Bankruptcy Law

Chapter 7 Chapter 13

There is no charge to meet with an attorney in consumer cases to discuss your bankruptcy options.  You will need to fill out our Bankruptcy Intake Form and schedule an appointment. CLICK HERE FOR THE BANKRUPTCY INTAKE FORM. Business owners seeking information are generally required to pay a consultation fee.

Chapter 7 and Chapter 13 are the two main chapters under which individuals can file personal bankruptcy. Chapter 7 bankruptcy is often referred to as a traditional bankruptcy or straight bankruptcy and is a liquidation of assets while Chapter 13 bankruptcy is a reorganization where the debtor pays a portion, or all, of his or her debt over a three to five year payment plan.

Chapter 7 A Chapter 7 bankruptcy discharges all a person's eligible debts in about 4 months.   The vast majority of Chapter 7 cases are no-asset cases where the debtor gets to keep everything they own.  For instance, a couple can protect $20,000 in equity in their home.   Usually a debtor with assets that he or she may wish to keep and that are not covered by exemptions files chapter 13 bankruptcy.

Are you eligible for Chapter 7? This is governed by the Means Test. 

First Step of the Bankruptcy Means Test: Check to see if the monthly average of your last 6 months gross income is below the median income in Georgia. If it is, you automatically pass the Means Test.

• (1 person household) $39,384
• (2 person household) $52,024
• (3 person household)$56,682
• (4 person household) $69,239
• Add $7,500 for each additional person in your household you are financially responsible for

Second Step of the Bankruptcy Means Test: If your income is higher than the applicable median income you may still be able to file Chapter 7. Numerous factors, including for example, actual health care costs, insurance costs, secured debt payments and child care costs, figure in the test. For example, we have clients that make in excess of $100,000 who pass the Means Test under their factual circumstances. We can let you know whether you pass the means test and are eligible for Chapter 7 after we meet. 

Chapter 13 is generally preferred by debtors who are trying to save a home from foreclosure. This is possible because under Chapter 13 a debtor proposes a plan to repay creditors over a three to five year period during which the debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions. Since the debtors plan will require regular monthly or biweekly payments, Chapter 13 is usually only appropriate for an individual debtor who has a regular source of income. Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $336,475 and secured debts are less than $1,081,400. 11 U.S.C. § 109(e). A corporation or partnership may not be a chapter 13 bankruptcy debtor. An individual cannot file chapter 13 bankruptcy or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e).

 

COMMON QUESTIONS:

1. How will bankruptcy help me?

Bankruptcy may make it possible for you to:

• Eliminate the legal obligation to pay most or all of your debts.
  This is called a "discharge" of debts. It is designed to give you a fresh financial start.
• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
• Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments.
  (Bankruptcy does not, however, automatically eliminate mortgages and other liens on your property without payment.)
• Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
• Restore or prevent termination of utility service.
• Get a fresh start on life

2. Is there anything Bankruptcy Does Not Do?

In bankruptcy, it is usually not possible to:

• Eliminate certain rights of "secured" creditors.
  A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan. Common examples are home mortgages and car loans. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
• Protect cosigners on your debts.
  When a relative or friend has co-signed a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
• Discharge debts that arise after bankruptcy has been filed.

3. How often can I file bankruptcy?

You can file for Chapter 7 bankruptcy again after eight years has passed from the date of your discharge from your last Chapter 7. A Chapter 13 cannot be filed unless: (i) The debtor received a discharge under Chapter 7, 11 or 12 more than four years ago; or (ii) the debtor received a discharge under Chapter 13 more than two years ago.

4. What Does It Cost to File for Bankruptcy?

• Court Filing Fees: It now costs $299 to file for bankruptcy under chapter 7 and $274 to file for bankruptcy under chapter 13, whether for one person or a married couple.
• Attorney Fees: We completely understand that you probably do not have a lot of money saved for attorneys’ fees based upon your situation. The attorneys’fees we charge at Lacy & Snyder LLP are significantly less than the many thousands of dollars you would pay at an expensive downtown Atlanta law firm. We are “hands on” attorneys and you will be meeting face to face with us rather than a legal assistant at all important stages of your case. Accordingly, our fees are slightly more than what you will pay at a high volume “bankruptcy mill” firm. Some of these mills file hundreds of cases a month and turn significant responsibility of your case over to a legal assistant. Indeed, we regularly observe attorneys from these mills calling out “a loud” their client’s names in the courtroom because they have never met them before.

Chapter 7: We generally charge between $950 and $1,900 depending on the facts of your case. This number can be significantly higher in complex cases involving business owners, judgment liens, tax liens, ongoing litigation and other issues.

Payment options: The aforementioned fees are based upon payments prior to filing. You can have someone else, a family member or friend, pay the fees for you. If a family member or friend pays, they can put it on a credit card. You, however, cannot.

Chapter 13: We charge a base fee of $4,000 for most cases. Some of that fee is paid up front depending on your circumstance.  The remainder of our fee will be paid over time through the three to five year Chapter 13 plan. All fees in Chapter 13 case must be approved by the Judge assigned to your case. If a case becomes unusually complicated or requires Court attendance for numerous hearings, we may ask the Judge to approve additional fees.

5. Can I file without my spouse and will my spouse be affected?

You can file a petition without your spouse. Your spouse will not be affected by your bankruptcy if they are not responsible (did not sign an agreement or contract) for any of your debt.  However, you have to provide your non-filing spouse's income information to the Court.

6. What property can I keep?

In a chapter 7 case, you can keep all property which the law says is "exempt" from the claims of creditors. For instance, $5,000 worth of household goods such as televisions, DVD players, other electronics, furniture, etc. are exempt (double this if filing jointly). Keep in mind that the value of the property for the exemption is not what you paid for it.

Under the current exemption law, you each can shelter up to $3,500 of equity in a car and up to $10,000 equity in a house. Thus, married couples can protect $20,000 in equity in their house. If you don’t own a house, you each can use $5,000 of your $10,000 house exemption as a wildcard for any property. Generally, your pensions, 401ks and IRAs are completely protected. There are other exemptions you might be entitled to which we will discuss when we meet.

7. What Will Happen to My Home?

THE BIGGEST MYTH IN BANKRUPTCY IS THAT YOU WILL LOSE YOUR HOME.   The only way you will lose your home in bankruptcy is because you can not afford to make the payments or you have excessive equity.   As stated above, a couple has a $20,000 homestead exemption.   Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.   Keep in mind that bankruptcy does not eliminate mortgages or "equity lines of credit".  Your personal obligation will go away, however, the security interests or mortgage do not go away. If you don't make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case. There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth.

8. Can I use my credit cards up until the time I file?

No. Using credit cards immediately before filing will draw an objection to your discharge. It is best not to have used them 6 months prior to filing but at least not less than 90 days prior to filing.

9. Can I Own Anything After Bankruptcy?

Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.

10. Will Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions. Bankruptcy will not normally wipe out:

1. Money owed for child support or alimony, fines, and some taxes.
2. Debts not listed on your bankruptcy petition.
3. Loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan.
4. Debts resulting from "willful and malicious" harm.
5. Student loans.
6. Mortgages and other liens which are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

11. Are Utility Services Affected?

Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills which arise after bankruptcy is filed.

12. What About Co-signers?

If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

13 Can filing bankruptcy stop bill collectors from calling?

Yes. The automatic stay prevents bill collectors from taking any action to collect debts.

 14. How long after filing will the creditors stop calling?

Once a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. We will assist you with any problems that might arise with these creditors.

 15. Can I erase my student loans by filing bankruptcy?

Generally, student loans are not discharged in bankruptcy. In 11 U.S.C. sec. 523(a)(8) there are exceptions to this general rule, which we can discuss with you. 

16. If I am going through a divorce how will my ex-spouse filing bankruptcy affect our divorce settlement?

Alimony, maintenance, and/or support are protected from discharge. Divorce decrees and separation agreements are covered by 11 U.S.C. Section 523(a).

523. Exceptions to discharge:
(a) A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt—
(5) for a domestic support obligation;
(15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.

17. What about  consumer credit counseling, debt consolidation companies or companies that claim to be able to stop foreclosure?

Be Very Cautious! Keep in mind that non-profit does not mean they are not making money or getting funded by someone (ie. credit card companies). Also, fraud is rampant during this difficult time.  You should never consider using someone outside the state of Georgia as it will be virtually impossible to go after a refund of your money.  Using a credit counselor or debt consolidation/assistance company will likely cost you more money and take you longer to rebuild your credit rating. Generally, it will cost you less money and you will improve your credit rating faster if you file Chapter 7 or Chapter 13. Also research the internet about the problems of unscrupulous companies in the credit counseling and debt consolidation/assistance industry. We have met with countless clients that have paid thousands to unscrupulous companies that did nothing for them. We will ensure that you get the protection the law provides you.

18. What is the Statute of Limitations for the legal collection of debt?

The statute of limitations for your creditors to bring a lawsuit to collect on an indebtedness in Georgia is generally six years from the date the debt became due and payable or the date you last made a payment.   If you make a payment on an older debt it may re-start the statue of limitations.  If a lawsuit is filed against you and you do not answer and raise the statute of limitations, this defense to payment will be waived.

19. What about repayments of debts to relatives?

Payments made to any relatives within twelve (12) months prior to the filing your bankruptcy case are recoverable by the Trustee in your case.   If you repaid money during that period to your sister, they will have to pay back that money to your Trustee who will then distribute it equally to all your creditors.   This insider preference is designed to prevent debtors from preferring one creditor over another.

20. Taxes

You can discharge debts for federal income taxes in Chapter 7 bankruptcy only if you meet all of these five conditions:

1. The taxes are income taxes. Taxes other than income, such as payroll taxes, Trust Fund Recovery Penalty or fraud penalties, can never be eliminated in bankruptcy.
2. You did not commit fraud or willful evasion. You did not file a fraudulent tax return or otherwise willfully attempt to evade paying taxes, such as using a false Social Security number on your tax return.
3. You pass the three-year rule. The tax return was originally due at least three years before you file for bankruptcy.
4. You pass the two-year rule. You actually filed the tax return at least two years before filing the bankruptcy -- having the IRS file a substitute return for you doesn't count unless you agreed to and signed the substitute return.
5. You pass the 240-day rule. The income tax debt was assessed by the IRS at least 240 days before you file your bankruptcy petition, or has not yet been assessed.

If any of the following situations apply to you, you will have to add time to the three-year, two-year or 240-day rules for your debts to qualify for discharge in bankruptcy:

1. If you submitted an Offer in Compromise, the 240-day rule is delayed by the period of time from when the Offer is made until the IRS rejects it or you withdraw it, plus 30 days.
2. If you obtained a Taxpayer Assistance Order from an IRS Problems Resolution Officer preventing the IRS from collecting, the bankruptcy court may require that you add the time collection was suspended to the three-year, two-year and 240-day requirements.
3. If you filed a previous bankruptcy case, all three time periods stopped running while you were in the prior bankruptcy case. You must add the length of your case plus six months to all three.

If the tax is dischargeable, the Chapter 7 bankruptcy will wipe out your personal obligation to pay the debt, and prevent the IRS from going after your bank account or wages, but if the IRS recorded a tax lien on your property before you file for bankruptcy, the lien will remain on the property. This means you would have to pay off the tax lien in order to sell the property.

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Contact Lacy & Snyder LLP today at 770-486-8445 for all of your Bankruptcy needs.