ABANDONMENT: When the trustee in your Chapter 7 bankruptcy returns nonexempt property you own because the asset has no market value or a very low value and so it could not be sold.
ADVERSARY PROCEEDING: A lawsuit arising in your bankruptcy case that is usually used to argue whether you committed bankruptcy fraud or misrepresentation, breached a fiduciary duty, or misappropriated funds.
ARREARS: The amount of money that is unpaid and overdue on one of your credit accounts when you file for bankruptcy. For example, the past due amount you may owe on your mortgage will be referred to as themortgage arrears.
ASSETS: Anything you own or have a have a legal interest in that has value. Examples of assets include cash, bank accounts, stocks, retirement accounts, a home, vehicle, household furnishings, clothing, computers and tools, among other things.
ASSUME: When you agree to continue living up to your obligations under a contract or lease to which you are a party. For example, if you file for bankruptcy and you want to keep your mobile phone contract and your apartment lease, you will indicate on your bankruptcy paperwork that you want to keep them and you’ll be obligated to continue paying on those obligations. If you don’t want to keep your mobile phone contract or your apartment lease, you will indicate on the paperwork that you want to reject the contract or lease. When you do, any unpaid amount on the lease or contract is added as a debt in your bankruptcy case.
AUTOMATIC STAY: An automatic court order that immediately stops lawsuits, foreclosures, repossession, garnishments and other collection activity against you. The automatic stay goes into effect as soon as your case is filed, which means no more threatening calls and letters from creditors and debt collectors!
BANKRUPTCY: A legal procedure for dealing with the debt problems of individuals and businesses.
BANKRUPTCY CODE: The informal name for Title 11 of the United States Code, the federal bankruptcy law.
BANKRUPTCY ESTATE: All legal or equitable interests you may have in any assets at the time that your bankruptcy begins.
CHAPTER 7 BANRUPTCY: A federal court procedure that will eliminate your liability for most types of unsecured debt you may owe. Although this kind of bankruptcy is also known as aliquidation bankruptcy because it could involve the sale of your nonexempt assets, there are usually no assets to liquidate (sell) in a Chapter 7. If you do own nonexempt assets, I would advise you to file a Chapter 13 bankruptcy so you could hold on to them.
CHAPTER 7 TRUSTEE: The trustee appointed in a Chapter 7 case. The role of the trustee is to conduct a meeting of your creditors (although your creditors will probably not attend the meeting) and to make sure that all of the information on your bankruptcy forms is complete and accurate. Also, if you own any nonexempt assets, the Chapter 7 trustee is responsible for gathering those assets, selling them, and distributing the sale proceeds to your creditors. However, if you own nonexempt assets, I would advise you to file a Chapter 13 bankruptcy so you could hold on to the assets.
CHAPTER 13 BANKRUPTCY: A federal court procedure that allows you to hold on to your assets by repaying all or some of your debts through a court-supervised plan over a period of 3 to 5 years. This kind of bankruptcy is also referred to as a reorganization bankruptcy or a debt consolidation plan.
CHAPTER 13 TRUSTEE: The individual assigned to your Chapter 13 case who will be responsible for receiving the payments on your plan and distributing that money to your creditors according to the terms of the plan.
CHAPTER 11 BANKRUPTCY: Chapter 11 is a federal court procedure that is available to you if you want to file a reorganization bankruptcy and you have too much debt to qualify for Chapter 13. This kind of bankruptcy is also available to businesses that want to reorganize their financial affairs so they can continue to operate.
CHAPTER 12 BANKRUPTCY: Chapter 12 is a federal court procedure that allows family farmers and family fisherman to reorganize their debts.
COLLATERAL: An asset you own that secures a loan you are obligated to pay. If you do not pay the loan, the creditor can take your collateral. For example, if you have a car loan, your vehicle is the collateral on the loan.
CONFIRMATION: The Bankruptcy court’s approval of a Chapter 13 debt repayment plan.
CONFIRMATION HEARING: The hearing in a Chapter 13 case at which the bankruptcy judge either approves or rejects the debt reorganization plan you have proposed. In most of the Chapter 13 cases I handle, I am able to work everything out in advance of the hearing, and so my clients do not need attend the hearing.
CONSUMER DEBTOR: A debtor whose debts are primarily personal or consumer debts as opposed to business debts.
CREDITOR: Any person or business that is owed money.
CREDITORS MEETING: Also, referred to as the Meeting of Creditors or a 341 Meeting, this is the one meeting during your bankruptcy that you absolutely must attend. However, the meeting, which will be run by the trustee assigned to your case, will probably be very short and it’s likely that none of your creditors will attend it. During the meeting, the trustee will make sure that you are the person that signed the bankruptcy petition, that your Social Security number is correctly listed, and that all the information on your bankruptcy schedules is true and correct based on your personal knowledge.
CREDIT COUNSELING: The counseling you must receive from a federally-approved nonprofit budget and credit counseling agency before you can file any type of bankruptcy. You will also have to receive additional counseling after your Chapter 7 or Chapter 13 bankruptcy begins. This second kind of counseling will educate you about personal financial management. You must complete the counseling before you can receive a discharge of your debt.
CREDIT REPAIR: The process of actively working to make sure that the information in your credit reports is accurate and up-to-date. Normally, it’s done after your bankruptcy is over in preparation for rebuilding your credit.
CURRENT MONTHLY INCOME: The average monthly income you received over the six months prior to the start of your bankruptcy. This income includes regular contributions to your household expenses from non-debtors and joint debtors, retirement income, disability income, contributions from family, and gifts.
DEBTOR: Anyone who files a bankruptcy petition.
DEFAULT: Your failure to make payments to a creditor in a timely manner according to the terms of the contract you agreed to.
DISCHARGE: The order in your bankruptcy case that eliminates your personal liability for a debt. When a debt is discharged, you are no longer legally obligated to pay it.
DISCHARGEABLE DEBT: Debt that you can eliminate through bankruptcy.
EQUITY: The value of your interest in a particular asset after all liens on the asset have been taken into account. For example, if you have a car valued at $10,000, and you have a loan against it for $7,000, then you have $3,000 equity in the car. Owing more than the value of an asset is often described as being upside down.
EVICTION: When you are legally forced out of the home or apartment you are renting.
EXEMPT: A term used to describe assets that you get to keep when you file bankruptcy. As a practical matter, most people keep all their assets in a bankruptcy. That is because if you own nonexempt assets — assets that you would lose in bankruptcy — no competent attorney would advise you to file bankruptcy.
EXEMPTIONS: The various kinds and values of specific assets you may own that are legally beyond the reach of your creditors or the trustee when you file for bankruptcy.
EXECUTORY CONTRACT/LEASE: Generally, a contract or lease under which both parties to the agreement have duties remaining to be performed. Most often this involves a mobile phone contract or a lease on an apartment.
FAIR CREDIT REPORTING ACT (FCRA): A federal law that is designed to prevent inaccurate or outdated information from entering or remaining in your credit reports and that establishes other rights related to those reports.
FAIR DEBT COLLECTION PRACTICES ACT (FDCPA): A federal law that prohibits debt collectors working for collection agencies from using unfair debt collection practices, such as lying, harassing, misleading and otherwise abusing debtors in an effort to get them to pay the money they owe. The law does not apply to debt collectors who are employees of a particular creditor.
FORECLOSURE: The legal process by which the lender that holds the mortgage lien on your home takes back your home when you default on the mortgage.
FRAUDULENT TRANSFER: When you transfer property that you own prior to the start of your bankruptcy with intent to defraud your creditors or when you receive less than market value for the property you transfer when you transfer it to a family member, friend or business partner.
FROZEN ACCOUNT: An account that you are no longer able to access after the court has issued a judgment against you. The creditor that won the judgment must get the court’s permission to have your account frozen via a Writ of Garnishment.
GARNISHMENT: A type of debt collection tool that a creditor may use to collect on a judgment against you. Garnishment involves the creditor getting the court’s permission to take money from your bank account.
INSIDER: Any friend, relative or business partner of yours.
JOINT PETITION: A bankruptcy petition that you file with your spouse.
LEVY: When an asset (property or money) that you own is taken from you to enforce a court judgment against you or when the IRS wants to seize one of your assets to satisfy a tax debt.
LIEN: A legal claim on an asset you own that is held by one of your creditors. The asset is referred to as your loan collateral and the creditor is described as a secured creditor. If you do not repay the money you owe to the creditor, the lien entitles the creditor to take your collateral. A common scenario where this happens is when someone falls behind on his or her mortgage payments and the home mortgage lender forecloses on that person’s home. The general rule whether you file for bankruptcy or not is: If you want to keep your possessions, you must continue paying for them.
LIQUIDATION: The sale of your nonexempt assets so that the proceeds can be distributed to your creditors.
MEANS TEST: A formula that is applied to your finances to determine if you qualify to file a Chapter 7 bankruptcy, or how much you should repay in a Chapter 13 bankruptcy.
MEETING OF CREDITORS: See Creditors Meeting.
MOTION TO LIFT THE AUTOMATIC STAY: A request to the court by a creditor to allow the creditor to take an action against you or your property that would otherwise be prohibited by the automatic stay. This typically happens when someone who has filed for bankruptcy stops paying his or her home mortgage. As a result, the mortgage lender files a motion to lift the automatic stay to get the court’s permission to post the home for foreclosure.
NO ASSET CASE: A term used in a Chapter 7 bankruptcy when you have no nonexempt assets that could be taken by the trustee in your bankruptcy to pay your creditors. Therefore, you will not lose any assets. Most Chapter 7 cases are No Asset cases.
NONDISCHARGEABLE DEBT: A debt that you cannot eliminate through bankruptcy. Examples of such debts include spousal support, child support, student loans, certain taxes, overpayment of benefits, debts you owe that are the result of the fact that you drove while intoxicated and caused a death or personal injury, as well as debts you incurred under false pretenses.
NONEXEMPT ASSETS: Bankruptcy law provides exemptions for certain types of assets. Those nonexempt assets are beyond the reach of the trustee in your bankruptcy and of your creditors, which means that you get to keep them. However, there are also nonexempt assets — assets for which there are no exemptions. In a Chapter 7 bankruptcy, the trustee can gather your nonexempt assets, sell them and distribute the sale proceeds to your unsecured creditors. If you own any nonexempt assets, I would advise you to file a Chapter 13 bankruptcy. This is because in a Chapter 13, you can keep those assets and their value will help determine the amount of your monthly payment to the trustee.
OBJECTION TO DISCHARGE: A formal objection by the trustee or by one of the creditors in your bankruptcy to your being released from having personal liability for certain dischargeable debts. This may be for reason such as fraud, misrepresentation, misappropriation of funds, or breach of a fiduciary duty.
OBJECTION TO EXEMPTIONS: A formal objection by the trustee or by one of your creditors in your bankruptcy to your attempt to claim certain property that you own as being exempt.
PERSONAL PROPERTY: Anything you own that is not real estate.
PETITION: The document that your attorney must file with the court to begin your bankruptcy case.
PLAN: A detailed written description of how you propose to pay your creditors’ claims over a 3 to 5 year period in a Chapter 13 bankruptcy. Also referred to as a debt reorganization plan.
PRE-PETITION: Anything that arises before your bankruptcy begins with the filing of your bankruptcy petition. Only pre-petition debts can be discharged in your bankruptcy. In other words, any debts you may incur after the start of your bankruptcy cannot be discharged.
PRIORITY CLAIM: An unsecured claim in your bankruptcy that is entitled to be paid ahead of other unsecured claims. An example of a priority claim is the debt you may owe to the IRS.
PROOF OF CLAIM: The document your creditors must file in your bankruptcy to show how much money you owe to them.
PROPERTY OF THE ESTATE: All legal or equitable interests you have in any property as of the start of your bankruptcy.
REAFFIRMATION AGREEMENT: An agreement in a Chapter 7 that involves your promising to continue paying a dischargeable debt after your bankruptcy. Usually you make this agreement because you want to hold on to your collateral, like your vehicle or house.
REAL PROPERTY: Land and anything permanently attached to land, like a building.
RELIEF FROM STAY: A formal request to the court by a creditor to lift the automatic stay so that the creditor can take action against you or against the property of your bankruptcy estate. See Motion To Lift The Automatic Stay.
REPOSSESSION: When one of your creditors takes property that is the collateral for a loan that you owe. For example, your auto lender is likely to repossess your vehicle if you do not pay your car loan.
SECURED DEBT: A debt is secured when the creditor has a lien on real or personal property you own. That property is referred to as your collateral. A car loan is a common example of a secured debt. Your car is the loan collateral.
SHERIFF’S SALE: The forced sale of your real property (real estate that you own) at a public auction so that the sale proceeds can be applied to your outstanding mortgage debt.
STATEMENT OF FINANCIAL AFFAIRS: A series of questions you must answer in writing at the start of your bankruptcy concerning your sources of income, any transfers of property you may have made, any lawsuits by your creditors, etc.
STATEMENT OF INTENTION: A declaration made in a Chapter 7 bankruptcy regarding your plans for dealing with any debts that are secured by the property in your bankruptcy estate.
SURRENDER: When you give a home, a car or any other secured property you may own back to the creditor instead of reaffirming the debt associated with the property.
TRANSFER: When you dispose of any real or personal property you own, including the gifting or selling of an asset that is not part of the normal course of your financial affairs. Basically, anything that you do that is financially out of the ordinary shortly before filing bankruptcy will be looked at very carefully by the trustee who is assigned to your case.
TRUSTEE: A private individual who is appointed by the U.S. Bankruptcy Court or through the US Department of Justice and U.S. Trustee’s Office to administer a bankruptcy estate. See Creditors Meeting, Chapter 7 Trustee, Chapter 13 Trustee.
UNSECURED DEBT: A debt that is not backed by any real or personal property you may own. In other words, the creditor to whom you owe the debt does not have a lien on one of your assets. Credit card debt is a very common example of unsecured debt.
U.S. TRUSTEE: An officer of the Justice Department who is responsible for supervising the administration of all bankruptcy cases, estates, and trustees.