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Busting Myths About Chapter 7
Episode 28th September 2023 • Georgia Bankruptcy Podcast • Attorney Jeffrey Kelly
00:00:00 00:17:35

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Join me, Jeff Kelly, on this week's episode of Georgia Bankruptcy Podcast as I unravel the intricacies of Chapter 7 bankruptcy. Misconceptions cleared, complex processes analyzed, and important issues like the median income test discussed. Be privy to my insights from my career and learn how hasty decisions could impact your assets dramatically. Don't miss this chance for a debt-free fresh start - visit our website for a free book and let’s explore your options together. You can start


Jeff Kelly: [:

So, if you have any questions about us, check us out at, and then our podcasting website is Alright, so let's talk about Chapter 7. There are so many myths about Chapter 7. It is ridiculous and I think probably the most common myth about Chapter [00:01:00] 7 is that you can just wave your magic wand and poof, you're done.

It's all your debts are wiped out and that's not true. There's, Chapter 7 is very complex. You need to be very careful before you file to make sure that you get some good legal analysis to make sure this is the right opportunity, right time, right option for you so that you don't end up in a terrible mess.

So let's go over some of those hot messes that sometimes people get into. I have seen cases in my career before where somebody went online, they read about Chapter 7, thought it was the magic wand deal, and so they just went online, downloaded some forms, and filed their own case.

, if you [:

You want to know what you're doing. You want to make sure you have good legal analysis, particularly the reason what's really causing a lot of havoc and a lot of people's current chapter seven situations is houses. And right now the real estate values are through the roof. I can't [00:03:00] believe it.

, the current exemption as of:

And so hypothetically, let's use a nice clean number. Let's say you have $100,000 in equity and you can only protect 43, 000 of it. That leaves a pretty good chunk left over. So, hypothetically, if you've got $30 - $40,000 in credit card debt, you can bet, you file Chapter 7, the trustee is going to sell your house, and they're going to pay those debts.

Now, [:

If the trustee decides to sell my house, And I get a check for 21, 500, or if it's a married couple, 43, 000. I would be satisfied with that result as long as all of my debts are wiped out. And, you know, a lot of people say, oh yeah, I'm willing to roll the dice, I'm willing to do it. And then when I present them with the document, it says, okay, I need you to sign it.

We're going to spell it out, [:

So another interesting thing about chapter 7, there's this thing called the median income test. What does that mean? That means that if you make more money than an average household of your size, you're probably not going to be able to file chapter 7, and you're probably going to have to pay something back to your creditors.

d the answer of course is... [:

But you know, it is important to understand that your income and your spouse's income affects whether or not you qualify for a Chapter 7. So, let's go over some other... Aspects of it here.

? Let's say you sold a house [:

Would it be a good idea to file Chapter 7? Absolutely not. Because let me tell you what would happen. The trustee is gonna let you proceed with your case. You're gonna get your discharge. You're gonna get your debts wiped out. And then the trustee will go to all of your relatives and say, Hand it over.

Give it back. And they're gonna have to or they're gonna be in trouble with the bankruptcy court. So, No, you cannot sell assets, liquidate them, and give them away to people and then turn around and file a bankruptcy case. If you do that, how far back can you go in the state of Georgia? And the answer is, you know, typically it's four years under the Georgia Fraudulent Transfer Act.

ey that you have given away. [:

What do we do? So what our firm does is we would send you an intake form and we would need you to Fill it out as best you can listing assets and when I say your assets, I mean everything you own furniture, televisions stocks, bonds, 401k. We want everything because we want to make sure we're not going to put you into any type of case that's going to hurt you or not give you the result that you want.

of time, typically about two [:

So, after you fill out the intake form and then we have the two hour meeting, then the next step is your 341 meeting of creditors. What happens there in a child reception situation and the answer is the trustee is going to ask you questions like hey Did you review this documentation with an attorney before you filed?

Yes, I actually reviewed it with Mr. Kelly, they're going to ask have you listed all of your assets? everything you own and Very important that you answer yes to that question and the trustee will then ask Has anything changed since your case was filed? Is this information still accurate today? And again, we hope it is.

earing. And then, after that [:

We want to make sure there's nothing holding you down. The other thing we want to do is after your case is discharged, we're going to want you to take a course called Fresh Start for Life and Don Golden, the owner of this company, will give you tips on things you can do to help rebuild your credit. Yes, people do rebuild after filing Chapter 7.

ther issue that I want to go [:

What happens if you fail to list it? And the answer is, the trustee, you know, actually, not the trustee, the, whoever you're suing is going to file something within that case saying, Hey, look, we caught him red handed. They've never listed this in the bankruptcy case and you're going to lose your case.

some hot water over that one [:

And under the 180 day rule, if you inherit any money after this bankruptcy case, you're gonna have to give it to the trustee, and they'll take your money, and they're gonna pay your creditors, and you get what's left over. Hypothetically, if somebody was about to file, and they had a, you know, a mom, dad, whoever, that was...

you know, potentially going to leave him some money or something pretty soon. They would want to meet with an estate planning attorney and there's ways you can leave money to people without exposing it to the creditors of the person that you want to leave the money to. It's called a trust. And there's ways that professional estate planners can write trust so that the money is safe and no creditor will be able to touch it.

ea to do something like that [:

And I'd like to talk to you at some point. I'd like to go through your income, go through your budget, kind of get a feel for your case, and let's see where we land. And I, I, a lot of people are afraid of the median income test. A lot of people will, you know, go online and say, Oh, look, I've decided I'm over median, or I, wha, under whatever.

e test was perfect, but it's [:

So, I would encourage you, hey, explore your options, and let's see what a fresh, if, you know, what a fresh start would look like. And, you know, worst case scenario, if you did have to do a chapter 13, you know, it's going to be better than what you're dealing with right now with all of these people coming down on you, causing stress.

e protected. You get a fresh [:

So again, I would encourage you go to my website, download the book, write down any questions you have, and we would love to help you get a fresh start. Thank you.