Normally when a person files for bankruptcy, the person’s debt is discharged (meaning the person is no longer responsible for the debt) or greatly reduced. This debt reduction or elimination seems very attractive to Georgians who are facing large credit card bills and other debts, but many people erroneously believe that by filing for bankruptcy, they lose everything – their house, their car, and all of their personal property. Because the justification behind bankruptcy proceedings is to provide people with a clean financial slate, thankfully it is not usually the case that bankruptcy filers “lose everything.”
One very important point to remember when considering whether to file bankruptcy is that a “homestead exemption” exists that may allow bankruptcy filers to keep their residential home. If your house still has equity in it (which means that your house is worth more than the mortgage), then you may be able to keep the house depending on your state’s specific homestead exemption allowance (different states allow different homestead exemption amounts). In Georgia, the homestead exemption amount is $21,500 (or $43,000 if you are married, own the house together, and are filing a joint bankruptcy).
The following is an example of how the homestead exemption works in Georgia:
You are unmarried and your house is worth $200,000. Your mortgage is $178,500, which means you have $21,500 of equity in your house. If you were to file for bankruptcy, your home equity would be exempt from the proceeding under the homestead exemption and your creditors would not be able to come after your house – and thus you would be able to keep your home.
Making the decision to file for bankruptcy can be a very difficult one, and it is a decision that should not be undertaken lightly. Our office is always available to advise clients on the benefits and disadvantages of filing for bankruptcy and we look forward to discussing your potential case. Contact us today to speak to a member of our skilled legal team!