A Chapter 7 case is a “liquidation” proceeding in which the Chapter 7 trustee is tasked with the administration of your case.  The trustee’s job is to maximize the amount of property in the bankruptcy estate for the benefit of unsecured creditors.  The bankruptcy estate is defined as all legal and equitable interest the debtor has as of the date of filing.  The estate is subject to the control of the trustee, and the trustee has the ability to reach back and void certain transfers that were made prior to a debtor filing bankruptcy.  A common scenario is when a debtor transfers title to a residence to his or her spouse or child shortly before filing.  Some debtors will attempt to be clever and transfer a residence to a family trust a few months before filing.  None of these techniques will work to exclude your residence from the grasp of the Trustee.  Under Section 547 of the bankruptcy code, the Trustee may avoid any transfer of property to an insider (family member or business partner) made within one year of filing.

​Think you can just wait a year and be safe? Think again.  Under Section 548 of the bankruptcy code, the Trustee may reach back two years if he can prove that the transfer was made with the intent to hinder and defraud creditors.  The aforementioned code sections are called Preference sections, and they were enacted to prevent the “preference” of the debtor to pay one creditor over the other.  The entire bankruptcy system is designed to give the Debtor a fresh start and an equitable distribution to each unsecured creditor.

It’s important to understand that, once you file for bankruptcy, an automatic stay is put into place that prevents creditors from taking action against you or seizing your property during the proceedings. Regardless of whether you file for Chapter 11, Chapter 12, or Chapter 7, an automatic stay can provide crucial protection as you seek relief from unmanageable debt.

Specifically, the automatic stay in bankruptcy can help by stopping:
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• Foreclosure — If your home is facing foreclosure, the automatic stay will halt the proceedings. However, whether you will ultimately be able to keep your home will depend upon the type of bankruptcy you file for. If you wish to retain your home, Chapter 13 might be a better option than filing for Chapter 7, unless your mortgage payments are current.
• Disconnection of Utilities — When you file for bankruptcy, the automatic stay will prevent utility companies from disconnecting your services for a period of time.
• Eviction — In some cases, an automatic stay may temporarily stop eviction proceedings for as long as the stay is in effect.
• Repayment of Public Benefit Overpayments — If your public benefits were overpaid, the automatic stay prevents the agency from collecting the overpayment.
• Wage Garnishments — Typically, after filing for bankruptcy, most wage garnishment stops, allowing you to take home your full salary without having portions of it taken.

There are, however, certain circumstances in which an automatic stay may not help. For example, while the stay will prevent the IRS from seizing your property or issuing a tax lien, you may still be audited by the IRS or sent a deficiency notice. In addition, bankruptcy does not stop required child support. alimony payments or criminal proceedings.

In some cases, a creditor may be able to request that the automatic stay be lifted. In order to do so, the creditor must submit a motion to the court explaining why the stay should no longer be in place. If the court grants the motion, the creditor can move forward with their collection efforts.

If you filed for bankruptcy and your case has been dismissed within the last year, the automatic stay will only remain in place for 30 days, absent obtaining Court approval for an extension. Additionally, an automatic stay is not permitted if you’ve filed for bankruptcy three times in a year.

The knowledgeable bankruptcy attorneys at Rountree Leitman & Klein LLC assist clients throughout Georgia who are seeking relief from creditors and debt through bankruptcy. Call 404-737-9623 or contact us online to schedule a free consultation in our Atlanta office.