What is Chapter 7 Bankruptcy?
Chapter 7 is available to individuals, couples and businesses. The process is often referred to as "liquidation". In theory, you are surrendering your assets to the court in exchange for a discharge (elimination) of all of your debts. However, individuals and couples are allowed to keep certain "exempt" property that varies by category and value.
Who typically files Chapter 7?
Debtors with primarily consumer debt, who earn less than the "median income", based on family size and county in Georgia, will qualify for Chapter 7. Debtors with an income in excess of the median income must pass the "means test" to file for Chapter 7 protection. Debtors filing Chapter 7 in the State of Georgia tend to have little to no equity in their homes, normal household goods, cars with minimal equity and primarily unsecured debts such as credit card and medical bills. Often, debtors who are current on payments are able to keep their homes and cars, eliminate the majority of their debt, and obtain a fresh start.
Is credit counseling required?
Individual debtors are required to complete credit counseling before they are eligible to file under the Bankruptcy Code. Failure to complete the course before filing can result in your case being dismissed. Not all counseling services qualify. Our office can assist you with making the appropriate arrangements.
What about Chapter 7 for a business?
Filing a Chapter 7 case for a business can actually create problems, so it is best to contact an attorney before deciding to file a case for a business entity.
What is the Automatic Stay?
When a Chapter 7 bankruptcy case is filed, an "automatic stay" is entered. The stay stops garnishments, harassing phone calls, collections, foreclosures, and lawsuits. However, if you had a case dismissed within the past year, the "automatic stay" may not apply.
What property is protected under Chapter 7 ? (per individual debtor)
- $21,500 of equity in your home
- $ 5,000 of equity in your car
- $ 5,000 of household goods and clothing
- $ 1,200 plus any unused amount of the household exemption (up to $10,000) to protect any other property
- Any amount of funds in a 401k, IRA or other ERISA qualified retirement plans up to $1,000,000
What if I have more property than can be protected?
Debtors with more property than can be protected may need to either be willing to lose certain assets or consider filing under a different chapter of the Bankruptcy Code.
How often can I file Chapter 7?
Once every eight years. However, if your prior case was filed under Chapter 13, you may be eligible much sooner.
For an analysis of whether Chapter 7 is right for you or your business, please contact our office for an appointment.