What Happens to Your Debts After Bankruptcy in Georgia?
Filing for bankruptcy can be a daunting process, bringing up numerous questions about your financial future. If you're considering bankruptcy in Georgia, one of your primary concerns may be regarding what happens to your debts following the proceedings. Understanding the implications of bankruptcy can help you make informed decisions moving forward.
In Georgia, individuals typically file for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. These two chapters have different effects on your debts, assets, and your overall financial recovery.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows you to eliminate most unsecured debts, such as credit card debt, medical bills, and personal loans. When you file under this chapter, the court appoints a trustee who may sell non-exempt assets to repay your creditors.
Once the bankruptcy process concludes, usually within four to six months, most unsecured debts are discharged. This means you are no longer legally obligated to pay them. However, certain debts like student loans, child support, and taxes owed to the IRS typically cannot be eliminated through Chapter 7 bankruptcy.
It's important to note that while Chapter 7 can provide a fresh start, not all debts are wiped away. Secured debts—those tied to an asset like a mortgage or car loan—are treated differently. You may choose to reaffirm these debts, allowing you to keep the asset, or you may decide to surrender it.
Chapter 13 Bankruptcy
Alternatively, Chapter 13 bankruptcy involves creating a repayment plan over three to five years to pay back all or a portion of your debts. This option is often chosen by individuals who have a steady income but need help managing their financial responsibilities.
During the repayment plan, creditors are prohibited from collecting debts, which can provide significant relief. After you complete the plan and meet its requirements, you will receive a discharge of remaining unsecured debts, similar to Chapter 7. However, unlike Chapter 7, you do not have to liquidate any of your property, making Chapter 13 a viable option for those looking to keep their assets.
Impact on Credit and Financial Future
Regardless of the chapter you file under, bankruptcy can have a lasting impact on your credit score. In Georgia, a Chapter 7 bankruptcy remains on your credit report for ten years, while Chapter 13 stays for seven years. However, many individuals find that rebuilding their credit becomes easier after bankruptcy, especially when they begin addressing their financial habits responsibly.
Conclusion
The aftermath of bankruptcy in Georgia holds the potential for a fresh start, but it requires careful consideration of the debt types you hold and your financial situation. Understanding the differences between Chapter 7 and Chapter 13 can empower you to make the right choices for your individual circumstances. Consult with a qualified bankruptcy attorney in Georgia to explore your options and determine the best course of action for managing your debts and securing a stable financial future.