A Quick Overview of the Bankruptcy Process

A Quick Overview of the Bankruptcy Process


Before you file for bankruptcy, you probably have some questions about the process. There are many laws and guidelines you need to follow, but there is still a basic format for filing. In this article, we will cover the steps of the bankruptcy process to give you a better understanding of what it looks like. If you want to learn more, our Georgia bankruptcy attorneys are here to help.

Credit Counseling

Due to the 2005 Bankruptcy Act, before individuals file for bankruptcy in Georgia, they need to receive credit counseling from a government-approved organization within the six months prior to filing. This rule applies whether you file for either Chapter 7 or Chapter 13 bankruptcy. After filing, you must also complete a financial management instructional course.

Read more on: The differences between Chapter 7 and Chapter 13

The Means Test

When you file for bankruptcy, you may choose Chapter 7 or Chapter 13 bankruptcy, depending on your financial situation. The means test calculates your ability to pay back your debts based on your income and necessary expenditures. The court will look at your finances and compare them to the median income for Georgia. If your income is less than the median, you qualify to file under Chapter 7. If your income is higher, you may only have the option of filing for Chapter 13 bankruptcy. However, even if you qualify for Chapter 7, you may choose Chapter 13 bankruptcy if you have secured property that you wish to keep in the process.

Paperwork

When filing, you will need to acquire any relevant financial information such as income sources, large financial transactions within the last two years, living expenses, debts, and property. Keep your tax returns for the previous two years, property deeds, car titles, and loan paperwork on hand.

Filing for Bankruptcy

When you file, either you or your attorney will file a petition and other required forms with your Georgia district bankruptcy court. In these forms, you explain your financial situation and transactions within the last few years. It is important to mention all aspects of your financial status. Any withheld information can jeopardize your petition for debt relief.

If you file for Chapter 13 bankruptcy, be aware that you must also submit a proposed repayment plan. A bankruptcy judge either confirms or denies your proposal at a hearing later on. You will need to attend this hearing.

Filing for Chapter 7 bankruptcy carries a fee of $306. If the fee is not waived, you can pay it in installments. However, the Chapter 13 bankruptcy fee of $281 cannot be waived.

Trustee Appointment

Once you file, an automatic stay goes into effect. Creditors may no longer have direct contact with you, and foreclosure proceedings will halt. The court then appoints a trustee to your case to review your paperwork and ensure creditors are paid accordingly.

Meeting of Creditors

About a month after filing, the trustee will hold a meeting of creditors. The debtor is required to attend as well. The meeting allows creditors to question or object to the proposed plan.

The Power of The Automatic Stay

About Automatic Stay


One of the most important aspects of bankruptcy filing is the automatic stay. We will explore how the automatic stay works for you, as well as the creditors’ option to submit a motion for relief from stay.

How Does the Automatic Stay Work?

As soon as you file for bankruptcy, either Chapter 7 or Chapter 13, the automatic stay goes into effect. The automatic stay keeps creditors from collecting debts during your case. When you or your attorney files, you will include a list of your creditors. These creditors will receive a copy of the automatic stay, which prevents them from taking any debt collection actions against you, such as:

  • Calling you
  • Sending letters
  • Foreclosing your home
  • Suing you for a debt
  • Filing a garnishment on your earnings
  • Continuing a lawsuit
  • Collecting on a judgment

The purpose of the automatic stay is to give you some financial relief while you develop a plan for your finances and repayment. It also benefits creditors who might not receive anything because another creditor collects all the assets first. The bankruptcy process attempts to divide payment fairly amongst creditors.

While the automatic stay provides you some much-needed breathing room, creditors still have options. They may ask the court to lift the automatic stay so they can continue collecting. The next part will cover what this means for you.

What is a Motion for Relief from Stay?

Sometimes creditors will motion for relief from stay. Not every creditor will file a motion. Most will be willing to receive payment from the bankruptcy plan. It is also up to the creditor to provide a credible reason for lifting the stay.

Secured Creditors

Secured creditors may try to lift the stay so they can collect on collateral. For example, when you file for Chapter 7 bankruptcy, the mortgage lender may ask the court to lift the stay if you are behind on your payments. By lifting the stay they can continue the foreclosure proceedings. Since you must either pay or return the property under the secured debt, the court will probably lift the stay if you cannot keep up with the payments.

However, the court may deny the motion for relief from stay if the debtor can show the ability to repay the loan with the asset’s equity. By doing so, the debtor demonstrates that the lender is sufficiently protected from financial loss.
Even when a motion comes forward, there is no reason to fight it if you have no intention of keeping the asset.

Unsecured Creditors

It is unlikely that an unsecured creditor will ask to lift the stay. If your Chapter 7 bankruptcy does not discharge a debt, a creditor can motion to lift the stay. However, since Chapter 7 cases usually last only a few months, most creditors are willing to wait until the end of the case to start collecting again.

In the case of Chapter 13 bankruptcy, according to the debtor’s three to five-year plan, unsecured creditors receive repayment for debts that are not discharged. Since they will receive partial or full payment, creditors have little reason to ask for relief from stay.

How Lien Stripping Works in Chapter 13 Bankruptcy

Lien Stripping Chapter 13

Bankruptcy is never an easy process. However, it may become the best option for you. In this article, we will explain how lien stripping can work in your favor if you are severely struggling with multiple mortgages. As of now, lien stripping is only possible for Chapter 13 bankruptcy in the state of Georgia, not in Chapter 7 bankruptcy. For a homeowner wanting to save their house during bankruptcy, Chapter 13 will probably be the way to go.

Read more about Chapter 13

Because bankruptcy rules are many and sometimes complicated, it is always prudent to consult an experienced bankruptcy attorney about your choices. They may also be able to suggest alternatives to filing for bankruptcy. Our attorneys will work with your specific situation to determine your best options.

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Bankruptcy and Your Credit Score


What is a Credit Score

A credit score is a mathematical algorithm, typically updated monthly, used by lenders and service providers (i.e. utility companies) to determine your character, creditworthiness, and likelihood to make payments on time.

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