Filing for bankruptcy is a critical decision that many Georgians have decided to make due to their personal and financial circumstances. Because filing for bankruptcy has the potential to affect your life for years to come, it is of the utmost importance for any person considering bankruptcy to consult with a knowledgeable attorney about this matter. An experienced bankruptcy attorney will be able to explain to you what bankruptcy can and cannot do to help you improve your economic circumstances.
One of the most common misconceptions Georgians have about bankruptcy is the scope of its powers – many debtors mistakenly think that filing for bankruptcy will erase all of the person’s, family’s or business’s debts. This is not the case. While the main benefit of filing for bankruptcy is that doing so can indeed eliminate large amounts of debt, there are limits to this benefit.
For example, filing for bankruptcy will not erase (called “discharge” in bankruptcy proceedings) student loans, most forms of tax debts, alimony, child support, and a few other types of debt.
Another common misconception is that there are no downsides or disadvantages to filing for bankruptcy besides any negative impact doing so may have on your credit report. Again, this is not the case. A major limitation of bankruptcy, specifically Chapter 7 bankruptcy, is that the bankruptcy court is empowered to sell a number of your valuable possessions – such as your car or your house – if you have more equity than the exemption allows in order to recoup as much money as possible to pay your creditors as much of the balances owed to them as possible.
In general, the great power of bankruptcy is that it can discharge large amounts of credit card debt, consumer debt, and unsecured debts (unsecured debts are those which have not been secured by a lien on your property). Now, if you file Chapter 13 bankruptcy, you will work with the court to come up with a payment plan wherein you will likely pay back a portion of your debt to your creditors. However, this payment plan will likely be much more forgiving than any previous plan you were on and the plans usually only last 3 to 5 years. After the plan expires, the remaining debt is discharged.
Another tremendous benefit of filing for bankruptcy is that doing do effectively and legally prevents your creditors from harassing you for payments and from pursuing other collection actions against you. Bankruptcy is able to offer this benefit through something called the Automatic Stay which automatically kicks in the second the bankruptcy petition is filed with the court.
Moreover, bankruptcy can also help you get rid of certain types of liens that you may have on your property. A lien is basically the right of your creditor to repossess a portion or all of your property. Liens are not automatically discharged in bankruptcy unless your attorney is able to complete certain actions (which again illustrates why it is so important to work with an attorney throughout the bankruptcy process).
If you are interested in learning more about the advantages and pitfalls of filing for bankruptcy, contact our office today to discuss your case with a skilled bankruptcy attorney. We look forward to working with you!