Anyone who is unable to pay back the debts they have incurred can file for bankruptcy. But because some people are literally more bankrupt than others (owing more money), there are legal checks that determine which form of bankruptcy is allowed. This is to prevent people who have the means to pay back at least some of the debt from claiming they are unable to pay back anything at all.
Types of Personal Bankruptcy Available in Georgia
Like elsewhere in the US, there are two types of bankruptcy open to individuals (including married couples):
- Chapter 7 that enables people to wipe out their debts and start afresh.
- Chapter 13 that reduces the total debt but involves a legally approved payment plan over a period of three to five years.
Both types of bankruptcy can save your house, car, and other property; stop interest accruing on tax debts; and prevent creditors from instituting wage garnishments or collecting money in accordance with existing garnishments. However, Georgia’s median for household size in each county, together with the bankruptcy means test, will determine whether debtors qualify for a Chapter 7 or not.
Georgia’s Bankruptcy Means Test
The Georgia median income test is based on the size of any household and specifies the maximum earnings allowed for anyone filing for Chapter 7 bankruptcy. First, the individual’s earnings for the past six months are determined and verified. The meridian income is the average over this period. This figure is compared to the income allowed by the US Department of Justice, which is updated from time to time, most recently on November 1, 2016.
A monthly, six monthly, and an annual amount is given in the Georgia median income test table. For Fulton County, Atlanta this ranges from $3,561 per month (or $21,368 for six months) for a single person, to $10,224 per month ($61,345 for six months) for a household of 10. This shows that the number of people living in the house can have a dramatic affect on a person’s median income figure.
Sometimes the reason a person decides to file for bankruptcy is prompted by a decrease in monthly income because they lost their job or for some other reason – and they simply cannot continue to repay what they owe. If this is the case, it might be necessary to wait until the monthly average is low enough to qualify for a Chapter 7. A Georgia bankruptcy attorney will advise.
Similarly, if a person (or couple) “fails” the bankruptcy means test because the amount earned is too high, actual household expenses are taken into account. If income after expenses is too low for debtors to reasonably undertake a repayment plan, they might still qualify for a Chapter 7. This is because to qualify for a Chapter 13 bankruptcy you must have a regular income so you can commit to a repayment plan. A Georgia bankruptcy attorney can help with these calculations too.
Exemption from Georgia’s Bankruptcy Means Test
If the income of a person or couple is below the Georgia median, an exemption is automatic, and they don’t have to complete a means test. Similarly, if the person’s debts are business related rather than personal debts, they will be exempt, and will qualify for a Chapter 7 without having to complete a means test. This is the case even if there are some personal debts; business debts just need to be greater.
If you are considering bankruptcy in Georgia, our Atlanta bankruptcy firm can assist. While the means test can be relatively straightforward, there are numerous issues that can complicate matters. Furthermore, even if you qualify for a Chapter 7, there are circumstances that might make a Chapter 13 the better option. We can help you make these important decisions.