What Happens to Unsecured Debts in Georgia Bankruptcy?
When individuals in Georgia face financial hardships, they may consider declaring bankruptcy as a way to find relief. Understanding what happens to unsecured debts during this process is crucial for those contemplating this option. Unsecured debts, such as credit card bills, medical expenses, and personal loans, do not have collateral backing them. This article explores how bankruptcy impacts these debts in Georgia.
In Georgia, individuals can file for bankruptcy under Chapter 7 or Chapter 13, the two most common types of personal bankruptcy. Each type addresses unsecured debts differently.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy." In this avenue, most unsecured debts are discharged, meaning you are no longer legally obligated to pay them. This process allows debtors to eliminate most types of unsecured debts fairly quickly, typically within 3 to 6 months of filing.
However, it’s essential to understand that there are certain criteria one must meet to qualify for Chapter 7 bankruptcy, primarily the means test. If your income is too high, you may not qualify and will have to explore other options like Chapter 13.
Chapter 13 Bankruptcy
In contrast, Chapter 13 bankruptcy is a reorganization plan, where individuals create a repayment plan to pay back their debts over a period of three to five years. With this option, unsecured debt is typically treated in one of two ways: it may be discharged at the end of the repayment plan, or some of it may be repaid depending on your financial situation.
During the Chapter 13 process, debtors have more control over their assets, which can be retained while they make payments toward their unsecured debts. However, it is important to know that the total amount you are required to pay back may depend on your disposable income and the nature of your debts.
Consequences of Not Discharging Unsecured Debts
If unsecured debts are not fully discharged in either bankruptcy type, creditors still retain the ability to pursue collection actions. Therefore, it becomes vital to have a clear understanding of which debts can and cannot be discharged when filing for bankruptcy in Georgia.
Georgia Exemptions
Georgia law allows for certain exemptions that protect your property during bankruptcy. For instance, when filing for Chapter 7, debtors can retain certain assets such as a portion of home equity, personal property, and retirement accounts. Understanding these exemptions is essential for preserving your financial stability post-bankruptcy.
Future Credit After Bankruptcy
After unsecured debts are discharged in bankruptcy, individuals can start rebuilding their credit scores. While a bankruptcy filing can initially lower your credit score, being free of unsecured debts often results in improved financial stability, allowing for obtaining new credit lines in the future.
Consulting a Bankruptcy Attorney
Navigating through bankruptcy laws can be intricate. Consulting with a knowledgeable bankruptcy attorney in Georgia can provide personalized insights tailored to your financial situation. They can guide you through the complexities of discharging unsecured debts and help you make informed decisions.
In conclusion, understanding what happens to unsecured debts in Georgia bankruptcy is vital for anyone facing financial difficulties. Whether opting for Chapter 7 or Chapter 13, knowing the implications for your unsecured debts can significantly shape your path to financial recovery.