The purpose of this blog is to give you a rough idea about why you must know the value of your house before you even think about filing bankruptcy in Georgia.  Under Georgia Law, a single person can exempt a maximum of $10,600 of equity in their house when they are filing either Chapter 13 or Chapter 7 (see GA Code 44-13-100).  For married couples filing bankruptcy in Georgia, the maximum exemption is $21,200.

Lets say a married couple has a home in Rome, GA worth $100,000.  They owe $70,000.  Their equity in the house is $30,000.  If we subtract the the exemption amount of $21,200, we are left with $8,800.  If this person were filing bankruptcy, I would recommend they file a Chapter 13 to protect their home.  In a Chapter 13, the person will have to pay back $8,800 to the unsecured creditors to protect their home in Rome.  In this situation, if the couple owes $100,000 in credit card debt, they will have to pay back only $8,800 assuming they pass the means test and their income and budget justify a composition chapter 13 plan.

In contrast, if they filed a Chapter 7, the trustee may sell the house and use the proceeds that are not exempt to pay creditors.  Could a person in this type of situation roll the dice and file Chapter 7 ?  Some Georgia bankruptcy lawyers roll the dice…….I don’t.  Some Georgia bankruptcy attorneys will argue that the cost to the Chapter 7 trustee in marketing the property and closing the deal will exceed $8,800 in transaction costs.  It might.  Why take a chance with your house when filing bankruptcy?

A good place to start when determining the value of your home is your tax bill.  Somewhere on your property tax bill, it will state “estimated fair market value.”  You can check your county tax assessment online at www.gaassessors.com.  Another way to determine the value is to call a Georgia realtor and ask them to give you an estimate on how much you should ask for your house if you were going to sell it.  The best way to determine the value is to get a certified professional appraisal.

Remember, there are exceptions to exceptions.  Don’t read this blog as legal advice.  If you want legal advice, you should call me at 888-832-8249 for your free consultation so we can see how the law applies to your situation.

Click here for Top Ten Myths About Bankruptcy

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

I recently spoke with a client who was the victim of Debt Management Company Scare Tactics.  After I met with this client and confirmed that the qualifies for Chapter 7, he went home and called his Debt Management Company and asked that they stop deducting money from his checking account because he was filing bankruptcy.  The representative from the debt management company responded that my client could not file bankruptcy.  When my client asked, “Why?”, the debt management company representative lied to my client by saying “that anyone who owns a house can’t file chapter 7.”   The debt management company representative then asked my client, “Do you own a television?”  My client answered, “Yes.”  The debt management company representative then lied to my client again and told him that the could “kiss the television goodbye.”   As you can imagine, my client was upset and disheartened after this conversation with the debt management company liar.  Fortunately, my client called me and I was able to calm his fears and set the record straight.

By telling my client that he could not file for bankruptcy, the representative from the debt management company broke the law by engaging in the unauthorized practice of law.  Some debt management companies will say just about anything to get your money.  Don’t let some debt management company scare you away from exercising your rights.  Meet with a real attorney and find out about your legal options to obtain real debt relief.

Here is the truth about debt management companies.  Credit card companies are not legally stopped from suing you for collection of the debt.  In contrast, Chapter 13 and Chapter 7 prevents credit card companies from suing you for collection.  Debt management companies have no power to force any creditor to accept a lower payment from you.  In contrast, a confirmed Chapter 13 plan payment or a Chapter 7 discharge is binding on all creditors listed in the case.  With Chapter 13 and Chapter 7 we don’t need permission from your creditors.

Taking a second mortgage out on your house to pay off credit card debt is a bad idea in most cases.  In the event you need to file bankruptcy, credit card debt can be wiped out if necessary.  Even in a Chapter 13 /a> plan where you are paying back all of your debt, the interest rate paid on credit card debt is zero.  In contrast, the most common way to get rid of your second mortgage in a Chapter 13 /a> or a Chapter 7 is to surrrender the house to your creditor.  To keep the house, all payments must be made on the second mortgage.  Why would you ever want to exchange a type of debt that can be wiped out or paid back at zero percent interest for a new type of debt that must be paid back with interest and could result in the loss of your house if you ever get into a position where you can’t make the payment?

Borrowing against your 401k is a terrible idea.  With Georgia Bankruptcy Exemptions, your 401k most likely will be 100 percent protected from your creditors.

One of the most common mistakes I see people make is that they will borrow against their 401K to pay off credit card debt or medical debt.  Within a short period of time, they realize that they are not going to be able to make the 401k loan payment.   Trying to get by, they skip other important bills like car payments and house payments.  Then, they come to my office to file Chapter 13 to save the house and car.  The reason I feel so bad for these people is because we could have wiped out the credit card debt and the medical debt in a  Chapter 13 /a> or a  Chapter 7 but now we are stuck with this 401k payment that they cannot afford.

Defaulting on the 401k loan is a bad idea because of the tax penalties. When a person defaults on a 401k loan, they will have to pay the government taxes that they otherwise could have completely avoided if they had never taken out the 401k loan to begin with.

Your 401k is meant for your retirement.  Don’t ever treat it like an emergency fund.

Myth #1:  I can’t afford to meet with an attorney.

Truth:  A free consultation with me does not cost you any money.  I will go over your income and budget to help you come up with a plan that works.

Myth #2:  I can’t file without hurting my spouse’s credit.

Truth:  Your spouse does not have to file with you.  If you are not joint on any debts, your filing will not have an effect on your spouse.

Myth #3 I am going to lose everything I own.  With Georgia exemptions, most people who file bankruptcy keep everything they own.

Myth #4 The creditors won’t accept my case.

Truth:  We don’t need the permission of your creditors.

Myth #5 I signed a contract with a creditor agreeing that I can’t file bankruptcy against them.

Truth:  This contract has no power to prevent you from filing against any creditor.  We can tell them to stuff it.

Myth #6 The creditor is going to take my car.

Truth:  The automatic stay prevents your creditor from taking your car.  As long as you keep insurance on the car and keep your Chapter 13 payments current, the Court will not allow the creditor to take your car.  If you are current on your car payments and you file Chapter 7, you can reaffirm the car.  A reaffirmation agreement basically says that you are going to treat the car debt as if you have never filed against them.

Myth #7:  Bankruptcy will ruin my credit forever.

Truth.  Not forever.  Yes, bankruptcy will damage your credit but so do lawsuits, repossessions and foreclosures.  Think about all the famous people who filed and recovered.

Myth #8.  The trustee will come to my house and I will be embarrassed.

Truth:  I have been practicing in this field of law for over 11 years.  I have filed hundreds of cases and I have never known the trustee to go to any one’s house.

Myth #9 I will never be able to buy a house after I file.

Truth:  You can buy a house after you rebuild your credit.

Myth #10 I can’t file without my spouse’s permission.

Truth:  You can file.

If you miss a few mortgage payments while you are in Chapter 13 in the Northern District of Georgia, the attorneys for the mortgage company will file a Motion for Relief against you.  They will charge you approximately $800 for filing this motion.  Generally, we can work out a deal with them to put their attorney fees into your Chapter 13 plan and spread out the missed payments over six months.  If this is not feasible, the motion will be granted and your house will be foreclosed. 

You must keep proof of all mortgage payments you make. If you don’t have proof of the payment, you may get stuck having to make it again.

Call me if you have any questions.

In my opinion, this is a bad idea.  If you are able to make your mortgage payments, do so.  I recently spoke with a person who quit making mortgage payments so that his mortgage company would consider him for a loan modification.  They filled out all the papers as requested by the bank for the modification.  After about four months of not receiving any payments, the bank started foreclosure proceedings.  The debtors never opened their mail from the foreclosure attorney and ignored a certified letter that was sent to their residence.  As a result, there house was foreclosed and there is nothing they can do to get it back.  Chapter 13 /a> does not lower your future mortgage payment but it can wipe out credit card debt to make is easier to pay the mortgage.

We serve the Tunnel Hill area through our Dalton office.  Click here for directions to our Dalton office.