What are the Differences Between Chapter 7 and Chapter 13 Bankruptcy in Georgia?

There are several key differences between Chapter 7 and Chapter 13 bankruptcy, but Chapter 7 is generally described as the “liquidation” chapter of bankruptcy, while Chapter 13 is described as the “reorganization” chapter of bankruptcy.

The key features of a Chapter 7 bankruptcy case are:

  1. Means Test Requirement: To file Chapter 7 in Georgia, debtors must pass what is known as the means test(or income test). The threshold for filing Chapter 7 in Georgia is median income for your household size. If a debtor earns less than median income for his household size, he qualifies to file Chapter 7. Even if the debtor makes more than median income, he can take deductions for secured debts, taxes, child care, medical and other expenses to qualify for Chapter 7.

  2. Liquidation of Assets: In a Chapter 7 case, a debtor lists all of his assets and liabilities, and the Chapter 7 trustee looks to see if there are any assets that can be sold to pay back creditors. The Chapter 7 trustee administers the sale or liquidation of assets that are not protected by Georgia bankruptcy exemptions.

  3. Limited Filing Ability: Debtors who file Chapter 7 and obtain a successful discharge can only file Chapter 7 once every 8 years.

  4. No Repayment of Debts: In a Chapter 7 case, a debtor does not make any direct repayments of debts. The only way by which a creditor in a Chapter 7 case can be paid is if the trustee finds assets to liquidate. Under such a circumstance, the trustee will disburse the money gained from the sale of the property to the creditors.

  5. Reaffirmation Agreements on Secured Debt: Debtors who want to keep their cars in Chapter 7 bankruptcy can sign reaffirmation agreements that re-obligate them on the original terms of the note, but allow them to keep the property.

The key features of a Chapter 13 bankruptcy case are:

  1. Repayment/Reorganization of Debts: A Georgia Chapter 13 bankruptcy filer makes a monthly payment to a bankruptcy trustee for disbursement to all of his creditors. The debtor does not pay interest or late fees on any unsecured debts. The means test is applied for the purpose of determining how much the debtor should repay to his unsecured creditors. The debtor can pay between 0% and 100% of his unsecured debts. At the end of the payment plan, which is 3 to 5 years, the debts are discharged.

  2. No Liquidation of Assets: Chapter 13 bankruptcy filers can keep property, even if it is not protected by the Georgia bankruptcy exemptions. By repaying debts in an amount equal to the value of unprotected property, a Chapter 13 debtor can keep all property.

  3. Keeping Houses and Cars: Chapter 13 bankruptcy filers who have fallen behind on secured debts (such as mortgages or car payments), can catch up on their payments through the bankruptcy plan.

  4. Reduction in Amount Paid to Car Creditors: In a Chapter 13 bankruptcy, a debtor can propose to repay his car creditors the fair market value of the vehicle rather than the loan amount, if he purchased the car more than 910 days before filing Chapter 13. Further, the debtor can also reduce the interest rate.

Whether you should file Chapter 7 or Chapter 13 bankruptcy in Georgia depends on your individual circumstances. If you are considering filing for bankruptcy in Atlanta, Georgia, please contact the Law Offices of Charles Clapp at (404) 585-0040 or info@lawcmc.com for a free initial consultation.