CAN I KEEP MY HOUSE IN A CHAPTER 7 BANKRUPTCY

Many of my bankruptcy clients are understandably concerned that they will lose their house in their bankruptcy.  However, this is often not the case.  Whether a person filing chapter 7 bankruptcy will lose their home depends on several factors.  First, are the payments current on the home?  One of the reasons people often file for bankruptcy is because they are behind on their mortgage payments and they are trying to avoid a foreclosure.  While it’s true that filing a chapter 7 bankruptcy will stop a foreclosure temporarily, if the payments are not made current, it is likely that the lender will simply petition the court for permission to foreclose on the home.  In this situation, a chapter 7 bankruptcy will merely serve to delay the bankruptcy. 

Conversely, if the mortgage payments are current (or close to current), then the bankruptcy filer may be able to keep their home.  In Georgia, a chapter 7 filer has a variety of exemptions available to him.  These exemptions are used to determine what property the filer can keep and what property must be handed over to the bankruptcy trustee for the benefit of the creditors.  Georgia allows a $21,500 exemption for equity in real estate that the filer uses as a residence.  A married couple filing jointly will have a $43,000 exemption available to them.  Consequently, if you own and live in your home, are married and filing bankruptcy jointly, are current on your mortgage payments, and have less than $43,000 of equity in your home, you will be able to keep your home so long as you continue to make the mortgage payments as they become due.

If you have additional questions about bankruptcy, please call Brim Law, LLC at (678) 353-3350 for a free consultation.

WILL I KEEP MY CAR IF I FILE FOR CHAPTER 7 BANKRUPTCY?

My clients are often concerned about keeping their car if they file for bankruptcy.  Whether you will be able to keep your car in bankruptcy depends on several factors.  First, how much equity do you have in your vehicle?  In Georgia, a chapter 7 filer has a variety of exemptions available to him.  These exemptions are used to determine what property the filer can keep and what property must be handed over to the bankruptcy trustee for the benefit of the creditors.  Georgia allows a $3,500 exemption for equity in one’s vehicle (or vehicles).  A married couple filing jointly will each have the $3,500 exemption available to him or her.  

This means if your car is paid off, and the value is $3,500 or less, you will be able to keep your car.  If you are still making payments on your car, and the value of the car is no more than $3,500 greater than your loan balance, you may be able to keep the car.  Generally, if you are still making payments on the car and have no more than $3,500 of equity in your car, in order to keep the car, you will need to (1) be current on your payments when you file for bankruptcy, and (2) have the necessary income to continue to make the payments as they come due after the bankruptcy petition is filed.  Often, if you are still making payments on your car, your lender will require you to sign a reaffirmation agreement if you want to keep the car.  A reaffirmation agreement ensures that your bankruptcy discharge has no effect on your obligation to make payments for the vehicle.  

If you have additional questions about bankruptcy, please call Brim Law, LLC at (678) 353-3350 for a free consultation.

ARE DEBTS ARISING OUT OF DIVORCE DISCHARGEABLE IN BANKRUPTCY?

Section 523 of the bankruptcy code list the categories of debt that are excepted from discharge.  Generally, this means if a bankruptcy filer has a type of debt that is listed in Section 523, then they will be responsible for the debt in spite of the fact that they filed for bankruptcy.  

There are various types of debt and/or financial obligations that may be created by virtue of a divorce decree.  Among these are domestic support obligations, including alimony and child support.  Section 523(a)(5) excepts domestic support obligations from discharge.  Therefore, debts owed for child support or alimony cannot be discharged in bankruptcy.  Although this has been the law for many years, prior to 2005, other types of debt created in a divorce decree or settlement agreement might have been dischargeable.  These other types of debt can include, for instance, obligations to pay off a former spouse’s credit card or home equity loan. 

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).  BAPCPA made significant changes and additions to the existing bankruptcy code.  Among these additions was Section 523(a)(15), which exempts from discharge any debt “to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.”  In 2010, Judge Robert E. Brizendine issued a ruling in which he interpreted this code section.  Judge Brizendine held that, when read jointly, sections 523(a)(5)&(15) render obligations created in a divorce decree nondischargeable. In Re: John Robert Cracknell, Debtor. Cheryl Diane Cracknell, Plaintiff v. John Robert Cracknell, Defendant., Northern District of Georgia, Case Number G09-21812-REB.      Therefore, at this point, in the Northern District of Georgia, any debts created in a divorce decree are nondischargeable.  This not only impacts those who have gone through a divorce, it also means that someone who is currently going through a divorce (or who may be considering filing for divorce) would be wise to consider the potential impact their divorce settlement may have on their ability to discharge those debts at a later date. 

If you have additional questions about bankruptcy, please call Brim Law, LLC at (678) 353-3350 for a free consultation.