Knowledgeable Guidance Through Chapter 7 Liquidation
The decision to liquidate assets through Chapter 7 bankruptcy is not one most business owners in Atlanta and surrounding areas make lightly. At Jones & Walden, LLC, we know this better than most people because we have unique experience guiding business owners — as well as individuals with unique ties to business assets and interests — through Chapter 7 petitions in order to come out the other side debt-free.
When you work with our attorneys, we will make sure the focus remains on providing you with the same high-quality legal counsel you’d expect from a larger firm coupled with the personalized attention you’d expect from a small firm. At Jones & Walden, LLC, we’re committed to helping you resolve your debt issues through bankruptcy options that make sense for you and your business. With our experienced legal team in your corner, you can rest assured that all of your legal matters are being addressed, no matter how complex they may seem.
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy is commonly referred to as a “liquidation” or “straight” bankruptcy. The bankruptcy court discharges (or in essence “forgives”) debts based on an individual’s inability to pay.
When an individual files a Chapter 7 bankruptcy case, the filing immediately stops collection attempts. Creditors cannot make harassing phone calls or garnish bank accounts, which generally gives the debtor relief. The bankruptcy filing also creates a bankruptcy estate (similar to an estate in a probate case), which consists of virtually all of the individual’s nonexempt property.
Shortly after commencement of the case, a third party known as the trustee is assigned to review and administer the debtor’s bankruptcy estate. The Chapter 7 trustee for each case is randomly appointed from a standing panel of trustees. The bankruptcy trustee has the ability to sell or liquidate property to pay creditors if the property is not exempt.
How Does Property Exemption Work?
Because bankruptcy is supposed to provide honest debtors with a fresh start, both federal and state laws allow debtors to “exempt” and retain certain property. The exempt property is excluded from the estate. Through Georgia’s statutory exemptions, Chapter 7 debtors can protect property such as real estate, vehicles and household furnishings up to certain limits.
Typically, trustees do not sell property — such as houses or cars — that are encumbered by liens or mortgages unless there is equity in the property above the amount owed on the lien plus the amount the debtor is entitled to exempt.
Our attorneys can provide a thorough assessment of a bankruptcy case and the assets eligible for exemption in a Chapter 7 case. One of our partners, attorney Leon S. Jones, authored an in-depth guide to exemptions under Georgia law, which goes in depth into exemptions if you have further questions or need more information.
We Can Help Consumers And Businesses In Debt
There are two types of individuals who may need to file Chapter 7 bankruptcy. The first is a “business debtor” case in which a majority of the individual’s debts arise from or relate to operation of a business. The second type of Chapter 7 case involves a “consumer debtor” whose debts are mostly comprised of personal expenses such as consumer credit cards, personal loans, vehicle loans and residential mortgages.
In order to qualify for Chapter 7 as a consumer debtor, the individual must take and pass the “means test.” The means test compares the individual’s average income during the six months prior to bankruptcy with predetermined expense allowances to calculate whether the individual has sufficient disposable income (i.e., the “means”) to pay back a portion of his or her debts.
Unlike the consumer debtor, a business debtor is exempt from the means test requirement. In other words, if the majority of the person’s debts are not consumer debts, then the individual avoids the means test.
Determining whether an individual will “pass” or “fail” the means test — or skip the test altogether — requires a comprehensive analysis of the person’s financial condition. The means test formula is complicated and has numerous pitfalls for those unfamiliar with its calculations. Our attorneys, however, are well-versed in this bankruptcy process. We can evaluate your eligibility under Chapter 7 and help you understand how to navigate the means test.
Important Information For Business Debtors
If more than 50 percent of an individual’s debts arise from the operation of a business enterprise, then the individual is a “business debtor” under Chapter 7. Often, a business debtor owns or operates a small, closely held corporation or single-member limited liability company (LLC) and has personally guaranteed the company debt.
Perhaps the biggest advantage for a business debtor is exemption from the means test requirement. Many small-business owners whose income would otherwise disqualify them from Chapter 7 under the means test are eligible to file Chapter 7 bankruptcy and obtain a fresh start. However, there is an important caveat. Even though a business debtor does not have to pass the means test, every bankruptcy case is subject to a “good faith” requirement. That is, if the debtor’s income exceeds expenses and the debtor could actually fund a repayment plan, the court may find that the debtor did not file the case in good faith and dismiss the Chapter 7 case.
Important Information For Consumer Debtors
In contrast to the business debtor, a “consumer debtor” is an individual whose debts are mostly for household and living expenses such as credit cards, medical debts, personal loans, vehicle loans and mortgages.
Consumer debtors must take and pass the means test to file a Chapter 7 case. Under the means test, average income (over the six-month period prior to the filing of the bankruptcy) is compared to the allowed median expenses for that state to determine if the debtor has disposable income to pay creditors.
If the test determines that the debtor has disposable income at a certain level, the individual “fails” the means test and is ineligible for Chapter 7. However, in this event the debtor may still seek bankruptcy protection under Chapter 12 — if they are a fisherman or farmer — Chapter 13 — if they have a regular income — or Chapter 11 — if the other chapters are not viable options.
Let Our Capable Team Help You Get Out Of Debt
The attorneys at Jones & Walden, LLC, have represented hundreds of individuals in bankruptcy and can help you decide which chapter best suits your unique circumstances. Our experienced team of lawyers can provide the same high-quality counsel offered at larger firms, while providing you with the personalized attention you’d expect from a small firm.
If you would like to schedule a consultation with someone on our team, please contact our office in Atlanta where we serve clients from all over the Atlanta metro area and surrounding counties. Call 678-701-9235 or contact us online to get started.