Georgia Means Test: Your Guide to Chapter 7 Bankruptcy Eligibility

Are you struggling with debt and considering Chapter 7 bankruptcy in Georgia? Understanding the Georgia means test is crucial for determining your eligibility. This post explains the means test, income limits, and alternative options.

Key Takeaways

• The Georgia means test assesses income to determine Chapter 7 eligibility.
• Income thresholds vary by household size.
• The means test calculates your Current Monthly Income (CMI) and considers allowable expenses.
• Failing the means test doesn’t disqualify you from other debt relief options.
• Professional guidance from a bankruptcy attorney is recommended.
• Credit counseling is a required step in the bankruptcy process.

Understanding Chapter 7 Bankruptcy in Georgia

Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” eliminates most unsecured debts. It can provide a fresh financial start but may require liquidating non-exempt assets. Georgia has specific bankruptcy laws and exemptions that protect certain assets. Filing for Chapter 7 has significant consequences and should be considered carefully.

The Georgia Means Test Explained

The Georgia means test is a financial assessment that compares your income to the state’s median income. It aims to ensure that Chapter 7 bankruptcy is accessible to those who genuinely cannot afford to repay their debts.

Income Thresholds for Georgia Residents:

Income thresholds are based on household size and are subject to change. Check current figures when considering bankruptcy. The means test considers both income and expenses.

Calculating the Chapter 7 Bankruptcy Means Test

• Current Monthly Income (CMI): Calculated by averaging your income from all sources over the past six months.
• Allowable Expenses and Deductions: Certain necessary expenses (housing, utilities, food, transportation, secured debt payments, priority debts, healthcare, childcare, etc.) are deducted from your CMI. These deductions are subject to specific limitations.

Passing the Georgia Means Test

Passing the means test generally requires having an income below the state median for your household size or demonstrating limited disposable income after allowable expenses. Meeting the means test requirements is a crucial step in qualifying for Chapter 7.

What Happens If You Fail the Means Test?

Failing the means test does not preclude other debt relief options:

• Chapter 13 Bankruptcy: Allows for debt restructuring through a 3-5 year repayment plan.
• Other Alternatives: Waiting and retaking the means test (if your financial situation changes), debt consolidation, negotiating with creditors, and credit counseling.

Alternatives to Chapter 7 Bankruptcy in Georgia

• Chapter 13 Bankruptcy: Suitable for individuals with regular income who want to retain assets and repay a portion of their debts over time.
• Debt Settlement: Negotiating with creditors to reduce the total debt amount, often through a lump-sum payment. Debt settlement can negatively impact credit scores and may have tax implications.

Seeking Professional Guidance

• Working with a Bankruptcy Attorney: A bankruptcy attorney provides expert guidance, explains the means test, helps identify exemptions, and navigates the bankruptcy process. They can answer your questions and address your concerns.
• Credit Counseling Requirements: Completing a credit counseling course is mandatory before filing for bankruptcy. Credit counseling provides valuable financial management skills.

Conclusion

The Georgia means test plays a critical role in determining Chapter 7 bankruptcy eligibility. Understanding the means test, income limits, and alternative options is essential for making informed decisions about your financial future. Seeking professional guidance from a bankruptcy attorney and completing credit counseling are highly recommended. Contact the Law Offices of Mark A. Bandy, PC, for a consultation.

Frequently Asked Questions

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” is a legal process that allows individuals to eliminate most unsecured debts, providing a fresh financial start. It involves liquidating non-exempt assets to pay creditors, but many filers can keep their essential property through exemptions.

What is the Georgia means test?

The Georgia means test is a financial assessment used to determine eligibility for Chapter 7 bankruptcy. It compares an individual’s income to the state’s median income to ensure that only those who genuinely cannot pay their debts qualify for debt discharge. Passing this test is the first step in evaluating overall financial fitness.

What are the income thresholds for the Georgia means test?

Income thresholds for the Georgia means test vary based on household size. For example, as of 2021, the median income for a single-person household was $52,977, while for a four-person household it was $91,161. These figures are updated periodically, so it’s important to check the most current thresholds.

What alternatives are there to Chapter 7 bankruptcy in Georgia?

Alternatives to Chapter 7 bankruptcy include Chapter 13 bankruptcy, which offers a 3-5 year repayment plan, and debt settlement, where individuals negotiate to pay less than what they owe. Chapter 13 is suitable for those with steady income who want to keep assets, while debt settlement can be beneficial but may impact credit scores.

Do I need an attorney to file for Chapter 7 bankruptcy in Georgia?

While not legally required, working with a bankruptcy attorney is highly recommended. An experienced attorney can simplify the means test, uncover potential exemptions, and act as a financial translator. They can address questions and concerns, providing reassurance throughout the complex bankruptcy process.

What is credit counseling, and why is it required?

Credit counseling is a mandatory step before filing for Chapter 7 bankruptcy. It’s a brief session that teaches essential money management skills, covering topics like budgeting and debt management. This requirement serves as an opportunity to gain financial clarity and learn strategies for future financial success.

Can I keep my home if I file for Chapter 7 bankruptcy in Georgia?

Georgia’s bankruptcy laws include unique exemptions that allow residents to keep certain assets. For example, you can keep up to $21,500 in home equity (or $43,000 for a married couple filing jointly). However, if your equity exceeds this amount, you may need to consider alternatives like Chapter 13 bankruptcy.

How long does the Chapter 7 bankruptcy process take in Georgia?

The Chapter 7 bankruptcy process in Georgia typically takes about 4-6 months from filing to discharge. However, the exact timeline can vary depending on the complexity of your case, court schedules, and any challenges from creditors. Your bankruptcy attorney can provide a more accurate estimate based on your specific situation.