What Exactly IS Bankruptcy?

Bankruptcy is a federal legal proceeding that helps debtors with financial difficulties get relief. The goal of bankruptcy is a fresh start through either discharge of certain debts or repayment of debt through the bankruptcy.  Bankruptcy begins with the filing of a petition. The bankruptcy includes all debts prior to the petition.

Bankruptcy is one of the most misunderstood areas of the law. Bankruptcy is a legal process designed to help individuals and companies get a financial fresh start by discarding or making arrangements to repay unmanageable debt. It can also be a way for companies to end business and liquidate assets in an orderly way.

There are times when the mountain of debt becomes too difficult to climb. Bankruptcy offers a way out of this situation while still considering the creditors seeking to collect debts.

What are the different types of bankruptcy?

The two most common kinds of consumer bankruptcy are Chapter 7 and Chapter 13. Chapter 11 bankruptcy is typically used by businesses.

Chapter 7 bankruptcy in Georgia

Known as “liquidation” since most unsecured debts are forgiven, Chapter 7 bankruptcy is the fastest and most common form of bankruptcy.

Chapter 7 bankruptcy is a liquidation bankruptcy that allows you to wipe out most of your unsecured debt. Most of the time, Chapter 7 bankruptcy filers in Georgia can keep their houses and cars in bankruptcy.

To qualify to file a Chapter 7 bankruptcy case in Georgia, you must have not filed a Chapter 7 bankruptcy less than eight years ago and must also meet an income test that is referred to as the “means test.” The means test uses the median income for your household size as a threshold for qualifying to file Chapter 7.

Best for: Consumers who have primarily unsecured debt, such as medical bills, credit card debt or personal loans.

Chapter 13 bankruptcy in Georgia

Known as a “wage earners” bankruptcy, Chapter 13 bankruptcy restructures debts into a payment plan over three to five years.

Best for: Those who have assets they want to retain, like expensive jewelry, or secured debts they want to get current on, like a mortgage.

You must have regular income and you must be current on tax filings. You cannot have filed for Chapter 13 in the past two years or Chapter 7 in the past four years.

Do you need a bankruptcy attorney?

The short answer: Yes.

Bankruptcy is a long and complicated process. One form improperly filled out could result in the dismissal of your case, which means you would have to wait six months to file again. Find a bankruptcy attorney to help you navigate the process and ensure your paperwork is properly filled out.

A word of caution if you’re thinking of filing without an attorney: Bankruptcy data shows that only 1.4% of Chapter 13 bankruptcy cases filed without an attorney in 2012 received a discharge, meaning the cases were closed and the eligible debts were forgiven, according to the Federal Judicial Center.