Bankruptcy Laws in Georgia: What Happens to Your Debt?
Bankruptcy can be a daunting process, but understanding the basics of bankruptcy laws in Georgia can help ease your concerns regarding debt management. In Georgia, the bankruptcy process is governed predominantly by federal law, meaning that the general rules apply uniformly across all states. However, state-specific variables can impact certain aspects of bankruptcy, including exemptions and the handling of debts.
When considering bankruptcy, it’s essential to know the two primary types of bankruptcy individuals in Georgia may file: Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves selling off non-exempt assets to repay creditors. In Georgia, it’s notable that individuals or households whose income is below the median income level for their family size may qualify for Chapter 7. If you qualify, most of your unsecured debts, such as credit card debt and medical bills, can be completely discharged.
Exemptions play a crucial role in Chapter 7 filings. Georgia residents can use state-specific exemptions to protect certain assets from being sold. For instance, Georgia allows exemptions on equity in your primary home (up to certain limits), personal property, and vehicles, which can be crucial for retaining essential assets after bankruptcy.
Chapter 13 Bankruptcy
Contrastingly, Chapter 13 bankruptcy is known as a reorganization bankruptcy. This option allows individuals with a regular income to create a plan to repay all or part of their debts over three to five years. If you have a significant amount of debt but want to keep your assets, Chapter 13 may be the better option.
Under Chapter 13, you can keep your property while making installments to a trustee who distributes these payments to creditors. Importantly, once you file for Chapter 13, an automatic stay goes into effect, preventing creditors from pursuing collection actions against you during the repayment period.
What Happens to Your Debt?
Upon filing for bankruptcy in Georgia, an automatic stay is applied to your debts, meaning most creditors must cease any collection actions. In the case of Chapter 7, qualifying debts can be discharged entirely, providing a fresh start. However, certain types of debt, such as student loans, child support, and some tax debts, are generally non-dischargeable.
In a Chapter 13 scenario, debts are reorganized. A repayment plan is established based on your income and expenses, and creditors are paid according to this plan. At the successful conclusion of the repayment period, any remaining eligible unsecured debts can be discharged.
Impact on Credit
Filing for bankruptcy will impact your credit score, and it can remain on your credit report for up to ten years, depending on the chapter under which you filed. However, many individuals find that, once their debts are discharged, they can begin to rebuild their credit more efficiently than when they were struggling with overwhelming debt.
Conclusion
Understanding bankruptcy laws in Georgia is essential for anyone considering this route to manage debt. Each person's financial situation is unique, so consulting with a qualified bankruptcy attorney can provide guidance tailored to your circumstances. Choosing the right path can lead to a fresh start, offering a chance to regain control over your financial future.