BRIAN R. CAHN & BRAD STEPHENS: CHEROKEE COUNTY BANKRUPTCY ATTORNEYS DEDICATED TO HELPING HONEST BUT UNFORTUNATE PEOPLE GET A FRESH FINANCIAL START.
By: Brian R. Cahn, Partner with the Firm of PERROTTA & CAHN
We opened our Cherokee County bankruptcy law office in Woodstock, GA on November 1, 2015. Our goal is to help people through difficult financial times, giving them the knowledge and power to use the laws of the United States and the State of Georgia for a fresh financial start. While bankruptcy isn’t the best option for every client, we have used the United States Bankruptcy Code to help thousands of satisfied clients in NW Georgia.
Some general information about bankruptcy:
Bankruptcy is a federal right that’s contained in a set of laws called the United States Bankruptcy Code.
Generally, we look at all available workout options before encouraging our clients to use personal bankruptcy to eliminate debt. Although going bankrupt is an effective way to wipe out most or all debt obligations, bankruptcy will negatively affect your credit, at least for a while. Of course, many non-bankruptcy events are even worse for your credit, such as unpaid judgments, tax liens, and lingering delinquent accounts. Often times, bankruptcy is actually a tool that may be used to IMPROVE credit. Think about it — if you have lingering bad credit, it will likely stay bad unless you do something about it. If you file a bankruptcy, you’ll have short-term bad credit, but you’ll have a fresh, debt-free platform, from which to rebuild.
Bankruptcy is an efficient way to prevent or delay foreclosure on a home and repossession of a car. It can also immediately stop wage garnishment and other legal actions of creditors attempting to collect debts.
The cost of a bankruptcy case is quite affordable. Some Chapter 13 cases can actually be filed for as little as $0 down.
Bankruptcy in the United States
There were 936,795 bankruptcy filings in 2014, a 12.5 percent drop from 2013. Still, that is four times as many as there were in 1980. There was a steady climb that peaked in 2005, with 2.08 million bankruptcies, and the number has gone up and down since then.Bankruptcy Filings in the United States by Year
The percentage of bankruptcies filed by consumers also has risen. In the early 1980s, consumer filings made up about 82 to 87 percent of all bankruptcy filings. By 2012, this had risen to 97 percent, meaning businesses made up only 3 percent of the bankruptcy filings.
Consequences of Bankruptcy
The overriding principle of bankruptcy is that it wipes away debt — sometimes all debt, many times a portion of it. All the other consequences are negative impact, especially as it concerns your credit score.
Bankruptcy remains on your credit report for 7 to 10 years, depending upon which chapter of bankruptcy you file under. For example, Chapter 7 (the most common) is on your credit report for 7 to 10 years, while a Chapter 13 filing (second most common) is there for seven years.
During this time, especially the first few months after bankruptcy, it could prevent you from obtaining new lines of credit or it could mean that you’ll have to pay higher interest rates..
If you are considering bankruptcy, your credit report and credit score are probably already considerably damaged. So, your credit report may not endure significantly more damage, especially if you consistently pay your bills after declaring bankruptcy.
Still, because of the long-term effects of bankruptcy, some experts believe it may be beneficial only if you’re unable to dig your way out of debt on your own (by stringent budgeting) within the next 36 months.
Where Bankruptcy Doesn’t Help
Bankruptcy does not necessarily erase all financial responsibilities.
It typically does not discharge the following types of debts and obligations:
- Child Support
- Debts that arise after bankruptcy is filed
- Some debts incurred in the six months prior to filing bankruptcy
- Loans obtained fraudulently
- Debts from personal injury while driving intoxicated
- Debts from willful and malicious injuries to person or property
- Some student loans
- Some taxes
It also does not protect those who co-signed your debts. Your co-signer agreed to pay your loan if you didn’t or couldn’t pay. So when you declare bankruptcy, your co-signer still may be legally obligated to pay all or part of your loan.
Filing for Bankruptcy
Before you file for bankruptcy, you are almost always required to receive credit counseling within 180 days before filing your case. You must obtain counseling from one of the approved providers listed on the United States Courts website. If we decide that bankruptcy is the best option, we provide our clients with a link and a passcode for this budget counseling session. It takes about 30-minutes.
What information should you gather for your consultation with an attorney? Prior to meeting with your attorney, it’s a good idea to gather-up all of your bills, collection notices and legal papers like tax liens, lawsuits or judgments. Make sure to bring recent pay stubs, and a copy of your last-filed tax return.
Most importantly, it’s a good idea to print a copy of your credit report for your attorney to review. A free copy of your credit report is available at www.AnnualCreditReport.com. Make sure you have a printer available, and plenty of paper, as many credit reports are over 50 pages long.
Exactly how you proceed depends on the type of bankruptcy you and your attorney choose to file.
Types of Bankruptcy
There are several types of bankruptcy for which individuals or married couples can file, the most common being Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy filings make up about 70 percent of non-business bankruptcy cases, and under this your debts are discharged and you are no longer responsible for repaying them. Some of your assets may be sold by a court-appointed bankruptcy trustee. The proceeds go towards paying the trustee, covering administrative fees and, if funds allow, repaying your creditors as much as possible.
You are allowed to keep key assets, but property exemptions vary from state to state. You may choose to follow either state law or federal law, which may allow you to keep more possessions.
Under Georgia law, you are typically entitled to $21,500 in equity in your home (or $43,000 if you’re married) and $5,000 in equity in your car, as well as certain less valuable items like household items and job-related tools.
You also retain your right to receive pension, Social Security, unemployment, veteran benefits and welfare.
Chapter 13 Bankruptcy
Chapter 13 bankruptcies make up for about 30 percent of non-business bankruptcy filings. A Chapter 13 bankruptcy involves repaying some of your debts to have the rest forgiven. This is an option for people who do not want to give up their property or do not qualify for Chapter 7 because their income is too high.
People can only file for bankruptcy under Chapter 13 if their debts do not exceed a certain amount. The specific cutoff is reevaluated periodically, so check with a lawyer or credit counselor for the most up-to-date figures.
Under Chapter 13, you must design a three- to five-year repayment plan for your creditors. Once you successfully complete the plan, the remaining debts are erased (“discharged”).
In addition to Chapter 7 and Chapter 13 bankruptcies, there are four other types of bankruptcy. They are rarely used, but they are:
- Chapter 9: Chapter 9 may only be applied to municipalities such as cities or towns and allows for their reorganization.
- Chapter 11: Chapter 11 is the third most common type of bankruptcy filing, with 1,757 filings in 2011. This chapter is almost always used to reorganize businesses but may be used by individuals as well.
- Chapter 12: Chapter 12 is used exclusively to adjust the debts of a family farmer or family fisherman.
- Chapter 15: Chapter 15 applies to cross-border cases, in which the debtor has assets and debts both in the United States and elsewhere.
Bankruptcy isn’t the best option for every client. For some clients, we recommend a debt consolidation or debt settlement plan. These options can help you get your finances back on track and may (may) be better for your credit than bankruptcy. Debt settlement may have some unfavorable tax implications.
Brian R. Cahn & Associates, LLC is a group of experienced bankruptcy lawyers dedicated to aggressively representing our clients. We use our experience to empower our clients with the power of information. The consultation is always free, courteous, and 100% confidential.
Brian R. Cahn
Brian R. Cahn & Associates, LLC
345 Creekstone Ridge
Woodstock, GA 30118
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