Why not file for Chapter 7 bankruptcy instead of Chapter 13? Before you start making decisions, there are some key points you need to know. First, let’s talk eligibility for Georgia filers.
Bankruptcy Eligibility
For Chapter 7 filers, you have to be below the median income for Georgia. For Chapter 13 filers, it’s uniform: your secured debts cannot exceed $1,010,650 and your unsecured debts must be lower than $336,900. Secured debts are items such as your home and car, where the creditor can take if no payment has been made. Unsecured debts are different in that the creditor has no leverage on you via assets, such as with a credit card or medical bills.
Changes in the Bankruptcy Code several years ago instituted new eligibility requirements, which tend to change based on income and debts. The numbers for Chapter 13 will change again in a few years, as that’s how it works. The changes have made it more difficult to file Chapter 7, making Chapter 13 more common than before.
Why File Chapter 7?
For Georgia residents with little to no income and minor assets, Chapter 7 is much better. It can discharge credit and medical debts of high amounts. If your problem is you don’t have enough money and that may not change – perhaps because of a job loss – you are likely eligible for Chapter 7. The good news here is you often lose nothing, though your credit will be hurt for several years and if you intend to buy a new home or car soon you may have some trouble.
Why Chapter 13?
Georgia residents who have an income, perhaps a home and car, can utilize Chapter 13 bankruptcy in a different way. For one, you pay back some if not all the debts, but you also gain some benefits. It’s been talked about quite often on the Georgia Debt Law blog, and it should be repeated: Chapter 13 is your best option to avoid foreclosure, keep all your assets, and sometimes to avoid wage garnishments. If you file Chapter 7, your assets can technically be liquidated, though that’s not common. But if you have an expensive home you’ve been paying on for 10 years, you may want to avoid losing it. In this and similar cases, Chapter 13 is very smart.
Making the Decision
Bankruptcy isn’t always your best option, but at the least you can sit down and talk with professional counsel about all your options. You may be able to pay these debts yourself. However, if you fear medical or credit card bills will ruin you, hiring a lawyer for Chapter 7 bankruptcy is smart. If you fear home foreclosure, hiring a bankruptcy lawyer to help with Chapter 13 can save it.
Before you file bankruptcy, the best choice you can make is hire a professional Georgia bankruptcy lawyer.
