How Bankruptcy Works
Bankruptcy works based on the framework laid out in the U.S. Bankruptcy Code, state laws pertaining to bankruptcy, and local rules adopted by each district of the federal Bankruptcy Courts. Bankruptcy law serves two main purposes: to give people a fresh financial start and to give equal treatment to creditors.
To be certain, bankruptcy is a complex and nuanced area of law. An experienced bankruptcy attorney can explain how bankruptcy works, let you know how filing will affect you, and can represent you throughout your case.
Benefits of Filing
Bankruptcy provides for debtors (people who file for bankruptcy) to erase certain types of debt, including credit card debt, medical bills, and certain other types of debts.
Chapter 7 and Chapter 13
Individuals and families typically file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy erases all or most of your debts, without a repayment plan, and in general, allows you to keep most or all of your personal belongings. Chapter 13 bankruptcy is a reorganization of debts, creates a three to five year repayment plan, and also allows you to keep most or all of your personal belongings.
The Automatic Stay
The Automatic Stay puts an immediate end to all collection action against you as soon as you file. The Stay puts an end to collection phone calls, a mailbox stuffed with overdue bills, lawsuits, wage garnishments, and any other debt collection action against you.
Qualifying for Bankruptcy
The Bankruptcy Code regulates who is eligible for bankruptcy relief. If your net income falls below the state median for your household size, then you automatically qualify for Chapter 7 bankruptcy. If your net income is above the state median for your household size, then you must run the means test to determine whether or not you qualify for Chapter 7 bankruptcy.
The median household income in Georgia (as of April 1, 2018) is:
- Household of One: $46,104
- Household of Two: $59,606
- Household of Three: $67,304
- Household of Four: $80,038
- Households of more than four: add $8,400 for each individual in excess of four.
Being a high-income earner does not preclude you from relief under Chapter 7. Many people who file for Chapter 7 bankruptcy earn above the median income. If you truly do not qualify for Chapter 7 relief you may still be able to qualify for Chapter 13 bankruptcy. Moreover, you may be better served by the additional benefits offered by Chapter 13, such as the ability to catch up on the missed mortgage or car payments.
Filing for Bankruptcy
While every case is unique and will have specific requirements, every bankruptcy case has certain elements.
The Mandatory Credit Counseling Course
Everyone who files for bankruptcy, with rare exception, must complete a Credit Counseling course within 180-days prior to filing for bankruptcy. The course is relatively straightforward, inexpensive, and not too time-consuming. It can be completed online or over the phone.
Gather Necessary Documents
To properly prepare your bankruptcy petition your attorney will need certain documents. You can view the list here.
Review Your Bankruptcy Petition
After your attorney prepares your bankruptcy petition, it is important that you review it together to ensure it is complete and accurate to the best of your knowledge. Bankruptcy petitions are filed under the penalty of perjury―being truthful and accurate is a must.
The Meeting of Creditors
The Meeting of Creditors (also known as the 341 Hearing) will take place about a month after your case is filed. The Meeting is conducted by the bankruptcy trustee assigned to your case. It does not take place in a courtroom and there will not be a judge present. Your creditors will be notified of the hearing and have the right to attend, but creditors rarely attend.
When You Hire Our Law Firm
Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, it is our job to make sure you are prepared for the Meeting of Creditors. We will help you through your bankruptcy case from start to finish, and we’ll be sitting by your side at the meeting.
The Mandatory Debtor Education Course
Debtor Education must be completed after filing for bankruptcy but must be completed prior to receiving your bankruptcy discharge order. It is a mandatory two-hour course in personal financial management.
The Bankruptcy Discharge Order
Receiving a Bankruptcy Discharge Order is the goal when you file for bankruptcy. It is a court order that releases you from personal liability on certain debts. You are no longer legally required to pay back any debts that are part of your bankruptcy discharge.
How Bankruptcy Will Work For You
The above is a broad overview of how bankruptcy works! To understand how filing for bankruptcy will affect you specifically, come meet with one of our experienced bankruptcy attorneys for a free consultation. We proudly serve the people of Savannah, Chatham County, Effingham County, Bulloch County, Bryan County, Liberty County, and Long County.
Find out more about Bankruptcy in our guide: All About Bankruptcy
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.