When debt becomes overwhelming and creditors continue to call, many Georgia families consider bankruptcy as a possible solution. Chapter 13 bankruptcy, also known as the “wage earner’s plan”, provides a structured way to organize debt while protecting your assets. However, understanding what it involves and whether it is suitable for you requires careful consideration of federal bankruptcy laws and your unique circumstances.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy is different from other bankruptcy options in that it allows you to propose a repayment plan for creditors over a period of three to five years, rather than liquidating assets to pay off debts. Unlike Chapter 7 bankruptcy, which involves the sale of assets to pay creditors, Chapter 13 allows you to keep your property and catch up on payments through a court-approved plan.
The process begins when you file a petition with the bankruptcy court. As soon as you do so, an automatic stay is placed under 11 U.S.C. § 362, which stops foreclosures, repossessions, wage garnishments, and other collection activities. This gives you some time to reorganize your finances and avoid creditor harassment.
How Chapter 13 Payment Plans Work
Your bankruptcy attorney will work with you to create a payment plan that must be approved by the bankruptcy trustee and the court. The plan will outline how much you will pay each month and how those payments will be distributed among your creditors. According to 11 U.S.C. § 1325, your plan must pay all priority debts in full and ensure that unsecured creditors receive at least as much as they would have received in a Chapter 7 bankruptcy liquidation.
Payment amounts depend on your discretionary income – what remains after paying for reasonable living expenses and securing debts such as mortgages or car loans. In Georgia, the current filing fee is $313, although courts may allow payments in installments if you can demonstrate financial hardship in accordance with Federal Rule of Bankruptcy Procedure 1006.
At the end of your three-to-five-year plan, any remaining qualifying unsecured debts, such as credit card balances, medical bills, and personal loans, will be discharged. This means you will no longer legally be obligated to repay these debts.
Who Qualifies for Chapter 13 Bankruptcy?
Chapter 13 bankruptcy has specific eligibility requirements under federal law. To be eligible, you must have regular income, which can come from employment, self-employment, retirement, or other stable sources. This income should be sufficient to cover your basic living expenses as well as the proposed payment plan.
Second, your debts cannot exceed the statutory limits set by 11 U.S.C. § 109(e). Individuals can only have up to $465,275 in unsecured debt or $1,395,875 in secured debt, adjusted for inflation. These amounts are periodically adjusted to account for changes in the Consumer Price Index.
Finally, if you have previously filed for bankruptcy, there are timing restrictions that apply. Under Section 1328(f) of the U.S. Bankruptcy Code, you cannot receive a discharge under Chapter 13 if you received a discharge in a previous Chapter 7 filing within the last four years or in a Chapter 13 filing within two years prior to your current filing.
Special Considerations for Georgia Residents
In Georgia, your income is compared to the average income for similar-sized households in your area. This comparison, which is required by the means test under 11 U.S.C. § 707(b), determines the length of your plan. If your income is below the state average, you may be eligible for a three-year plan; if it is above the average, you will typically need to propose a five-year plan.
Georgia also has specific exceptions under O.C.G.A. § 44-13-100 that determine which assets can be protected during bankruptcy proceedings. These exceptions cover equity in the home, vehicle, and personal property, as well as retirement accounts up to certain limits.
Is Chapter 13 Right for You?
Chapter 13 bankruptcy is best suited to individuals with regular income who have secured debts, such as mortgages or car payments, and want to continue owning their assets. This type of bankruptcy can effectively stop foreclosure proceedings or vehicle repossession while the individual catches up with their payments.
However, Chapter 13 requires commitment. You need to make consistent monthly payments for three to five years. If you fail to do this, you could face dismissal from the case. Before making a decision, it is recommended that you consult an experienced bankruptcy attorney who can evaluate your financial situation and explain all available options under the Bankruptcy Code.
Take the First Step Toward Financial Freedom Today
Filing for individual bankruptcy can be a confusing and frustrating process if you are unfamiliar with it. At Duncan Bankruptcy Law, our team of experienced professionals can help streamline the process and make it as smooth as possible. We will guide you through the options, necessary steps, and ultimately lead you to financial freedom and independence.
Contact Duncan Bankruptcy Law today to schedule a no-obligation consultation and find out if Chapter 13 bankruptcy is the right solution for your financial situation. We can help you stop creditors’ calls, protect your assets, and begin a new path out of debt with manageable payments.
