Georgia Bankruptcy Exemptions and Law
COVID-19 Statement — Georgia's Bankruptcy Courts are Open: Georgia has three federal district bankruptcy courts and they are all open. However, some have restricted access to certain groups of individuals. Some courts have also implemented special filing procedures for people representing themselves in bankruptcy (known as filing “pro se"). If you have business before one of the courts, please check its website to see if any special procedures are in place. You should also check the website before in person to make sure the court is open and staffed.
How Bankruptcy Helps
If you are a Georgia resident and in debt over your head, bankruptcy could protect you from creditors while you pay off or eliminate your debt. Bankruptcy offers people an option for ridding themselves of overwhelming debt and starting over without worrying about being harassed or sued by bill collectors. Additionally, Georgia has enacted state laws that let residents protect some of their assets from creditors during bankruptcy.
The U.S. Bankruptcy Courts are federal courts governed by the U.S. Bankruptcy Code. However, federal law lets states make their own rules regarding what property their residents can protect from creditors. Georgia has chosen to implement its own rules on exempt property, which is the property you can keep to help you get on with your life after bankruptcy.
While some states let you choose between the federal exemptions provided in the Bankruptcy Code and their state law exemptions, Georgia requires you to use the state exemptions.
To better understand the role exemptions play in the bankruptcy process, it helps to familiarize yourself with the two types of personal bankruptcy:
- Chapter 7 bankruptcy is sometimes known as “liquidation" bankruptcy because you must turn over the property you cannot protect with an exemption to a bankruptcy trustee who will sell the property and use the proceeds to pay your creditors. Exemptions can play a large role in Chapter 7 cases because you will often lose much of the property that is not covered by an exemption. In return for giving up your nonexempt property, you will usually exit bankruptcy free from nearly all of your debt. But you must first meet strict income thresholds to qualify.
- Chapter 13 bankruptcy lets people who have a steady income reorganize most of their debt and pay it off in three to five years. The payments are made under a court-approved plan that usually eliminates some of your debt. Chapter 13 is popular with homeowners because they can often keep their homes.
One of the most important benefits you will enjoy if you file under either chapter is the automatic stay issued by the court when you file. The stay stops almost all creditor collection activity, including foreclosures and court cases. This prevents collection agencies from harassing you and gives you the breathing room you need to resolve your debt problems.
Secured vs. Unsecured Debt
When you declare bankruptcy your debts are usually categorized as secured or unsecured. The designation is significant because the two types of debt are treated differently in Chapter 7 and Chapter 13, which will dictate how much debt you can eliminate.
Debt is considered to be unsecured when a creditor has no right to repossess your property for failure to pay. Credit card debt, court judgments, and medical debt are among the most common types of unsecured debt.
Since your unsecured creditors hold no collateral for their debts, unsecured debt is the most likely to be eliminated through bankruptcy. But some priority unsecured debts, like child and spousal support, can't be discharged.
A secured creditor has the right to repossess your property if you do not repay what you owe. Secured debt is often the result of a contract. For example, if you sign a car purchase or lease agreement, under the contract the lender has the right to seek a lien on the property that you put up as collateral if you don't pay. Put simply, the lender has the right to take back the property (in this case, the car) for failure to pay.
Because secured creditors retain their right to repossess the property in bankruptcy, you will usually need to give up the property or work out a payment plan with the creditor. Home mortgages and car loans are the most common types of secured debt.
How Secured and Unsecured Debt Work in Bankruptcy
When you file for Chapter 7 bankruptcy, you can usually discharge most of your unsecured debt. However, secured debt is treated differently and can rarely be eliminated in a Chapter 7 case. Usually, you will need to choose from one of the following options:
- Return the property to the creditor. If you choose this option you will lose the property, but you will usually be free from making additional payments.
- Keep the property and continue making payments. This is sometimes possible when a state exemption covers the equity you have in the item.
- Purchase the property outright. This is rare in Chapter 7 cases because most people who file under this chapter lack the assets to purchase the property.
Chapter 13 bankruptcy lets you create a plan to repay your secured creditors over three to five years. The court must approve your plan and may force creditors to reduce or restructure your debt. If you want to keep your home you will need to continue making mortgage payments outside of the plan, but the trustee may negotiate a payment agreement with the lender if you are behind on your payments.
In Chapter 13, unsecured creditors are paid with the disposable income that is left over after you have repaid your secured creditors. Any unsecured debt not paid under the plan is discharged when the plan has finished.
To file under Chapter 7 in Georgia you must show that your income is low enough to qualify. This is usually done using one of two "means tests."
The first means test is simple: If your household income is less than the median household income for similarly sized households in your state, you qualify. .For example, U.S. Census data shows that the median income for a three-person Georgia household was $75,460 as of November 2020. That means that if you live in a three-person household that has less than $75,460 in income, you will qualify under Chapter 7 in Georgia.
If your household income is above the Georgia median, you can still qualify under Chapter 7 based on your disposable income. Your monthly disposable income is calculated by subtracting your monthly expenses from your monthly income. If the calculation shows that you have little disposable income each month, you can file under Chapter 7.
To file under Chapter 13 you will need to show that you have a steady income and unsecured debt of no more than $419,275. Your secured debt can't total more than $1.26 million.
Georgia's exemption system must be used by anyone filing for bankruptcy in the state. If your property falls within one of the exemptions, you can protect it from creditors and use it to start over when you are finished with bankruptcy.
When a married couple files for bankruptcy together in Georgia each spouse is usually allowed to claim a complete set of exemptions. In essence, if you file for joint bankruptcy with your spouse you will be allowed to double most state exemptions if you own the property together.
Georgia will let you exempt up to $21,500 of the equity you have in the residence you use as a home at the time you file for bankruptcy. That doubles to $43,000 if you and your spouse both own the home and file for bankruptcy together.
You are allowed to keep 75% of your weekly disposable earnings or 40-times the state or federal hourly minimum wage, whichever is larger. A bankruptcy judge may allow some low-income debtors to keep more of their earnings.
Motor Vehicle Exemption
You can exempt up to $5,000 of the equity you have in one or more motor vehicles.
Georgia has a wildcard exemption that you can use to protect any property you own up to $1,200 in value. If you do not take full advantage of the state's homestead exemption you will be allowed to use up to $10,000 of the unused homestead exemption amount to protect other property.
Personal Property Exemptions
The following household items are exempt up to a combined total of $5,000, not to exceed $300 per item:
- Household goods
- Musical instruments
The state will also allow you to keep up to $500 in jewelry.
Tools of the Trade Exemption
You can exempt up to $1,500 of the implements, books, or tools you need to pursue your trade or occupation.
Insurance Benefits Exemption
Payments under life insurance contracts that insured an individual upon which you depended for support are exempt to the extent they are reasonably necessary to support you and any dependents.
Pension and Retirement Exemption
Most pension and retirement plans are exempt in Georgia, including:
- Tax-exempt retirement accounts such as 401(k)s, IRAs, and defined benefit plans
- Public officer or employee plans
- Reasonably necessary payments made on account of illness, disability, death, age, or length of service under a pension or annuity plan
Public Benefit Exemptions
The following public benefits are exempt in full:
- Social Security benefits
- Unemployment benefits
- Disability benefits
- Veterans' benefits
- Local public assistance benefits
- Alimony and child support to the extent reasonably necessary for support
- Money from a health savings account or medical savings account
- Professionally prescribed health aids
- Payments for the wrongful death of an individual upon whom you were dependent to the extent they are reasonably necessary for your support
- Up to $10,000 of payments for personal bodily injury, not including payments for pain, suffering, or financial loss
- Payments as compensation for the loss of future earnings that are reasonably necessary for your support
If you are filing for bankruptcy anywhere in the U.S. you must first complete a counseling course within 180 days of filing. The course is designed to help you assess whether you can pay your debts outside of bankruptcy.
If you plan to file under Chapter 13, you may be asked to prepare a repayment plan to file with the court as part of the course. You must file a course completion certificate along with your bankruptcy filing.
Most people start bankruptcy by finding a qualified bankruptcy attorney. When you file without an attorney, you will begin the process by finding and downloading the correct forms for the bankruptcy court in your district. If you are unsure of whether you reside in Georgia's northern, middle, or southern district you can search under “U.S. Bankruptcy Courts" in the Federal Court Finder. The instructions for the filing forms will let you know which additional forms and documents must accompany your petition.
Where Do I File for Bankruptcy in Georgia?
There are three federal courts in Georgia, each with its own bankruptcy court. The district bankruptcy courts can be found at the following locations:
The Northern District of Georgia has bankruptcy courts in:
The Middle District of Georgia has bankruptcy courts in:
The Southern District of Georgia has bankruptcy courts in:
It will cost you $338 to file for Chapter 7 bankruptcy in Georgia and $313 to file under Chapter 13. The fees are the same whether you represent yourself or hire an attorney. If you can't afford the filing fee, you can ask to pay in installments over 120 days. If you earn less than 150% of the poverty line you can request that the fee be waived.
Most people who file for bankruptcy choose to be represented by a lawyer. While each bankruptcy case is unique and the fees can vary depending on where you live in the state, most Georgia bankruptcy lawyers will charge between $650 and $1,500 for a fairly straightforward Chapter 7 case. Since Chapter 13 cases are usually more complex, most attorneys will charge more to represent you in those cases.
Need Help Filing for Bankruptcy in Georgia?
If you are having trouble paying your bills, hiring an attorney to represent you in bankruptcy may seem like an expensive luxury when you could file on your own. However, even simple bankruptcy cases can involve complex court filings and meeting strict deadlines. An experienced local bankruptcy attorney will help guide you through the filing process, represent you in court, and negotiate with your creditors to ensure that you retain as many of your assets as the law allows.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
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