What will happen to my credit after bankruptcy?

Frequently Asked Questions | Bankruptcy Lawyers Attorneys Georgia | 770-609-1247After filing for bankruptcy, you can expect it to become a little more difficult to get credit and the amount might be limited. However, filing for bankruptcy does not prevent you from getting new credit; after two years of the bankruptcy discharge the filer is for mortgage loans with almost the same terms as those who have not filed for bankruptcy. It is true that your bankruptcy will be on your credit report for ten years.  However, as time passes it becomes less significant. It is good to know that it is not impossible to get new credit; there is even an entire class of lenders that focus on bankruptcy filers.  Also, it is not unusual to be able to be approved for a normal (not-subprime) car loan after just one year from filing a bankruptcy case.

If I file for bankruptcy, does my spouse have to file with me as well?

No, if you are filing for bankruptcy your spouse is not obligated to file with you.  Married couples have the option of filing a joint case – or just one of the parties filing their own individual bankruptcy case. See 11 U.S. Code § 302 – Joint cases.

Will I be eligible to file for bankruptcy if I have a high income?

When filing for bankruptcy, the filer will need to take something called a means test, which is a test that is used to determine the filers ability to pay. It is primarily used to determine whether the filer is able to file under chapter 7 and discharge all of their debts. If the filer is determined to not be eligible for chapter 7, they can still file under chapter 13.  However, there are exceptions to the means test – which can allow many people who would not normally qualify for a chapter 7 case to be approved.  The most notable is in cases where the primary source of the debt is income taxes, a tort claim or is business related debts.

What do I have to do to file?

Before filing, the filer may be required to get a credit briefing showing any opportunities for credit counseling from an approved agency, not doing so could be grounds for dismissal of your case. After doing so, the filer must file a petition, list all assets and debts, and pay the filing fee, the filer will also be required to attend at least one meeting of creditors where the trustee and any creditors that choose to attend will ask you questions about your financial affairs.

Will I have to give up all of my stuff?

No, according to the bankruptcy code, there are some assets that are considered exempt property. Exempt property is property that the trustee cannot liquidate to pay your debts. Normally there are federal bankruptcy exemptions and there are also state exemptions and the filer can choose which set of exemptions to use. However, in the state of Georgia the filer is only allowed to use the state’s bankruptcy exemptions.

Will I lose my house?

It depends on whether there is significant equity on the house. Generally, if there is not enough equity in the homes owned by the vast majority of cases – and the bankruptcy trustee will abandon the house to the debtor as long as they continue to pay the mortgage.  If there is significant equity it is necessary to determine whether the exemptions that you are using are exceed or are equal to the equity. If the exemptions are more than the equity you can keep the house as long as you continue to pay the mortgage. If the equity is more than the exemptions, the filer should consider filing under chapter 13 instead.  Again – It is important to note, that in the vast majority of cases – there is not enough equity in a home for it to be an issue in the bankruptcy case due to the generous exemptions afforded under Georgia and Federal bankruptcy law.

What will happen to my car?

It is similar to the house, whether you keep the car depends on whether there is nonexempt equity in the car. If there is no equity in the car, depending on the value of the car after subtracting any car loans and exemptions, the trustee will not take the car. If there is equity in the car and it exceeds the exemptions, it is possible for the filer to buy any unprotected equity from the trustee.  It is important to note, that in the vast majority of cases – there is not enough equity in an automobile  for it to be an issue in the bankruptcy case due to the generous exemptions afforded under Georgia and Federal bankruptcy law.

How will bankruptcy impact my taxes?

For the average filer, obtaining a discharge in bankruptcy has no tax consequences. However, if the debt was cancelled without filing for bankruptcy, the cancelled debt could be classified as income for tax purposes.  In some cases, federal and state income taxes, interest and penalties may be discharged; if this is something you are interested in obtaining – it is important to consult with an experienced bankruptcy attorney that understands the dischargability of income taxes in bankruptcy.

Do I have to state all of the debts I have?

Yes, the filer is required to list all of their debts even if they are secured or non-dischargeable. If the filer plans the not list a card because they want to continue using the card does not mean they will continue to be able to use the card due to the fact that most credit card issuers use a nationwide database to find out who has filed for bankruptcy and can cancel credit cards even if there is no balance owed. It is important to know that not listing a debt is considered perjury and that is also grounds for dismissal of your case.

What will happen to my student loans?

Since 1998, student loans are not dischargeable unless it can be proven that repayment of the loans is causing undue hardship on the filer or their family. To prove hardship the filer must show that it is practically impossible to repay the loans and maintain a minimum standard of living for the filer or their family.

Will filing for bankruptcy put a stop on my wage garnishments?

Yes, after the petition is filed the creditors are no longer allowed to garnish your wages. However, you have on-going child support that may still be taken out if your wages.

What if give some of my assets to friends / family to keep them safe from the bankruptcy trustee?

If the reason you are transferring property to someone else is so that the trustee will not liquidate it – that can be considered fraud and can be grounds denial of your discharge. It is also worth knowing that the trustee can reverse such transfers and get that property back depending on how long ago the property was transferred, usually one year.  In addition, once you have transferred an asset to a friend or family member in an effort to shield it from the bankruptcy trustee – you have also given up any rights to now use any of the bankruptcy exemptions that you could have used to protect the asset.

Will anyone be coming to my house to investigate my stuff?

In most instances, no one will make a trip to your house to take a look at your stuff. However, if there is suspicion that you have extremely undervalued your assets or tried to hide them, someone may be sent to investigate and even then that is very unlikely.

Obtaining Assistance in Your Bankruptcy Case

If you are looking at possibly filing a bankruptcy case in Georgia, call us at 770-609-1247 to speak with one of our experienced personal and business bankruptcy attorneys.

Updated: 2019-02-18