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Filing Chapter 7 Bankruptcy

Are you thinking of filing a Chapter 7 Bankruptcy, getting a fresh financial start? Living with the burden of unpaid debt can be extremely stressful and scary. Bankruptcy laws were created so that honest individuals who have over extended themselves can find a fresh start. For individuals being sought by debt collectors, who have unmanageable credit card debt or unpaid medical bills Chapter 7 bankruptcy, may be an appropriate remedy. This blog is written for educational purposes and will give you an overview on how Chapter 7 bankruptcy works. If you are thinking of filing for Chapter 7 Bankruptcy, it is strongly advised to consult with an experienced bankruptcy attorney before filing for bankruptcy under Chapter 7.

When is Chapter 7 Bankruptcy Appropriate?

For individuals being sought by debt collectors, who have unmanageable credit card debt or unpaid medical bills, Chapter 7 bankruptcy may be an appropriate remedy. Further, an initial self-assessment can help determine if Chapter 7 bankruptcy is appropriate remedy for you or not. An initial self-assessment of assets can be calculated by adding up all assets including bank accounts, retirement accounts, stocks, bonds, home equity, and any other real property. After calculating all the assets, calculate all the debts including, but not limited to credit cards, loans, medical bills, and overdue utilities. If after the initial calculations, the debt outweighs the assets, it is generally advised that filing for chapter 7 Bankruptcy is an appropriate remedy that can provide some relief.

Bankruptcy Filing Procedures

By filing for Chapter 7 Bankruptcy, individual assets are distributed to pay off as much debt as possible to creditors. The debtor may be able to keep certain properties exempt from liquidation under 11 U.S.C. § 522. Nonetheless, there is a provision in the bankruptcy code that allows the states to create their own exemption laws, thus it is advisable to speak to your attorney within the home state. The “Georgia Exemption Law” was recently amended to be more lenient which is good news for Georgia debtors. O.C.G.A § 44-13-100.
Federal court hears Bankruptcy cases. United States Bankruptcy Code governs the bankruptcy cases. Prior to filing the petition in Bankruptcy Court, it is recommended to provide the following information to the court:

  • A list of all creditors and the amount and nature of their claims (this includes debts that are non-dischargeable)
  • The source, amount, and frequency of income
  • A list of all property (this refers to the assets mentioned above)
  • A detailed list of monthly living expenses, (i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.)

The filing fee for Chapter 7 Bankruptcy Cases is currently Three Hundred Thirty Five Dollars ($335). The Court may allow the fees to be paid in installments. Additional attorney’s fees will apply. The petition for bankruptcy must be filed at the bankruptcy court that serves the area where the individual resides. As soon as the bankruptcy petition is filed, the filing of the petition automatically stops most collection against the debtor. This includes wage garnishment, lawsuits, harassing phone calls, and some liens on property.

No later than two months after filing the Bankruptcy petition, the debtor is required to attend a 341 hearing, which is usually a short meeting with a bankruptcy trustee in a meeting room.  The debtor, with their attorney if they have retained one, will answer questions in regards to personal financial under oath. The debtor is required to cooperate by providing any records or documents that might be requested. Following the creditors’ meeting, a report is made to the court as to whether the debtor is abusing the power to file bankruptcy. The vast majority of the Chapter 7 Bankruptcy cases filed result in a discharged, eliminating all or most debts. Until or unless one of the creditors objects, the debtor will usually receive a notice of discharge within 120 days of the meeting with the trustee (341 hearing). A discharged debt is no longer subject to any legal or collection action by creditors.

The Long Term Effects of Filing Bankruptcy

Once Bankruptcy is filed, the bankruptcy stays on credit report for ten years. Although, bankruptcy can negatively affect an individuals credit score, and most filers already have a damaged credit score; bankruptcy also makes it much easier to repair a credit score after filing. Most people can buy a new car at a good interest rate within a year of filing and FHA Home Mortgages are available after one to two years of a bankruptcy discharge.  Most people find the relief granted by the discharge of debts is worth the long-term financial effects.

Not all debts can be relieved by a Chapter 7 filing. Some debts are non-dischargeable meaning an individual will not be released from this debt by filing bankruptcy. There are 19 categories in the U.S. Bankruptcy Code that are non-dischargeable. Exceptions to Bankruptcy Discharge: 11 U.S.C. § 523. These categories include government funded student loans, criminal penalties, child support payments, and other secured debts. Additionally, the court can deny to discharge debts if the debtor fails to account for assets, hides property, or otherwise attempts to defraud his creditors. Other debts that can be denied are luxury purchases made within 90 days of filing for bankruptcy. Likewise, any debts accrued after the filing will not be discharged.

Who can file Bankruptcy?

Chapter 7 bankruptcy can only be filed by an individual and will not extend to partnerships or corporations. Chapter 7 bankruptcies are not the appropriate remedy for every individual. Most, if not all, the debtor’s assets are taken and sold to repay creditors. Therefore, if there is a small business or a family home that the debtor wants to save, Chapter 7 is likely not the best solution. There are several types of bankruptcy that can be filed and many variables that determine the best course of action. There is really no such thing as a “simple” bankruptcy case. It is highly advisable to consult an attorney to guide you through filing for bankruptcy.

Filing for Bankruptcy can be challenging, but with a qualified and experienced bankruptcy attorney, the process can be made easier. If you are interested in filing for bankruptcy, call 770-609-1247 to speak with one of our experienced and caring bankruptcy attorneys today.

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