If you live in Georgia, and you are struggling to make payments on debts, you may consider filing Chapter 7 bankruptcy. Chapter 7 is a type of bankruptcy in which debts are erased, eliminated or more specifically … discharged. In cases involving significant assets, certain property may be sold and used to repay all or some debts. However, the vast majority of Chapter 7 cases are considered to be “No Asset” cases, in that there are not enough assets for anything to be sold. This is because, people filing bankruptcy in Georgia (and other states) can rely on federal and/or state bankruptcy property exemptions to protect all or most of their assets.
At the end of the bankruptcy case, you may be able to discharge or cancel all or most of your debts. You may also be able to keep certain property (called exempt property) during and after bankruptcy. So for most people, the main goal of filing for Chapter 7 bankruptcy is to discharge their debts. However, not all debts are discharged under Chapter 7. Some of your debts are non-dischargeable and other types of your debts are dischargeable. Below provides a few key information on types of dischargeable and non-dischargeable debts under Chapter 7 bankruptcy.
What is a Chapter 7 Bankruptcy Discharge?
A discharge in the bankruptcy refers to a process officially releasing a debtor from all or most of his or her debt. No legal action may be taken against the debtor to collect on discharged debts, and no collection calls or letters may be sent with regard to such debts. In other words, when a discharge is granted, the debtor is no longer legally required to pay any debts that are discharged. Yet, a bankruptcy discharge of the debt does not mean that your debt is cancelled or extinguished. Rather, it extinguishes the debtor’s personal liability. Also, a discharge does not automatically discharge co-debtor’s or guarantor’s liability. While your liability for debt is removed upon bankruptcy discharge, the cosigner is on the hook for the entire balance of the debt.
Although a debtor is discharged in bankruptcy, however, the bankruptcy discharge has no effect on liens. A lien is a legal right acquired by a creditor to keep possession of property until the owner of the property pays the debt. Many people mistakenly believe that where the debtor is discharged in bankruptcy, liens against the property will be extinguished. However, a valid lien that has not been made unenforceable in the bankruptcy case will remain even if the underlying debt or obligation has rendered unenforceable (i.e., discharged). Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.
In average, the whole Chapter 7 process takes about four to six months from the time a debtor file his or her bankruptcy petition to the that the debtor receives a discharge. Although typically you will obtain a discharge about fort to six months after filing your Chapter 7 petition, the time your bankruptcy case progress will vary depending on your local court. It is advised to consult with a local attorney who can tell you how long a case will take in your state or county.
Debts that are Discharged in Chapter 7 Bankruptcy
The U.S. Bankruptcy Code lists 19 categories of deb that cannot be discharged. Everything that does not fall within these categories is dischargeable. Below is a list of the most common debts that can be discharged in Chapter 7 bankruptcy.
Chapter 7 bankruptcy can discharge most unsecured consumer debts such as credit card charges (including overdue and late fees), medical bills, utility bills (past due amounts only), personal loans from friends, family and employers, government benefits overpayments, and money owed under lease agreements (includes past due rent).
Unless you have a special “secured” credit card, your credit card balance is an unsecured debt which means that the credit card company does not have a lien on any of your property and cannot repossess your property if you fail to pay the debt. Similarly, your other unsecured debts such as unpaid medical bills or utility bills can be discharged under Chapter 7 bankruptcy.
Also, once a tenant files a Chapter 7 bankruptcy, an “automatic stay” prevents all creditors, including landlords, from pursuing the repayment of debt and the landlord cannot evict the tenant unless the landlord had a court-ordered judgment for possession of the apartment prior to the tenant filing for bankruptcy. Even if the tenant had already filed bankruptcy, the landlord can ask the court to lift the automatic stay and, if granted, can proceed with the eviction process. Landlord tenant law varies by state and changes frequently, so be sure to consult with a local attorney if you are a tenant filing for a bankruptcy or if you are a landlord dealing with a tenant who filed for a bankruptcy.
In addition, there is an exception to discharge if the money, property, or services were obtained under “false pretenses, a false representation, or actual fraud.“ [11 U.S.C. § 523 (a)(2)(A)]. Bankruptcy law is designed to help honest people get out of debt and is not designed to help people to get away with bad behavior. Accordingly, the law prevents people who lie or commit fraud at the time they obtained credit to erase those debts through bankruptcy.
Lawsuits, judgments and garnishments filed against you
Money judgments are almost always dischargeable under Chapter 7 with a few exceptions such as child support and alimony, or debts arising out of someone’s death or injury as a result of your intoxicated driving.
Secured debts if you return the property securing the debt to the creditor
A debt is considered “secured” if a specific piece of your property (called collateral) is used to guarantee the repayment of the debt. If you do not repay a secured debt, the creditor has a right to take the property without having to first sue you and get a court judgment. Examples of secured debts include mortgages (which are secured by your home) and car loans (which are secured by your vehicle). Any secured debt may be discharged if you let the creditor take back the property securing the debt. If you do not want or need the secured property, you may consider writing the “Statement of Intentions” form that indicates your intention to surrender the property.
Debts incurred before your bankruptcy filing
Please keep in mind that among the dischargeable debts, only the debts that arose before the date of filing for Chapter 7 will be discharged. You will still be responsible for any debt you incur after filing your bankruptcy petition but before receiving a discharge. In some cases an otherwise dischargeable debt might not be discharged in Chapter 7 if you incurred it close in time to your bankruptcy filing. Debts for luxury goods or services incurred within 90 days of filing the bankruptcy case, or certain cash advances obtained within 70 days of filing the bankruptcy case are “presumed” to be non-dischargeable. [11 USC Section 523(a)(2)].
Certain tax debts
Income taxes (taxes other than income can never be eliminated in bankruptcy) may be discharged if:
- the tax return was filed more than two (2) years before you filed your bankruptcy petition
- you did not file a fraudulent tax return or otherwise willfully attempted to evade paying taxes
- the taxes were originally due at least three (3) years before you filed for bankruptcy, and
- tax liability was assessed by the IRS at least 240 days before you filed bankruptcy
If you are struggling to pay your debts, Chapter 7 bankruptcy may be your option. Rather than ignoring the problem, find out whether you are eligible to file for Chapter 7 bankruptcy and whether your debts consist mostly of dischargeable debts or non-dischargeable debts. You may want to talk to an experienced bankruptcy lawyer who can review your situation and let you know whether you have a chance to discharge your debts.
Call us at 770-609-1247 to speak with one our experienced bankruptcy attorneys located in Georgia. We offer free consultations if you qualify for a bankruptcy discharge.