Do I Qualify to File Chapter 7 in Atlanta, Georgia?

Qualifying to file Chapter 7 in Atlanta, Georgia hinges on two main issues: assets and income. Under the 2005 revised bankruptcy laws, all individual debtors seeking relief under the bankruptcy code must undergo what is known as the “means test,” which is an income test that compares the debtor’s income to the average income of residents in the same county and state. The second component of analyzing whether filing Chapter 7 in Atlanta, Georgia is a good idea is determining whether a debtor has assets that can be liquidated to repay creditors. Luckily, there are “exemptions” under Georgia and bankruptcy law that protect most property in Chapter 7 cases.

The Means Test in Georgia

The means test or bankruptcy Form 22C is a worksheet that shows income and expenses for the purpose of deciding whether a debtor can file a Chapter 7 or how much a debtor should repay in a Chapter 13. Debtors must show income for the 6 months preceding the filing of the case. Income includes employment income, business income, pension income, and unemployment income. Income such as social security income is not included in the means test. If a debtor’s gross income is less than median income for his/her household size, then s/he qualifies to file Chapter 7.

However, if the debtor’s gross income exceeds the median income, then s/he must complete the worksheet to deduct expenses to show that s/he has no disposable income with which to repay creditors. Types of expenses that can be deducted include taxes, secured debt such as mortgages and car payments, health care costs, health insurance, childcare, mandatory retirement contributions, charitable contributions, and education costs for dependents. Often, after taking expense deductions, if there is no disposable income shown, then the debtor can file a Chapter 7.

The means test that the debtor submits is not the final say in whether one can file a Chapter 7 or not. The U.S. Trustee’s office is tasked with reviewing means test to verify deductions and to see if the debtor’s current financial state should require repayment of debt in a Chapter 13 case.

Assets in Georgia Chapter 7 Cases

One of the most common questions regarding Chapter 7 bankruptcy is whether a debtor can keep property, such as cars and homes, in bankruptcy. Most of the time, the answer is yes, as bankruptcy law provides “exemptions” that protect property in Chapter 7 cases. The Georgia exemption laws provide protection for up to $21,500.00 per person on a home; this exemption is commonly referred to as the homestead exemption. Thus, if you own a home and are considering filing bankruptcy in Georgia, you can conduct a simple analysis to see if you can use the homestead exemption to protect your home.

Let’s say your home is worth $100,000.00, and you owe your mortgage company $80,000.00. In theory, you have about $20,000.00 worth of equity in your house. Thus, a trustee could look at the home as a potential asset in bankruptcy. However, you have a $21,500.00 homestead exemption that can be applied to your home. Thus, your house is fully protected from liquidation under that scenario. However, if you owed nothing on your house and owned it free and clear, then a Chapter 7 trustee would want to sell your house and recover the net profit to pay back your creditors.

There are many exemptions under Georgia and bankruptcy law, including car exemptions, clothing household good exemptions, jewelry exemptions, cash exemptions, and retirement exemptions. It is rare that a Chapter 7 debtor actually loses property in bankruptcy.

A proper analysis by a qualified Georgia bankruptcy attorney will answer your questions as what you will be able to keep in a bankruptcy case. Call us today at 404.585.0040 to schedule an appointment with an Atlanta bankruptcy attorney.