue to be obligated to your car creditor, even after the bankruptcy case is closed.
Some debts in bankruptcy are not dischargeable, including student loans and taxes. However, income taxes that were filed more than three years before a bankruptcy filing are usually dischargeable. Further, if a debtor in bankruptcy is able to prove that he or she is suffering from an undue hardship that will prevent the debtor from repaying the student loan debt, then it may be possible to discharge student loan debt.
After you file a Chapter 7 bankruptcy case in Georgia, there is normally one hearing known as the 341 Meeting of Creditors, where the trustee and creditors can ask you questions. The trustee’s questions are typically aimed to see if you have any assets that can be sold to repay creditors. The trustee also conducts an examination to see if any fraudulent transfers of property were made prior to filing. Creditors have the right to appear at the hearing and ask you questions. However, it is rare that creditors appear at this meeting of creditors.
You are required to take two credit counseling courses in order to file Chapter 7, one before you file and one after you file. At the end of your bankruptcy case, the court will order that your debts are discharged, giving you a “fresh start.” The filing fee for a Chapter 7 is $306.00. Other fees include fees for credit counseling, tax transcripts, and credit reports. Attorneys’ fees for a Chapter 7 in Atlanta, Georgia vary depending on your specific case. If you have any further questions about Chapter 7 bankruptcy in Atlanta, Georgia, please call Law Offices of Charles Clapp at (404) 585-0040 or contact us on the web for a free consultation with an Atlanta bankruptcy attorney.