Nobody ever expects to have to file for bankruptcy, but the reality is, people do it every day. Individuals (and families) that qualify, can receive the protections and benefits of a fresh start through what’s known as Chapter 7 Bankruptcy.
Chapter 7 simply refers to the chapter of the federal bankruptcy code that the law is written under. Other bankruptcy chapters include Chapter 11 bankruptcy, typically used by businesses, and Chapter 13 bankruptcy, which is another form of consumer bankruptcy. Under a Chapter 7 bankruptcy, once a consumer files for bankruptcy protection a trustee is assigned to their case. The trustee must determine what the assets are, which assets are exempt and what assets can be sold off to repay creditors.
Qualifying for Chapter 7 Protections
Georgia, like most states, has what’s called a “means test” for determining whether a consumer qualifies for Chapter 7 bankruptcy protection. This means test assesses two things: income and assets. The test compares your income with the average income of residents living in your same county.
Using Form 22C, consumers can determine what their average income and expenses are for the past six months. Income includes things like:
- employment income
- unemployment income
- business income
- pension income
Social security income is not used to determine a consumer’s income and does not need to be considered in the means test. If your gross income is under the median income for your county (based on the number of people in the household) then you may qualify for Chapter 7 bankruptcy protection.
What If My Gross Income Exceeds the Median?
If your gross income exceeds the median income for your household in your county, do not panic. You can use the Form 22C to deduct expenses from your income to illustrate that you have no disposable income that you can use to repay creditors. Deductible expenses include:
- health care costs
- health care insurance
- secured debts, including car and house payments
- mandatory retirement contributions
- dependent educational costs
- charitable contributions
Once you have deducted these expenses, if you have no disposable income remaining, then you may qualify for Chapter 7 bankruptcy. If you have disposable income remaining, you may consider a Chapter 13 payment plan.
Can I Keep My House, Car, Jewelry, Etc.?
This is the most common question we get each day: “Will I get to keep my _________?” The answer is, it depends. But, in most cases the answer is “yes” you get to keep all of your stuff. Georgia has a list of exemptions that you can protect from the bankruptcy court. These exemptions include:
- $21,500 per person for a home (the “homestead exemption”)
- $3,500 car exemptions
- $5,000 household goods exemption
- $500 jewelry exemption
- $600 wildcard exemption (to cover whatever you want, such as extra equity in a house or car)
- unlimited retirement exemption
Even if you do not think that you qualify for Chapter 7 Bankruptcy protection, talk with an experienced bankruptcy attorney before you make a decision. We offer free consultations to those considering bankruptcy, so call us to schedule yours today!