The law allows you to keep certain property that the State thinks you need in order to live. That property is exempt. Georgia has one list of such property, and South Carolina has another. Generally, South Carolina’s list is more generous for some reason. The exemption laws are too complex to explain in detail. But, in general, bankruptcy attorneys will advise debtors who think they still have whopping equity in their homes, even in this terrible housing market, or their houses are paid for, to stay away from Chapter 7.
In the rare case where a particular piece of property is not exempt under state exemption laws, this does NOT mean that you’ll automatically lose the property, however. Chapter 7 trustees are usually looking for the quick buck, and would rather have cash than property that they have to market and sell. Consequently, you can probably ransom your non-exempt property by making a negotiated cash payment to the trustee. Some trustees will let you pay over a short period of time. You may be able to negotiate a ransom price that’s considerably less than the replacement value of the property.
In Chapter 13, property exemptions are used in the best interests of creditors or liquidation test (one of the five tests for confirmation of a plan) to make sure that your unsecured creditors get at least as much money through the plan as they would have gotten in a theoretical Chapter 7 case. Once again, you don’t lose the property. Instead, you must pay the value of the non-exempt property into the plan somehow. You can pay out of your earnings, or, in a rare case, you can sell the property and pay the proceeds into the plan.
The Automatic Stay
As soon as you file a bankruptcy petition, a stay goes into effect automatically. The bankruptcy stay prevents everyone from attempting to collect a pre-petition debt. For example:
- A foreclosure sale must be put on hold.
- A car lender can no longer grab your ride.
- Civil lawsuits, such as ones brought by debt collectors or credit card companies, are halted.
- Garnishments or levies on your pay check must stop.
Individual creditors may, however, petition the Bankruptcy Court for relief (or to lift) the stay, if they think they have a good reason (or cause) for doing so. If the Court agrees and the petition is granted, relief allows them to proceed with foreclosure, repossession, eviction, and so on.
If you have questions about bankruptcy, contact Lee Ringler Law Offices today. We proudly serve clients throughout the greater Augusta area and CSRA, including Evans, Martinez, and Grovetown, GA, North Augusta and Aiken, SC, and surrounding counties.