When Should I File for Bankruptcy | Georgia

When Should I File for Bankruptcy?


when should i file for bankruptcy

When is the best time to file for bankruptcy?

The decision to file for bankruptcy is not an easy one, but it can provide a fresh start and a chance to rebuild your financial future. If you find yourself asking, “When should I file for bankruptcy?”, it might be time to talk to a local bankruptcy attorney.

When it comes to bankruptcy issues in Georgia, the Law Office of Jeffrey B. Kelly is your trusted ally. Contact us today to schedule a consultation and let our dedicated bankruptcy attorneys guide you through the bankruptcy process. Take the first step towards financial freedom by putting our knowledge and experience to work for you.

What is Bankruptcy?

Bankruptcy is a legal process that provides individuals and businesses with a fresh start by eliminating or reorganizing their debts. If you find yourself drowning in debt and unable to meet your financial obligations, filing for bankruptcy may be a viable option to consider.

When Should I File for Bankruptcy in Georgia?

Making the decision to file for bankruptcy is a big step, and it’s important to consider all the factors before taking action. Filing prematurely could result in the loss of assets that could have been protected or even require you to file for a different chapter of bankruptcy than you originally intended.

But don’t worry; there are alternative options that you can explore before resorting to bankruptcy. By taking the time to understand these alternatives, you may be able to avoid bankruptcy altogether. So, let’s dive into different situations where postponing bankruptcy might actually be beneficial.

Do you see the need for mortgage modification later on?

Many people file for bankruptcy to delay foreclosure. Filing for bankruptcy too soon can make it harder to get a mortgage modification.

Once bankruptcy is filed, lenders often stop negotiating or refuse to negotiate the mortgage. Since bankruptcy erases the need to repay the mortgage debt but the lien on the house remains, creditors see no use in negotiating anymore.

If you might need a mortgage modification later, it’s best to wait on filing for bankruptcy until you know what might happen with the modification process.

Has your income increased recently?

Your income in the past six months is important for determining if you qualify for Chapter 7 bankruptcy through the bankruptcy means test. If you earn more than the set limit, you might have to file for Chapter 13 instead, which means you’ll need to repay some of your debts.

If your income has recently decreased due to a pay cut or job loss, it might be best to wait a few months before filing Chapter 7. This is to allow your pay cut to reflect and lower your average income, so you can more likely pass the means test.

For example, Let’s say your average income was $8,000 per month in the past six months, but you got laid off and now receive $1,500 per month in unemployment benefits. Waiting two months before filing for bankruptcy will lower your average gross income from $8,000 to under $5,900 per month. In this case, you will most likely qualify for Chapter 7 bankruptcy in most states due to your lower income.

Do you have property you wish to safeguard?

You might lose your property if you file for bankruptcy now. If you wait before filing, you can keep the property or sell it and make the most of the proceeds before filing bankruptcy.

Tax Refund

If you are expecting to get a tax refund, it might be in your best interest to wait before filing. If you were to file for bankruptcy before receiving the refund, you’d be required to surrender it to the bankruptcy trustee.

However, if you decide to wait and receive the tax refund first, you have the opportunity to utilize the full benefit of the refund. By spending it gradually over a few months on essential expenses and then proceeding with the bankruptcy filing, you can make the most of the refund to address your immediate needs.

Property Exceeding the Exemption Limits

Another reason to delay your bankruptcy filing is if you have more assets than are allowed by bankruptcy property exemptions. If you wait a few months to file, your assets may decrease in value and become exempt from property limits.

For instance, if your car is worth $6,000 but the state’s exemption laws only allow you to keep a car worth up to $5,500, If you wait a few months before filing for bankruptcy, the car’s value might decrease enough to meet the acceptable range specified by the exemption laws. This way, you can keep the car and benefit from the property exemption provisions.

Nonexempt Assets

If you are worried about your assets being taken away by the bankruptcy trustee and sold to repay your creditors, there are strategies you can use to make sure you benefit from these assets.

One option is to sell the property for its fair market value before filing for bankruptcy. That way, you can use the proceeds to cover your essential needs.

Alternatively, you could use the proceeds to acquire assets that are exempt from being sold in bankruptcy, such as a burial plot or a vehicle. That way, you can make sure your assets are protected.

Do you intend to take out another loan in the near future?

If you expect to have big expenses soon, it’s better to wait before filing for bankruptcy. Chapter 7 bankruptcy eliminates debts as of your filing date. You will be responsible for any debts after that date, which could burden you for a long time.

For example, if you have knee replacement surgery coming up in the next year, you may need to take out a loan to pay for the hospital costs. If you wait to file for Chapter 7 bankruptcy after your surgery, you may be able to include this loan in your bankruptcy discharge.

How often can I file for Chapter 7 bankruptcy?

Chapter 7 bankruptcy is commonly referred to as liquidation bankruptcy because it involves the sale of certain assets owned by the debtor. The funds generated from these asset sales are then utilized to repay the creditors.

It’s important to note that if you have previously filed for Chapter 7 bankruptcy and are considering filing for a new Chapter 7 case, there is an eight-year waiting period between the two filings. This waiting period is a requirement to be eligible for another Chapter 7 bankruptcy.

In certain situations, individuals may opt for Chapter 11 bankruptcy, which is primarily viewed as a bankruptcy option for businesses. On the other hand, the rules for filing Chapter 7 bankruptcy after a Chapter 13 case are somewhat more complex than filing consecutive Chapter 7 cases. Here are some of the guidelines to consider in such scenarios:

  • If all creditor claims were fully paid in the previous Chapter 13 case, there is no waiting period required to file a Chapter 7 case.
  • If the previous Chapter 13 plan was a genuine and sincere attempt to repay creditors, demonstrating the best effort, and at least 70% of the claims were paid during the case, there is no waiting period to file for Chapter 7 relief. The term “best effort” in a bankruptcy case means utilizing your disposable income to fulfill your obligations to creditors.
  • However, if less than 70% of the claims were paid during the previous Chapter 13 case, a waiting period of six years is necessary before filing a Chapter 7 case.

How often can I file for Chapter 13 bankruptcy?

Through a Chapter 13 bankruptcy plan that the court has approved, people can choose to repay all or part of their debts. These plans, sanctioned by the court, typically span a duration of around three to five years.

If you have previously filed for bankruptcy, specifically Chapter 7, and now intend to file for Chapter 13, there is usually a waiting period to consider. In most cases, you must wait at least four years from the date of your Chapter 7 bankruptcy filing before being eligible to file for Chapter 13 bankruptcy.

However, if you plan to file back-to-back Chapter 13 cases, the waiting period is reduced to two years.

How Many Times Can I File for Bankruptcy in My Lifetime?

While there is a waiting period between bankruptcy filings, it’s important to note that there is no specific limit to the number of times you can file for bankruptcy. However, it is crucial to consider the impact of each filing on your credit. When you file for Chapter 7 bankruptcy, it can remain on your credit report for up to ten years from the date the case was filed.

Similarly, a Chapter 13 bankruptcy filing can stay on your credit report for approximately seven years after you file the case. It’s essential to be mindful of these timelines and the potential long-term effects on your credit history when considering bankruptcy as a financial option.

What is Double Filing?

Double filing, also known as Chapter 20 bankruptcy, refers to the process of filing for Chapter 13 immediately after obtaining a discharge in Chapter 7. It is important to note that Chapter 20 is not an officially recognized term within the bankruptcy laws.

Rather, it is a colloquial way of describing the act of filing Chapter 7 and then promptly proceeding with a Chapter 13 filing. Before pursuing back-to-back bankruptcy cases, it is crucial to carefully evaluate the advantages and disadvantages associated with this approach.

Benefits of Double Filing

The primary advantage of utilizing the “Chapter 20” strategy is that it provides the opportunity to address a larger portion of your debt over time. By first filing for Chapter 7 bankruptcy, you can eliminate unsecured debts, while subsequently filing for Chapter 13 allows you to establish a structured payment plan for both secured and unsecured debts.

Initiating the process with Chapter 7 bankruptcy helps reduce the overall debt burden, ensuring that you fall below the thresholds required for filing Chapter 13. This strategy can also offer the possibility of catching up on outstanding payments for items like mortgages or car loans that may have fallen behind. To summarize, here are the key benefits of double filing:

  • You have the opportunity to reduce a larger portion of your debt gradually over time.
  • By filing for Chapter 7 bankruptcy before restructuring your debt with Chapter 13, you can effectively decrease your overall debt burden.
  • This strategy provides you with more time to catch up on overdue bills and payments that may have accumulated in the past.

Drawbacks of Double Filing

Here are the drawbacks of pursuing double or consecutive bankruptcy filings:

  • Certain debts, such as child support and alimony, cannot be discharged through bankruptcy.
  • To fully discharge debts in a Chapter 7 case and then file for Chapter 13, you must wait at least four years.
  • It is essential to demonstrate good faith and avoid any intention to defraud creditors when pursuing consecutive bankruptcies.
  • Filing back-to-back bankruptcies can prolong the time it takes to restore your financial situation and regain stability.

Find Out If You Should File For Bankruptcy Now!

Still figuring out when you should file bankruptcy? Our Georgia bankruptcy lawyer at the Law Office of Jeffrey B. Kelly can help you navigate the complex process and maximize the potential benefits available to you.

With our knowledge of bankruptcy laws, guidance through the process, individualized assessment and strategy, protection from creditor harassment, advocacy and representation, and future financial guidance, you can take the first step towards a brighter financial future. Contact us today to schedule a consultation.

Remember, you don’t have to face this challenging journey alone. We are here to support you every step of the way and help you achieve the fresh start you deserve.