Georgia bankruptcy filers got two pieces of good news this past week – the Governor has signed Senate bill 117 increasing the bankruptcy homestead exemption from $10,000 to $21,500, and the median income tables for Georgia families has been adjusted upwards, reversing a steady downward trend.
By far, the new homestead exemption is the most significant of these two events. Georgia, like several other states, has opted out of the federal exemption statute, substituting in its place Georgia Code Section 44-13-100. For the past 10+ years, Georgia permitted bankruptcy filers to shelter or exempt $10,000 of equity in real estate ($20,000 for a married couple filing jointly).
On May 2, 2012 Governor Nathan Deal signed into law a bill that increased the real estate exemption from $10,000 to $21,500 (the available exemption for married couples increases from $20,000 to $43,000).
The updated law does not, however, change the wildcard exemption at O.C.G.A. 44-13-100(a)(6) which allows debtors to shelter $600 in any property plus up to $5,000 in unused real estate exemption. The wildcard exemption, therefore remains limited to $5,600 for an individual filer and $11,200 for a married couple filing jointly.
The effect of the increased homestead exemption will help more struggling families qualify for Chapter 7 without jeopardizing any equity they may have accumulated. Chapter 13 debtors will also benefit because it will be easier to satisfy the liquidation test, which is one of the requirements for a confirmable Chapter 13 plan. The liquidation test (also known as the “best interest of creditors” test) mandates that in Chapter 13, unsecured creditors must receive at least what they would have obtained in a Chapter 7 liquidation of non-exempt property. Since debtors can now shelter twice as much real estate equity, they will necessarily have less non-exempt real property.
The May 1, 2012 updates to the median income tables used in bankruptcy filings will also benefit Georgia debtors. Reversing a multi-year trend of lower household income figures, the May 1, 2012 numbers have increased. A family of 4 can now earn up to $66,250 without triggering the means test, compared to $64,223 prior to May 1.
These two changes will help more people squeeze into Chapter 7 and will slightly reduce the mathematical demands inherent to Chapter 13 calculations.
While these particular changes are limited to Georgia, the dynamic nature of bankruptcy law applies to filers in every jurisdiction. Perhaps you met with a bankruptcy lawyer 2 years ago to discuss filing, but decided to hold off because you risked losing assets or because a proposed Chapter 13 payment was too high. Fast forward two years and your equity in real and personal property may have decreased significantly, the median income numbers for your state may have gone up to your benefit, and your state may have passed a law that increases the options available to debtors.
Federal and state legislators are under a great deal of pressure from constituents to jump start the housing market and easing the rules on filing bankruptcy is one way to unclog the system. The only way you will know for sure if there have been bankruptcy changes that benefit you is to pick up the phone and call you knowledgeable bankruptcy lawyer. If your jurisdiction is served by a Bankruptcy Law Network lawyer, do not hesitate to make that call!
by Jonathan Ginsberg, Bankruptcy Law – Northern District of Georgia