In a recent post, we talked a little about the "Meeting of Creditors." That got us to thinking, are there other terms and steps along the way that we could help you better understand if you are still considering filing bankruptcy? And, does the blog mention or gloss over some terms that leave you with questions? So, we decided to put together a brief glossary of bankruptcy terms and jargon that might help get a better idea of how this whole thing works.
- Automatic stay: A court action that holds your creditors at bay upon filing bankruptcy.
- Collateral:An asset that backs up a specific debt.For example, in the most fundamental sense, your house backs up a mortgage loan. Think of it as something that you agree to wager as value in exchange for a loan.
- Confirmation:When the bankruptcy court makes your Chapter 13 plan binding, meaning that the plan has been accepted by everyone involved and it's legally authorized.
- Discharge: What happens to your debt at the end of your case when the judge wipes clean your debt slate.
- Exempt property: Property that is not subject to the grasp of the creditors. They are "exempt" from the bankruptcy.
- Foreclosure: The legal process by which the bank takes back your home when the mortgage can longer be paid. On a more technical note, foreclosure is basically the method by which a creditor, namely a bank, turns an asset into cash. Everything needs to be disclosed to the public through announcements and an auction. Bankruptcy can stop a foreclosure and keep your family in your home.
- Joint bankruptcy: When you and your spouse file bankruptcy together, as a couple.
- Lien: Very similar to collateral. A lien is an obligation that must be met before you gain full ownership of an asset. You have to satisfy, or pay, the lien on your home before it's actually yours. The same with a car loan. The loan itself is considered a lien.
- Means Test: A list of qualifications that a person must "meet" in order to file for bankruptcy under the legal reform of 2005 that determines whether you are entitled to an outright discharge of your debts under Chapter 7 or whether you must file a Chapter 13 bankruptcy. A good bankruptcy attorney knows the ins and outs of the means test and can help you maneuver the many hurdles.
- No asset case: Pretty straight-forward really. This is when a person filing Chapter 7 does not have any assets valued above state exemption limits. This means you don't have enough value to your property that would make it worthwhile for a Trustee to sell the assets for the benefit of unsecured creditors. The majority of Chapter 7 cases are no asset cases.
- Personal property: While this seems like an easy concept, it's actually a legal term. It means anything you own, outright, that is not attached to land. Car. Retirement funds. Furniture. That sort of thing. Most personal property is subject to specific rules within a bankruptcy.
- Petition date: The date on which you filed your bankruptcy petition.
- Property of the estate: An overarching term to include everything you own and that may be at risk on your petition date.
- Reaffirmation: A promise to pay back certain debts even in the face of being able to discharge them.
- Redemption: The ability to only pay the value of personal property despite still owing more on it. So, let's say your flat screen is worth $750 but you owe $1,100. This allows you to just pay the $750 and be done with it.
- Repossession: The taking of your collateral. (See above.)
- 341 meeting: The U.S. Bankruptcy code provision for the meeting of the creditors, a chance for your creditors to appear and object to your bankruptcy. Although creditors have the right to appear at the meeting, in the majority of cases, none do.
Okay, now that you have a good breakdown of bankruptcy terms, bookmark this post and refer to it if something gets by you as your bankruptcy gets underway. And of course, talk to your bankruptcy attorney if you have any questions.
From the Law Offices of John T. Orcutt. Call today to set up a free consultation. +1-919-646-2654.