All items from Atlanta Bankruptcy Attorney Blog

What Happens in a Chapter 7?
Clients often ask me what happens if they get a big raise or a start a business that does really well after filing a  Chapter 7 in Atlanta. Chapter 7 bankruptcy is literally a snap-shot in time of your finances at the time of the filing of your petition. The purpose of bankruptcy is to give you a new lease on life – a fresh start on your finances free from bill problems in the future. The Supreme Court has stated this as recently as 2007:  “The principal purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but unfortunate debtor.”
What this essentially means is that whatever money or property you obtain after bankruptcy belongs to you.  When you file, a bankruptcy estate is created, and all property of the Debtor on the date of filing  becomes property of the estate to be administered by the Chapter 7 trustee.  Most cases are called “no-asset” cases, meaning that the debtor is able to exempt under Georgia law all property of any value from the reach of the Chapter 7 trustee.  This means that any weddings rings, musical instruments, household goods, clothes, etc. will be safe from liquidation.

The answer to this question may surprise you.  You actually do not have to be destitute to file bankruptcy. Ideally, my clients would come to me before the bottom drops out from under them, but many wait until they are almost a year behind on their mortgage payments or a car has already been repossessed before seeking counsel from a bankruptcy attorney.  In fact, you can even file a Chapter 7 case and have whatever non-exempt property (property that is not capable of being protected from the Chapter 7 trustee and our creditors) you own liquidated by the Chapter 7 trustee administering your case to pay your unsecured creditors. I have seen creditors get paid out at 100% in Chapter 7 cases, though this is rare. Most are “no-asset” cases in which creditors receive nothing.
In Chapter 13 cases, you will have the option to pay back some of your debts over a 3-5 year period.  In some cases, unsecured creditors will receive nothing, while in others, all of your creditors will receive 100% of what you owe them, only with no fees and interest accruing during the plan period.
Chapter 11 is another animal entirely, as businesses need sufficient cash reserves to be able to whether a reorganization effort through bankruptcy.  Individuals filing for Chapter 11 should take this same advice to heart, as Chapter 11 fees are much higher and cannot be paid out over the life of a plan like in a Chapter 13.

You can absolutely keep your 401k if you file bankruptcy in Atlanta, Georgia.  This is one of the most common questions I receive when clients schedule an appointment with me. Many people thing that the bankruptcy court (or more appropriately, the trustee assigned to your case) will liquidate all your assets under a Chapter 7 bankruptcy.  This is simply not the case.  Georgia has specific laws that protect certain assets of the debtor from being taken by the Chapter 7 trustee or creditors.
For instance, under Georgia bankruptcy law (specifically, the Georgia law specific to exempt property in bankruptcy), the Debtor may shield from creditors up to $23,500 of equity in his or her personal residence, $3,500 in a car, and $5,000 in household goods, among other things.
When it comes to 401k retirement plans, you may exempt the entire amount of the holdings in your 401k.  This is one of the most debtor friendly laws in the state of Georgia.  It just makes sense. How can you expect someone to get back on their feet if their retirement is up for grabs by creditors?
Section 44-13-100 of the Georgia Code states,
“Exemptions for purposes of bankruptcy and intestate insolvent estates

This may seem counter-intuitive, but owing more on your home mortgage can actually be a godsend in wither a Chapter 7 or Chapter 13 bankruptcy.  In a Chapter 7 bankruptcy, the Chapter 7 trustee is an individual appointed by the U.S. Trustee to administer your case.  This is a fancy way of saying this person is in charge of selling your non-exempt assets so he or she can distribute some funds to your unsecured creditors (medical bills, credit cards, etc.).  You see, immediately upon filing your petition, all your property is now property of the newly created bankruptcy estate, except of course for the property you can exempt under Georgia state law.  Exempt property is a dollar amount that you can shield from the grasp of creditors.  For instance, in Georgia, an individual can exempt up to $21,500 in his homestead.  This means that if the trustee were to sell your home for the benefit of your unsecured creditors, you would receive $21,500, if that much equity existed in your property.