Since 2008, the Carr Law Group has filed more than 1,000 bankruptcy cases. During that time, we’ve answered nearly that many questions. Here are some of the most common questions we encounter. Filing for bankruptcy can feel overwhelming, but we hope this FAQ will guide you toward the solution right for you and your family or business. Want to learn even more about bankruptcy? We recommend the U.S. Court bankruptcy guide. And if you’re in Georgia, feel free to contact us for a free consultation. Don’t fight bankruptcy alone.
Chapter 7 vs. Chapter 13
Bankruptcy & Property
Life After Bankruptcy
There are certain qualifications you must meet to file bankruptcy. This question normally comes up in two areas: income and prior bankruptcies. To file a chapter 7, your disposable income must be below a certain level. Most people are surprised at how much money their family can make and still qualify for bankruptcy. If you have a higher-than-average income but unusually high expenses (insurance, childcare, child support, medical bills, etc.), you could still qualify. However, if you have filed for bankruptcy in the last eight years, you may have difficulty qualifying for certain types of bankruptcy. If you live in North Georgia, schedule a free consultation to see if bankruptcy is a good fit for you and your family.
There are no minimum debt requirements in bankruptcy. Nor do you have to be behind on your payments. You just have to be struggling—or anticipate struggling—to make ends meet. Know your options before you drain your 401k or liquidate your assets. At Carr Law Group, we have met too many clients who wished they had consulted with a bankruptcy attorney far earlier in their financial struggles. Often, we could have preserved our clients’ 401ks and substantive assets had they met with us sooner.
Can I obtain bankruptcy protection again if I have filed a bankruptcy in the past and am now falling behind in payments again?
Some of my accounts are very old, and we don't get collection letters in the mail anymore. What if I don’t know all my creditors?
This question comes up often. Bankruptcy law requires that we tell the court about every debt you have – no exceptions. That also means that every creditor is to receive notice of your bankruptcy filing in the mail at the address you provide the court. However, there are some accounts you can keep, such as your car loan or mortgage. Some accounts you can simply agree to pay, such as your pediatrician bill, dentist bill, and/or general doctor or specialist.
The court never says that you can’t pay back a creditor, just that you don’t have to. There are some creditors who are too important not to pay, but it is ultimately your choice who you decide to pay.
Debt consolidation companies help you reach agreements with various creditors so that you can make a single payment to the debt consolidation company each month to address all the debts at once. Ideally, your payment to this company would be less than is required of you to meet your minimum obligation on each card collectively. This company will typically take out their fee from each payment.
Is debt consolidation better than bankruptcy? In our opinion, bankruptcy is better than debt consolidation, for a few reasons:
- Creditors do not have a choice in bankruptcy. In debt consolidation programs, creditors can change their minds, sell the debt, or decide not to participate at all.
- You may be able to build your credit faster after ch. 7 bankruptcy than with debt consolidation. Ch. 7 is short and sweet, whereas debt consolidation is usually based on a 36-month or longer repayment plan.
- Bankruptcy may mean that you pay 0% of your debt back. In a debt consolidation plan, you are usually paying the entire balance or a high percentage, though you may not have to pay interest.
Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 bankruptcy usually takes about 3-4 months and helps you (1) keep the property you want to keep and (2) get rid of the debt you want to get rid of. Our goal is that you can keep your property and get rid of the credit card debt and medical bills that are piling up without paying a single dime (0%) towards this unsecured debt. About 70-80% of the cases we file are chapter 7.
Chapter 13 usually takes either 36 or 60 months (3 or 5 years), the latter being the most popular. During that time, you will make a monthly payment to a chapter 13 trustee, who then uses that money to pay back some of, if not all, your debts. People usually file a ch. 13 for three major reasons:
- Their income is higher than average for their family size or county. In this situation, the court may not allow you to file for Chapter 7.
- They are very far behind on their mortgage and/or car loans. In this scenario, we put you on the 3- or 5-year payment plan to catch up on your debt.
- They have substantial equity in real estate or some other asset that we won’t be protected under the bankruptcy exemptions. Bankruptcy exemptions are state laws that allow us to protect a certain amount of assets when you file bankruptcy.
Many people do have a choice between which bankruptcy to file. Most of the time, it is clear which type will be most beneficial. On rare occasions, the pros and cons are about the same, and a client will have to decide after careful consideration.
However, there are situations in which clients do not have a choice. This may be due to circumstances, i.e., your income is too high; past filings, i.e., there are limits on how often you can file; or the client’s goals: at times, we can accomplish in one bankruptcy something we cannot in another.
Reaffirmation agreements are usually only signed for car loans or mortgages when clients want to keep their property. The benefit of signing is that it will allow the loan to continue to report on your credit, which can aid in rebuilding your credit. It also allows you to have online access to your account, which is often shut down by lenders after bankruptcy is filed. If your income is not stable, we do not recommend that you sign a reaffirmation agreement.
Keeping Your Property with Bankruptcy
All this being said, filing for bankruptcy can help people keep their homes! This is because it can help folks resolve unnecessary or low-priority debts, thereby allowing homeowners to focus on paying for what’s important. Chapter 13 bankruptcy can help people who have fallen behind temporarily (think temporary job loss or illness) and just need some time to make up the payments. It also allows the person 36 or 60 months to pay back whatever amount they are behind. Are you $6,000 behind? Divide that by 60 and you will see that for $100 a month, you can stay current on your mortgage.
If your property has equity, we either must protect all of it with bankruptcy exemptions or agree to pay back some, if not all, of your debts to keep the court from selling it. You can find more information about Georgia bankruptcy exemptions with a simple Google search. This is the only area of bankruptcy law that is governed by state and not federal law.
If you have lived in Georgia for the last two years, Georgia exemptions apply to you. If you just moved here from another state, it gets more complicated. Schedule a consultation and we will figure it out together.
Can I remove judgment liens (aka writ of Fi.Fa.) from my primary residence if I file bankruptcy? What about my second mortgage?
After Filing Bankruptcy
The meeting of creditors is an informal meeting with the trustee, whereby you answer some basic questions (your attorney should review those questions during one of your consultations). This meeting typically lasts less than 5 minutes. Only in the more complex cases (i.e., multiple businesses and/or real estate parcels) will you see it go longer.
Next, you have 60 days after your hearing before your case officially closes (in the case of chapter 7). During this time, you’ll have some paperwork to complete; otherwise, there is very little to be done.
What kinds of questions will the trustee ask me at the meeting of creditors (also known as a 341 hearing)?
- Did you provide the information contained in your bankruptcy petition to your attorney?
- Is your petition still true and correct?
- Did you review it and sign it?
- Do you own real estate? When did you buy it? How much did you pay for it? Any major upgrades since purchase? Have you refinanced the loan or taken out a second mortgage? If so, when and did you pull any cash out? What was the new money, if any, used for? Do you plan on keeping or surrendering this property?
- Do you have any claims against anyone or are you currently suing anyone? Have you been injured in a car wreck or slip-and-fall accident where you could sue someone?
- Have you ever received an inheritance? Do you anticipate receiving an inheritance soon (i.e., has someone died recently, leaving you something)?
- If you have owned businesses in the last 5 years, you may be asked about those businesses and whether they own any assets.
- Have you owned any non-retirement stocks, bonds, or CDs in the last 5 years?
- Have you transferred any property valued at over $5,000 to anyone in the last 2 years, including your spouse, if any?
- Why are you filing for bankruptcy? (Often easily answered by stating that you simply could not afford to repay all your debts).
As you move forward in life, it falls further behind, having less and less of an impact on your credit. In the meantime, you establish a few positive lines of credit and maybe even continue paying off your car and house loan beyond bankruptcy. Anything you can do to create positive reporting will help to rebuild your credit. You can do it!
Meet With an Experienced Bankruptcy Attorney
Need assistance filing bankruptcy? Let us help! The Carr Law Group is a family-owned firm serving clients in and around Clarkesville, Gainesville, and Cleveland, Georgia. Our bankruptcy team, led by attorney-at-law Quentin Carr, has extensive experience in filing bankruptcy (both chapter 7 and chapter 13) for individuals and businesses. Learn more about Quentin or contact us today for a free consultation.