Frequently Asked Questions About Bankruptcy in Georgia
What is the difference between Chapter 13 and Chapter 7? Will a bankruptcy ruin my credit for ten years? Can I get rid of shared debt through bankruptcy? Visit our FAQ page to get answers to all of your questions before you file for bankruptcy.
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How long does Chapter 7 bankruptcy stay on my credit report?
Chapter 7 bankruptcy offers a way for people struggling under a huge financial burden to wipe out most of their debts and get a fresh start. However, many people are wary of filing for bankruptcy due to the effect it can have on their credit.
The public record of a Chapter 7 bankruptcy can remain on a person’s credit report for up to seven to ten years, meaning future creditors will be able to see that a person filed for bankruptcy up to a decade after filing. Other references to bankruptcy, such as accounts and tax liens that were discharged in bankruptcy and debts to collection agencies, can remain on a credit report for seven years but will show a $0 balance. While this may seem daunting, there are ways to raise your credit score after bankruptcy effectively.
Rebuilding Credit After a Chapter 7 Bankruptcy
If your credit score is 650 or higher, filing bankruptcy may have a negative impact on your credit rating. But, if your score is low, with high balances, collection accounts and judgments affecting your score, filing bankruptcy and discharging these debts may actually raise your score. (Does that make sense?) People who file bankruptcy can start rebuilding their credit almost immediately after filing.
Not all filers will see the same effect on their credit after bankruptcy. Your post-bankruptcy credit score will depend on:
- The amount and number of debts. There are many different calculations at work in determining a person’s credit score. The specifics of your bankruptcy play a huge role in the impact on your credit, such as the amount of debt discharged and the number of negative and positive accounts you retain.
- Your past credit history. If you have a good history of paying your bills on time (even before your financial troubles began), that information is not lost after bankruptcy. Your payment history on the accounts included in bankruptcy are retained in your credit report, and affect the scoring formulas in the decade after your filing.
- Your actions after bankruptcy. How you rebuild after bankruptcy can affect your score enormously. Every time you make an on-time payment to current creditors, maintain a low balance on a credit card, or make regular payments on installment loans, you will boost your score month by month.
If you are considering bankruptcy, call us today or fill out your contact information to make an appointment with a Georgia bankruptcy attorney.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is a way for people with an overwhelming amount of debt to have their debts cleared, allowing them to start over financially. This bankruptcy eliminates certain types of unsecured debts, such as credit card debts, some taxes, medical bills, utility bills, past-due rent, and personal loans. Some types of debt will not be discharged in bankruptcy, including child support and alimony, most student loans, and debts incurred by fraud. In order to qualify, debtors will need to meet the requirements of Chapter 7 bankruptcy.
Rules and Requirements of Chapter 7 Bankruptcy
Chapter 7 bankruptcy offers some advantages over Chapter 13 bankruptcy. Unlike Chapter 13, debtors do not have to follow a court-approved repayment plan for outstanding debts, and there is no limit on the amount of debt that can be forgiven. In addition, once the bankruptcy-eligible debt has been discharged in Chapter 7, the debtor is no longer responsible for repaying any of the past due debt.
In order to file Chapter 7 bankruptcy, you will have to:
- Meet the income requirements. Eligibility for Chapter 7 bankruptcy depends on your income. Our office will compare your current monthly income to the median income for a family of your size in Georgia. If your income is less than or comparable to the median, you should be eligible for Chapter 7 bankruptcy.
- Pass the means test. If your income is higher than the median, you can still file for Chapter 7 bankruptcy as long as you pass the “means” test. This test deducts your monthly expenses from your monthly income to determine your monthly disposable income. If your monthly disposable income is too high, you will be disqualified from Chapter 7 bankruptcy.
- Wait six to eight years after a previous bankruptcy. If you previously discharged debts through Chapter 7 bankruptcy, you must wait eight years before filing Chapter 7 again. If you are not eligible to file Chapter 7, you can file Chapter 13 to obtain the protection of the bankruptcy court but, depending on the time since filing Chapter 7, you may or may not be eligible for a Chapter 13 discharge.
- Be honest about your financial situation. It is vital that you do not attempt to hide any assets or conceal debts from the bankruptcy court. If the court discovers that you tried to trick or evade your creditors, transferred assets to your friends and family to protect them, or otherwise lied about your income or debts, you will be denied relief through Chapter 7.
If you qualify for Chapter 7 bankruptcy, your debts could be discharged in as little as three months. Call us today or fill out your contact information to speak to a Valerie G. Long about your options.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is a form of bankruptcy that allows a person to reorganize his financial situation. Those who file for Chapter 13 keep their property and their assets but a debt repayment plan is created to repay the secured debts such as cars or furniture, or catch up house payments, usually at a lower payment schedule. The repayment plan lasts 3 - 5 years with the goal of discharging unsecured debts upon completion of plan payments, but their debts are not entirely forgiven as they are in Chapter 7 bankruptcy. Instead, filers pay back a portion of their debts (generally secured debts) over a three- to five-year period, after which the rest of their unsecured debt will be wiped out.
Qualifications for Chapter 13 Bankruptcy
The central factor in Chapter 13 bankruptcy is the repayment plan for your debts. The payment plan is court-ordered and provides specific details on when, how, and how much you will pay each of your creditors every month. If you make all of these payments faithfully for the term of your bankruptcy, the remainder of your debts will be discharged, and you will owe nothing else to these creditors.
Not everyone is a good candidate for Chapter 13. You may be ineligible for Chapter 13 bankruptcy if:
- You do not meet income requirements. Chapter 13 requires debtors to make enough income each month to pay their secured debts, such as a car or house. If you do not earn enough or your income is not steady, the bankruptcy court might not allow you to file for this type of bankruptcy.
- You owe too much money. Debtors may be disqualified for Chapter 13 if their outstanding debts are too high. In 2016, the courts required a filer to have less than $1,184,200 in secured debts and less than $394,725 in unsecured debts to file for Chapter 13—and these amounts change from year to year.
We can help you decide whether Chapter 13 or Chapter 7 bankruptcy is the best option for you and your family. Call us today or fill out your contact information to speak to Valerie G. Long about your financial future.
Can Bankruptcy Save My House And My Car?
Bankruptcy provides a fresh start for many people who have accrued unsecured debts. However, bankruptcy laws consider child support to be a priority debt, meaning it cannot be discharged in bankruptcy proceedings. People who file for Chapter 13 bankruptcy will have to include any outstanding child support obligations in their mandatory repayment plan, and those filing for Chapter 7 bankruptcy are not protected from bill collectors and lawsuits that seek payment of child support debt.
Should I File for Bankruptcy If I Am Behind on Child Support Payments?
While filing bankruptcy does not discharge your past child support debts, it can still help you if you are behind on child support. Although you will still need to make ongoing child support payments during the course of your Chapter 13 or Chapter 7 bankruptcy, either option can clear away some of your other debts and allow you to put more of your income towards child support.
Benefits of filing for bankruptcy when you owe back child support include:
- Increased debt forgiveness. Child support payments are usually a fixed, non-negotiable amount, which can reduce the amount you are able to pay to other creditors. Most bankruptcy courts forgive a large portion of debt, allowing your money go to your children.
- Dedicated payment plans. Chapter 13 bankruptcy requires an organized repayment plan to ensure that you do not fall behind on payments to your creditors you want, such as a house or a car. These plans help many people stay on track financially, allowing them to stay current on the mortgage, car note, and utilities as well as child support.
- Future planning. If you stay current on your regular child support payments and have paid back all of the child support you owe, the rest of your debts will be discharged in bankruptcy, allowing you more financial freedom.
We can help you decide which bankruptcy option is right for you. Call us today or fill out the contact information to speak to a Georgia bankruptcy attorney about your situation.