Chapter 7 Bankruptcy

Chapter 7 Bankruptcy Means Test

The 2005 revisions to the Bankruptcy Code created new  requirements for a Chapter 7 discharge. The “Means Test” is used to see whether or not a debtor has the financial means to pay his or her obligations. You are presumed to pass the means test and be eligible to file bankruptcy if your income falls below the median income for your geographic area. If you make more than the median income, our Atlanta chapter 7 bankruptcy attorneys can assist you  in determining if you are still eligible to file chapter 7. This can be done by deducting certain expenses and payments to demonstrate that you should be able to take advantage of Chapter 7 bankruptcy rather than being compelled into a Chapter 13 bankruptcy payment plan. If your debts are mostly business or commercial related, the means test does not apply, and you may file a Chapter 7 bankruptcy regardless of your earnings. We have experience in counseling clients about such means test issues, so that they can take full advantage of Chapter 7 rather than a lengthy payment plan.

How Does the Means Test Work?

It’s a complicated equation that takes into account your income against the median income for comparable-sized households in your county.

• A Presumption of Abuse Arises or,
• A Presumption of Abuse Does NOT Arise

The first step in the means test is to figure out your household size. Your household size is determined by how many people live in your home (excluding roommates and non-dependents). College-age children may still be considered dependents if they continue to live at home, but any income they bring into the household will be considered household income. For example, if your monthly income is $2,000 and you have four persons in your home: two adults and two children who are under the age of 18, you would use the gross income for each person filing bankruptcy, as well as any other members of the household for the previous six months. 

If your household’s average income for the previous six months is less than the median income of the county where you live in Georgia, you pass the means test and there is no presumption that you are abusing the bankruptcy system. However, if your earnings are higher than the median income, you are presumed to be abusing the bankruptcy system and should consult with an experienced Chapter 7 bankruptcy lawyer to see if any deductions can be taken to rebut the presumption of abuse.

Business Debts and the Means Test

Small business owners facing financial difficulties frequently have business-related debt (such as loan guarantees, lease guarantees, vendor guarantees, etc.) that allows them to claim exemption from the Means Test. This allows people who may not otherwise qualify for chapter 7 bankruptcy to file chapter 7 bankruptcy. This is because business related debts can quickly become large if you have a personal guarantee, business credit card debt on which you are a co-signer, and other business-related debts that you are liable for personally.

Because business debts may exempt you from the Means Test, it is important to talk with an experienced Chapter 7 bankruptcy lawyer to determine if such debts may allow you to file a Chapter 7 bankruptcy. Chapter 7 bankruptcy is frequently more cost-efficient and less time consuming that a Chapter 13 bankruptcy.

Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a three-to-five-year repayment plan overseen by a Chapter 13 trustee and designed to pay creditors over time. While a Chapter 13 bankruptcy can help protect certain assets, most people want to avoid the lengthy obligations involved with a Chapter 13 bankruptcy. The experienced bankruptcy attorneys at Robl Law Group, will work with you to keep you eligible for a chapter 7 bankruptcy while still protecting your assets. 

Bankruptcy exemptions allow you to claim that certain property or cash is exempt from sale by a bankruptcy trustee or from being used for payment to creditors. Our experience with exemptions helps you maximize what property you can retain despite filing bankruptcy. 

Chapter 13 Bankruptcy vs. Subchapter V Bankruptcy

An alternative to Chapter 13 bankruptcy available to those with business debts is known as a subchapter “V” (or subchapter “five”) bankruptcy. A subchapter V bankruptcy is similar to a Chapter 13 bankruptcy, as you will pay creditors some amount through a payment plan over time. However, a subchapter V bankruptcy is designed to assist those with business debts so that they can reorganize these debts in ways that a Chapter 13 bankruptcy is unable to.  Subchapter V cases may also be utilized by individuals who do not qualify for Chapter 7 bankruptcy because they have higher than median income.  Please read more about subchapter V bankruptcy here.

What to Expect When Filing for Chapter 7 Bankruptcy in Atlanta

Before filing your case, you will work closely with your Chapter 7 bankruptcy attorney to draft your bankruptcy petition, schedules, and statement of financial affairs. You will also need to complete your pre-Chapter 7 bankruptcy credit counseling course requirement, which is ordinarily accomplished through a one-hour internet program. 

As soon as your Atlanta Chapter 7 bankruptcy attorney files your case with the court, the automatic stay will come into force. The bankruptcy code imposes the automatic stay and compels lenders, trade vendors, and debt collectors to cease all collection efforts due to the automatic stay. This includes halting any lawsuits, wage garnishments, levies, foreclosures, judgment collections, and obnoxious phone calls or letters.

After filing your Chapter 7 bankruptcy, your Atlanta bankruptcy lawyer will receive a case number. About 40 days after we file your case, you will be required to attend a “341 meeting” or meeting of creditors. This meeting is typically short (often only 10 to 15 minutes in duration), is not in a courtroom, does not involve a judge, and in recent times has been conducted by conference call with us assisting you rather than in-person. A trustee appointed to oversee your case will ask questions regarding your petition and debts during this short session. As experienced Chapter 7 lawyers, we will prepare you for those questions based on our substantial prior experience in Chapter 7 cases. After the meeting, the Chapter 7 bankruptcy trustee will investigate any possible non-exempt assets with equity for distribution to creditors. It usually takes anywhere from six to eight weeks for the investigation. Once the Chapter 7 bankruptcy trustee has finished, he or she will enter a report indicating whether any assets are available to be distributed to creditors.

Although most obligations can be discharged or erased in Chapter 7 bankruptcy, certain debts are not eligible to be discharged. Some of these non-dischargeable debts include the following:

• Alimony;
• Child support;
• Recent income tax debt;
• Student loans; 
• Debts incurred by fraud;
• Criminal restitution; and
• Obligations arising from injuring someone while intoxicated.

Debt management is a stressful and anxiety-provoking experience for individuals and their families. Chapter 7 bankruptcy may help you get back on track financially by wiping away credit card debts while also freeing up money that can be used to pay down your mortgage or automobile payments. For more information about filing for bankruptcy, contact our Atlanta Chapter 7 bankruptcy attorneys at Robl Law Group today.

Filing Chapter 7 Bankruptcy for Businesses

Most people are not aware that a business can file for chapter 7 bankruptcy. If you are seeking to shut down a business, have a business that is subject to numerous lawsuits, or have a business that is struggling due to aggressive creditors, a Chapter 7 bankruptcy for the business is a potential option to address those situations.

A chapter 7 business bankruptcy lets the business take advantage of the automatic stay, which prevents creditors from taking further action against the business. A business is also not subject to the Means Test, which makes a chapter 7 business bankruptcy an attractive option for a business looking to close but not be subject to many lawsuits from creditors.

The experienced Atlanta bankruptcy attorneys at Robl Law Group can assist your business in navigating a Chapter 7 business bankruptcy. This includes working to create the bankruptcy petition, schedules, statement of financial affairs; attending the 341 meeting (the meeting of creditors) with you; and helping you navigate the chapter 7 trustee’s investigation of any company assets.

Frequently Asked Questions about Chapter 7

Can I Keep My Property After Chapter 7 Bankruptcy?

One of the most common misunderstandings about Chapter 7 bankruptcy is an assumption that you will lose everything, but this isn’t the case. In fact, you may be able to keep your home and automobile in certain situations. Georgia law provides for numerous “exemptions” that you can use to protect your assets from the chapter 7 bankruptcy trustee and creditors. The chapter 7 bankruptcy attorneys at Robl Law Group can help you use these exemptions to safeguard your assets from being liquidated by the trustee.

Unfortunately, people who file their chapter 7 bankruptcy without an experienced Atlanta bankruptcy attorney frequently do not correctly use their exemptions and fail to have their assets correctly protected. With an experienced Robl Law Group attorney at your side, we will help you navigate applying exemptions to your assets.

The easiest way to file Chapter 7 bankruptcy is by simply listing all of your assets on your bankruptcy schedules. However, using exemptions correctly is one of the more difficult aspects of bankruptcy law and the main reason why individuals who do not seek expert assistance regret filing for bankruptcy. Your Chapter 7 trustee will generally just care about a few sorts of assets: houses with significant equity, vehicles with substantial equity, cash in bank accounts, publicly listed shares, and cryptocurrency. The majority of people, including those with six-figure salaries, lack significant equity in their houses or automobiles for a trustee to sell and do not have cash or money in bank accounts above what it is permissible to exempt from the Chapter 7 trustee under Georgia law.  In other instances, legitimate changes ahead of filing bankruptcy may avoid loss of assets. Put our Chapter 7 bankruptcy experience to your advantage by contacting us to discuss how the process works.

What are the Benefits of Filing for Chapter 7 Bankruptcy in Georgia?

Chapter 7 bankruptcy in Georgia is a legal financial option that may assist you in eliminating debt and getting back on track with your finances. Individuals who meet the requirements for a Chapter 7 bankruptcy are able to discharge (i.e., get rid of) the vast majority of their obligations, such as:

• Credit card balances; 
• Personal guarantees of business debts; 
• Unsecured personal loans;
• Merchant cash advance (or, MCA) guarantees; and
• Medical bills.

Another advantage is that Chapter 7 bankruptcy law offers a significant real property exemption and personal belongings exemption. Depending on the amount of equity in your house and the state of your mortgage, you may not be required to sell it.

A further advantage of Chapter 7 bankruptcy is the automatic stay, which can prevent creditors – such as lenders and collection agencies – from taking actions against you while you obtain a discharge of debts through bankruptcy. The automatic stay is one of the most powerful tools an individual has in the bankruptcy process. 

Will My Credit Be Ruined After Chapter 7 Bankruptcy?

Many people believe that by filing a Chapter 7 bankruptcy, their credit will be ruined permanently. This notion is untrue. The majority of people are able to start rebuilding their credit right away after their Chapter 7 bankruptcy is completed. In fact, many people begin receiving offers from lenders who focus on people with recent bankruptcy case. And, many individuals who go through bankruptcy subsequently are able to purchase a car or home after receiving a Chapter 7 discharge in Georgia. A Chapter 7 bankruptcy in Georgia takes an average of four to six months to complete. The majority of clients get a discharge around four to six months after filing.

Additionally, bankruptcy can help credit scores by eliminating debt that would otherwise show up on your credit report and by ending the monthly reporting of delinquent payments. Those debt amounts and ongoing delinquent payment reports hurt credit scores. And, if the debts and arrearages lead to lawsuits, then the lawsuits and related judgments also hurt credit scores. So, Chapter 7 bankruptcy offers a path to improve credit by addressing the underlying causes of negative credit scores in the forms of large debts, ongoing reports of delinquencies in payments, and lawsuits and judgments. 

What is the Difference Between the Chapter 7 Trustee and the United States Trustee’s Office?

The Chapter 7 trustee is a private attorney or accountant appointed to oversee your chapter 7 bankruptcy case as it progresses. The Chapter 7 trustee will ask questions at a short meeting of creditors, investigate your assets and financial condition, and process your case so that you can receive your discharge. 

The United States Trustee’s Office is a government office that is an arm of the Department of Justice. They are responsible for overseeing enforcement of various bankruptcy laws and rules, and monitor cases for abusive conduct.

While a Chapter 7 trustee is appointed in every Chapter 7 bankruptcy case, it is uncommon for the United States Trustee’s Office to become deeply involved in a Chapter 7 bankruptcy unless there is some abusive conduct occurring or suspected. In that event, the experienced Atlanta bankruptcy attorneys at Robl Law Group will be able to advise and assist you in dealing with the United States Trustee’s Office. We have successfully resolved such inquiries or investigations for our Chapter 7 bankruptcy clients in prior cases.

Contact an Atlanta Chapter 7 Bankruptcy Attorney Today

Debt problems can take the enjoyment out of life. All of us do our best to fulfill our obligations, but sometimes we can all use assistance from someone with experience. An experienced Atlanta Chapter 7 bankruptcy attorney can evaluate your legal possibilities with you and assist you in creating a path forward. It’s possible that the time has come to start fresh. At Robl Law Group, we are dedicated to making Chapter 7 bankruptcy more accessible. Call us at (404) 373-5153 or email us today to learn more about how our Chapter 7 bankruptcy lawyers can assist you in taking your first step toward a brighter future.