The decision to file for bankruptcy in Georgia involves plenty of considerations. One of the biggest concerns among individuals and couples who feel bankruptcy is a possible solution to their debt problem is retaining some of their assets. For instance, does bankruptcy law allow them to keep their car? Their home? Their personal belongings?
As with most legal matters, the answers can be found by exploring the bankruptcy code and then discussing the situation with a knowledgeable bankruptcy attorney. Each state offers exemptions that may help some people who file for bankruptcy retain certain items. In Georgia, these exemptions are fairly clear, but can be confusing to those who do not regularly deal with them.
Exemptions Thoughts About Chapter 7 Versus Chapter 13 Bankruptcy
Before diving into Georgia bankruptcy exemptions, it is important to note that exemptions are generally more important to people contemplating Chapter 7 bankruptcy. Chapter 7 bankruptcy involves liquidation of as many assets as possible. Chapter 13 bankruptcy is more of a rearrangement of debts, which is a bit different. Still, even those who file for Chapter 13 bankruptcy may want to understand exemptions, just in case.
The basic Georgia-specific exemptions most bankruptcy filers care about are the homestead exemption, motor vehicle exemption, personal property exemption, support exemption, public benefits exemption, wage exemption, tools of the trade exemption, pension and retirement exemption, insurance exemption, and wildcard exemption.
Homestead Exemption
“Will I lose my home?” This is one of the first inquiries most people make when they start to realize bankruptcy may be the wisest way for them to get out from underneath years of mounting debt. While the thought of having to suddenly move can be scary, it can also be a practical way to pay off creditors. Nevertheless, the homestead exemption in Georgia allows some homeowners to keep their residences.
The state allows for an exemption of up to $21,500 per person or $43,000 if a couple files for bankruptcy together. That amount goes against the equity held in the house. For example, if married spouses file for Chapter 7 bankruptcy and own a home worth $150,000, they will need to know their equity stake. If it is $40,000, they are $3,000 under the joint homestead exemption. From a practical standpoint, that means they can probably hold onto their home. Plus, they can use the extra $3,000 to put toward the wildcard exemption, explained below.
On the other hand, if this same couple’s equity stake in their home was $80,000, they would need to sell it. After the sale, they would be able to hold onto $43,000 and the other $37,000 would be distributed among their creditors.
Wildcard Exemption
Although the name may sound strange, the wildcard exemption simply gives bankruptcy filers another chance to protect their assets. Georgia allows up to $10,000 in leftover equity money that is unused from the homestead exemption to be put toward another exemption. Additionally, it provides $1,200 to protect anything else. That is up to $11,200 that could go toward saving property.
Do many people actually use the full wildcard exemption? To be sure, it depends upon their situations. However, a large number of Chapter 7 bankruptcy filers decide not to hold onto their homes, or have minimal equity in the real estate property they own. Or, they do not own any real estate at all. Therefore, they can use the $10,000 plus $1,200 wildcard exemption to protect themselves in other areas.
Motor Vehicle Exemption
Like a home, a vehicle is an essential asset to most modern individuals and families. Having a working vehicle can be useful to get to and from work, or have the freedom to go to the grocery store or attend medical appointments when needed.
In Georgia, the motor vehicle exemption is up to $5,000 in equity. Again, this means that if the individual or couple has $5,000 or less of an equity stake in their vehicle, they can keep it. Of course, if the vehicle is a pricier model and they have more equity in it, they may need to get rid of it to pay down debt as part of their bankruptcy plan.
It is critical to note that the wildcard exemption has ramifications for motor vehicle exemptions, too. Someone who uses $10,000 or less of their homestead exemption equity allowance can put the amount toward saving their motor vehicle.
Personal Property Exemption
The antique piano inherited from a great-grandmother. The beautiful painting that’s actually worth several thousands of dollars. The leather living room set purchased in 1990 that still looks like new. Can these pieces of personal property be kept, or do they need to go?
The personal property exemption in Georgia is set at $5,000, which is a generous amount. Most items in homes have depreciated greatly over the years and are not worth very much in terms of resale value. Still, some personal belongings may command high rates on the open market. Plus, each item only has a cap of $300. Consequently, a musical instrument such as a baby grand piano may be worth $3,000. Although $3,000 is less than the $5,000 exemption, it is $2,700 more than the $300. That means it should be sold. From a realistic standpoint, though, an item that is worth $325 may cost more to sell than $25. In that case, the item usually stays in the bankruptcy filer’s possession.
It should be noted that jewelry can be protected up to $500 rather than $300. So are $7,500 in lost future earnings and $10,000 in personal injury lawsuit case recoveries. Burial plots are completely covered by the personal property exemption as long as the homestead exemption has not been used. And home health aids are generally protected in their entirety, no matter how much their resale value.
Support Exemption
Where does support, such as child support and alimony, fall into the picture when it comes to protecting assets during Chapter 7 bankruptcy? Georgia protects all child support and alimony proceeds that have been assigned by the court as necessary.
Public Benefits Exemption
Persons who have filed for bankruptcy are entitled to keep any unemployment compensation, workers’ compensation amounts, Social Security benefits, and related benefits. They should talk with their bankruptcy attorney in detail about the best way to save incoming benefit monies to avoid future debt issues.
Wage Exemption
How much of their wages do bankruptcy filers in Georgia have the opportunity to keep? The state caps the percentage at 75 percent of earned, unpaid weekly earnings. If the 75 percent of earnings is less than 40 times the United States’ accepted hourly minimum wage, the minimum wage amount will supercede the 75 percent of earnings.
Be aware that bankruptcy court judges can sometimes change wage exemptions for people who fall into very low income status.
Tools of the Trade Exemption
For individuals who rely on specific equipment to conduct their work, Georgia allows for up to $1,500 in exemption. These tools of the trade could be anything from a laptop to hammers and saws.
Pension and Retirement, and Insurance Exemptions
Retirement accounts including IRAs and 401(k) setups can be retained at their full value, regardless of whether an individual files for Chapter 7 or Chapter 13 bankruptcy. The same is true of pensions. However, only $2,000 of unmatured life insurance cash value equity can be kept by bankruptcy filers.
Answering Tough Bankruptcy Exemption Questions
Under the best of circumstances, filing for bankruptcy can be a complex process. If you are thinking about using bankruptcy law to help you either get a little breathing space or give you a fresh start, please contact the Law Office of Jeffrey B. Kelly at (770) 637-1756. During your initial consultation, you may want to discuss exempt property considerations, as well as other aspects of how bankruptcy may affect you and your family.