What Happens to Credit Card Debt in Georgia Bankruptcy?
Filing for bankruptcy can be a daunting decision, particularly when it comes to understanding how credit card debt will be impacted. In Georgia, as in many other states, bankruptcy laws provide various ways to manage and discharge unwanted debt, including credit card bills.
When an individual files for bankruptcy in Georgia, they must choose between two primary types: Chapter 7 and Chapter 13. Each chapter treats credit card debt differently, which can greatly influence the outcome of a bankruptcy case.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as "liquidation" bankruptcy, is designed to eliminate most unsecured debts, including credit card debts. Upon approval of a Chapter 7 filing, the court may discharge these debts, freeing the individual from the burden of repaying them. However, not all debts are dischargeable, and certain debts like student loans or tax debts may remain payable.
In Georgia, debtors must pass a means test to qualify for Chapter 7 bankruptcy. This test evaluates the individual's income against the median income for Georgia households. If a debtor's income is below this median, they may easily file for Chapter 7. If not, they may have to consider Chapter 13 bankruptcy instead.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy differs significantly from Chapter 7 in that it allows individuals to reorganize their debts instead of discharging them outright. Debtors propose a repayment plan to make manageable payments over three to five years. During this period, individuals can keep their assets, which can sometimes include valuable property that might otherwise be liquidated in Chapter 7.
For credit card debts in a Chapter 13 case, these debts can often be reduced or restructured within the repayment plan. The plan must be approved by the court and adhere to the stipulations outlined in the bankruptcy code, which can provide debtors with a sense of control and structure in repayment.
Impact on Credit Score
Regardless of which chapter is filed, it's crucial to recognize that bankruptcy will significantly impact an individual's credit score. Both Chapter 7 and Chapter 13 will remain on your credit report for several years (usually 10 years for Chapter 7 and 7 years for Chapter 13). While this negative mark can impact future borrowing, it also provides a pathway to financial recovery.
Exemptions and Asset Protection
In Georgia, individuals filing for bankruptcy can take advantage of state exemptions that help protect certain assets from creditors. This means that even when debts are discharged, the individual may keep certain properties, which can alleviate some of the stresses associated with bankruptcy.
Consulting with a Bankruptcy Attorney
Given the complexities of bankruptcy laws, it’s highly recommended that individuals facing credit card debt in Georgia consult with a qualified bankruptcy attorney. An attorney can provide personalized legal advice, guide an individual through the filing process, and help navigate the available options based on specific financial situations.
In summary, credit card debt can be managed effectively through bankruptcy in Georgia, but the outcomes will depend on the type of bankruptcy filed and the individual's financial status. With the right guidance, individuals can find relief from crippling debt and start on a path toward financial stability.