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Bankruptcy Information – Should I File Bankruptcy?

Deciding whether to file bankruptcy is a decision you should only make after talking with an experienced bankruptcy attorney.  Everyone’s situation is different, but there are certainly alternatives that should be explored prior to filing.  At my office, we will discuss every available alternative, including:

  • Loan Modification
  • Asset Protection
  • Debt Settlement

We will also discuss what bankruptcy can do for you, and what bankruptcy cannot do for you. For instance, you may be wondering “will bankruptcy clear tax debt?” or “can bankruptcy eliminate tax debt?” Generally, if none of the above alternatives will work to solve your financial problems, bankruptcy is probably the right decision.  Don’t worry, no one is judging you on how you incurred your debts or whether you “deserve” to receive a discharge. And even if you did get a bit carried away, as long as you did not rack up a bunch of charges within 90 days of filing, no one will even take a second glance at your schedules.

After talking about each of your options, we will decide whether Chapter 7 or Chapter 13 is right for you.  If you operate a small business or do not quality to file Chapter 13 because you have too much debt, we will consider whether filing Chapter 11 is right for you. 

Chapter 7

Chapter 7 can be used by individuals and business, but the reasons are different. For individuals with few assets, Chapter 7 is the most efficient and cost-effective bankruptcy to discharge your debts. We can also hlep high-income earners qualify for Chapter 7 under the right circumstances.

Chapter 11

Chapter 11 can be used by individuals and business to reorganize large amounts of debt. Chapter 11 is a very complicated and niche practice area that can offer a lot of flexibility to debtors, but the costs are high.  We have extensive experience confirming a wide variety of cases.

Chapter 13

Chapter 7 is for indiviuals only. Businesses may not file a Chapter 13, though a self-employed individual may. Chapter 13 is the ideal chapter to catch up your mortgage or car payments while keeping all your stuff.  Chapter 13 is also a solution to pay back tax debts at 0% interest over a 5 year period of time.

The Timing of Bankruptcy

It is important that you do no delay in seeking the a consultation with a bankruptcy attorney.  In certain cases, filing a petition almost immediately (a “skeleton petition”) is going to be of paramount important to stop a foreclosure sale or wage garnishment action.  In other cases, it may be perfectly appropriate to delay the filing of your bankruptcy petition to discharge taxes in which a return was due three years ago or to wait out a specific time period on a transfer you made prior to filing to prevent the trustee from avoiding such a transfer.

When Is Bankruptcy Not The Right Decision?

If you are elderly and/or have no assets that a creditor could garnish (social security wages cannot be garnished) or seize, then bankruptcy is probably not right for you. Moreover, if you only have non-exempt assets and large amount of non-dischargeable debts such as student loans, then filing bankruptcy in Atlanta may not be the right choice.

The Most Common Reasons People File Bankruptcy in Georgia

  • Job Loss/Income Loss – The number one reason why people file bankruptcy in the Atlanta area is loss of income.  The economy is still not where it was a few years ago, and many employers are still routinely cutting jobs and hours. In an ideal world, every person would have at least six months of living expenses stashed away in case of a financial disaster; however, in reality, most people in Georgia are living hand to mouth due to lowering wages and dual-income households turning into single-income households overnight.
  • Medical Bills – Lack of health insurance really is a plague on our country, and when people, especially hourly, non-salaried employees fall ill or become seriously injured, many times the jobs they once relied on to put food on the table are no longer available when they come back recovered and ready to earn a living.  And sometimes, the health insurance you have does not cover extensive or alternative treatment options.
  • Small Business Loss – I regularly help small businesses file Chapter 11 to restructure the overwhelming amount of debt eating into owner profits. Also, many people, especially real estate developers, have personally guaranteed the large loans taken out to operate their businesses. When the business collapses, the owner is on the hook for the the amount of debt still owed after the lender liquidates the underlying collateral.  In many cases, this can be millions of dollars of business debt.  In these cases, the entrepreneur can file for Chapter 7 despite having a high level of income because  a debtor will primarily business debts, or debts incurred with  profit motive, are exempt from the means test.
  • Credit Card Debt – Credit card debt is a very common impetus to filing bankruptcy; however, it is more aptly described as a consequence of job loss or medical debt forcing a person to rely on credit card usage to support their families during the lean times. When you live exclusively off a credit card for a few months, that debt can be very difficult to overcome, especially at an interest rate of 30%. Whatever you do, never deplete your retirement account to pay out-of-control credit card debt.  Retirement accounts are a special class of assets that are protected in bankruptcy; thus, no matter what chapter you file, neither creditors nor the trustee can seize the funds in your retirement account to satisfy your outstanding debts.
  • Too Much House/Variable Rate Loans – An integral part of the American Dream is to be a homeowner, but often, people receive the misinformed advice to “buy as much home as you can afford” because housing values will “always go up”. That didn’t pan out exactly like the “experts” thought it would, did it?  Moreover, financing the purchase of a home with a variable-rate mortgage, meaning that the mortgage rate is not “fixed” over the life of the mortgage, but instead fluctuates with the prime interest rate, has lead to thousands of home foreclosures across Georgia. Fortunately, filing Chapter 13 can save your home from foreclosure and allow you to catch-up on your arrears.  I always advise my clients who decide to finance a second home to choose a fixed rate mortgage to avoid a surprise increase in mortgage payments 5 years down the road.

Bankruptcy Tax Attorney

If you have any questions about how this whole process works or think bankruptcy may be an option to help you secure a better financial future, give us a call at (678) 587-8740, and we will schedule a time to meet and talk about your situation.  We offer a flexible approach to meeting clients, so we am comfortable with meeting you at one of our office locations, a local coffee shop, or even over the telephone or email if commuting is difficult.  Whatever you situation, we will work with you to make this process as smooth and easy as possible.