If you find yourself in an overwhelming amount of debt, bankruptcy may be the best option available to you. Chapter 7 is one of the most common types of bankruptcy filing and will eliminate debt and give you what is considered a “fresh start”. The assets that you hold will be collected by a trustee and liquidated to pay off your loans. However, Georgia exempts some assets from sale and in some cases, individuals can keep most of their assets. Essentially, taking chapter 7 will allow you to start over financially free from debt except for items that the district of Georgia labels non-dischargeable debt (i.e. student loans, child support).
How it Works
Filing for chapter 7 bankruptcy is a lengthy, multi-step process; but once filings begin the process typically lasts 3-6 months and your debts will be discharged at the end. To start, a bankruptcy petition must be filed with the court, and it is advised that an experienced bankruptcy attorney help you through the process. Before the proceedings begin, the court will mandate credit counseling to ensure that there are no other options. During this time, you should assemble all financial records that will be presented to both the court and the counselor to present your case.
During the next step, you will fill out documents called schedules that are lettered A-J and will list everything from assets to income and expenses. Once petition has been filed, there will be an automatic stay that will halt all actions from your creditors; this means that they will no longer be able to collect or harass you once the motion for bankruptcy has been made. The bankruptcy court will review your case and go through the process of bankruptcy.
After all of this is complete, your assets will be given to a trustee to pay off as much of the debt as possible. Having someone familiar with bankruptcy law can make all the difference in helping you keep some of your assets in these cases. With chapter 7, all your debts will be erased after the liquidation and repayment process. Certain types of bankruptcy, like chapter 13 bankruptcy, will re-structure your debt and offer repayment plans. While this has its benefits and is useful in some cases, chapter 7 is more common and will let you have a fresh start.
There is an additional item called a reaffirmation agreement that can be used bankruptcy in Georgia that will allow you to keep one item of property, like a house. If this is something you can do, you would sign the document, then pay any back payments on the loan. For example, if you were 3 months late in payments, you would be required to pay those off to obtain the reaffirmation agreement. Although you will be allowed to keep the property, you will still be required to make payments on that loan, as it will not be discharged in the bankruptcy filings. It will also not be able to be processed in any future bankruptcy filings for 8 years after the agreement is signed.
What Happens to My Credit Score?
Most individuals are afraid of the impact filing for bankruptcy will have on their credit score, which sometimes keeps them from getting the help they need. It is important to remember that for people considering bankruptcy that enough missed payments will harm your credit score just as much as declaring bankruptcy. If you find yourself in an overwhelming amount of debt, consulting an attorney is your best option to find out what path you should take.
If you decide to go with bankruptcy, the initial hit on your credit score will vary depending on where your score was to begin with. Chapter 7 bankruptcy will stay on a credit report for 10 years after the initial filing, and all other types of bankruptcy will remain for 7 years. Time is on your side as it comes to repairing your credit score, and there are actions you can take to help get your score back to where you want it. Obtaining a secured credit card or secured line of credit are two of the initial and easiest steps to take, and later it may even be possible to obtain a new car loan or mortgage.
For people who cannot keep up with their debt and payments, filing chapter 7 may be the best option for you. Consulting an experienced bankruptcy attorney can help give you perspective on your situation and evaluate what options are available to you. Bankruptcy law also varies from state to state, and the requirements of Georgia can be difficult to understand. Make sure you have all of the information and tools available to you so that you can make the best decision on your financial future.