Automatic Stay - This is a court order that goes into effect immediately after you file for protection under the Bankruptcy Code. The automatic stay prohibits your creditors from continuing collection activities such as phone calls, foreclosures and other lawsuits. Return to top of page.
Bankruptcy Estate – At the time a petition for relief under the bankruptcy code is filed, all of the debtor’s legal and equitable interests in property or property rights become property of the bankruptcy estate. Absent an exclusion or applicable exemption, all property of a Chapter 7 bankruptcy estate is subject to administration by the case trustee. This means that the trustee can sell these assets and use the proceeds to help pay your debts. You cannot sell or otherwise dispose of this property. Return to top of page.
Claim - A creditor that believes they have a right to payment from the debtor has a claim. Return to top of page.
Credit Counseling - In individual bankruptcy cases, each debtor is required, prior to filing bankruptcy, to attend and obtain a certificate of completion from a court approved, nonprofit budget and credit counseling agency. Return to top of page.
Creditor - A creditor is a person, company or other entity (i.e. IRS) to whom the debtor owes money or who claims that the debtor owes them money. Debts can be secured or unsecured. A secured debt means that you have pledged property (collateral) to secure payment of the debt. A secured debt would be a home loan secured by a mortgage on your home or a car loan secured by the car. If you don't pay a secured debt the creditor can take the property back and sell it to recover the money they loaned you for its purchase. An unsecured debt means that you have not pledged any property to secure your promise to repay the money you owe the creditor. A common example of an unsecured debt would be a revolving credit card. A secured creditor refers to a creditor that has security for the debt in the form of pledged property. Likewise, an unsecured creditor is a creditor that has no security pledged for the debt Return to top of page..
Creditors Meeting/Meeting of Creditors - This refers to the one hearing that every Chapter 7 debtor must attend in a bankruptcy case. At this meeting, the Trustee assigned to your case will be able to meet with you and ask you, under penalty of perjury, questions about your, property, debts, financial condition and any matter that may affect administration of the bankruptcy estate or the debtor's right to a discharge. It is called meeting of the creditors because your creditors are notified of the meeting and can attend and ask you questions about the location of your property, its condition and any other matter that may affect the administration of the case. Return to top of page.
Debtor - A person who has filed a bankruptcy petition asking for relief under the Bankruptcy Code. If you have filed for bankruptcy, you are the debtor. Return to top of page.
Discharge - A discharge is the order from the bankruptcy court that releases the debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. Return to top of page.
Dismissal – A dismissal, or having your case dismissed, means that the court did not grant you a discharge. A dismissal can occur for a number of reasons. For example, if you do not show up at the creditors meeting or if you fail to provide documents when the trustee requests them, your case can be dismissed. A dismissal lifts the automatic stay. In other words creditors can begin calling you and foreclosure actions and other lawsuits can go forward. Return to top of page.
Exemptions – An exemption or exempt property refers to the property that the bankruptcy code or applicable state law allows the debtor to keep. For example each debtor has a right to a homestead exemption that allows them to exempt equity in their home up to a certain amount. Exemptions are the reason most debtors are allowed to keep their homes, cars, household goods, clothing and retirement accounts. Return to top of page.
Foreclosure – A lawsuit filed by the person or company that holds the mortgage on your home or other real estate asking for the right to take possession of your property and sell it to pay the debt that you owe to them but have not paid. Return to top of page.
Financial Management Training – This is a course that individual debtors in Chapter 7 and 13 cases must attend and complete prior to a discharge being granted. Return to top of page.
Insider – In Chapter 7 Bankruptcies filed by individuals, an insider refers to a family member or general partner of the debtor, or a partnership in which the debtor is a general partner or a corporation where the debtor is a director, officer or shareholder. Payments to insiders are considered preferential debt payments and can be recovered by the bankruptcy trustee for the benefit of your other creditors. Return to top of page.
Joint Petition - This is the filing of a single petition by a married couple and is the legal document that starts the bankruptcy case. Return to top of page.
Lawsuit - A lawsuit is a legal proceeding filed in state or federal court. In the context of a bankruptcy case, it usually refers to a claim by an individual or company that you owe them money and have not made payments as you agreed. Foreclosure actions are lawsuits but refer specifically to an attempt to take possession of property that the creditor claims secured the debt. Return to top of page.
Means Testing - This is the method that is used to determine if you are eligible to file a Chapter 7 Bankruptcy. The means test is a mathematical formula used to determine whether your income exceeds the median income for your state. If your income exceeds the median income then the second part of the test uses a formula to determine whether you qualify to file a Chapter 7 Bankruptcy based upon your disposable income. Return to top of page.
Petition - The petition is the legal document that must be filed by a debtor to start a bankruptcy case. Return to top of page.
Preference – A preference is also called a preferential debt payment and refers to money paid to a creditor within 90 days of the date you file for bankruptcy. A preferential payment gives the creditor more than they would receive in the debtor's Chapter 7 case. Payments to an Insider within one year of filing for bankruptcy are considered preferential payments. Return to top of page.
Reaffirmation Agreement – This is an agreement by the debtor with a secured creditor that is approved by the court on a dischargeable debt. The agreement requires that the debtor continue paying the debt after the bankruptcy but allows them to keep the property. Reaffirmation agreements are most often made when the debtor wants to keep their car, home or other real property. The effect is that after the bankruptcy you still owe the money and if you stop paying the debt, the creditor can sue you to take possession of the property, sell it and then collect from you personally any amount they were not paid. Return to top of page.
Schedules - In addition to the bankruptcy petition, the Bankruptcy code requires that a debtor provide detailed information in the form of schedules. These schedules are required forms and must be completed and filed within a set period of time after the filing of the petition. Most often, the schedules are filed with the petition. Return to top of page.
Secured Debt – This is a debt for which the property was mortgaged or pledged as collateral or for which there is a lien. The most common examples of secured debt would be a home for which there is a mortgage or a car for which the lender has taken a lien. Return to top of page.
Unsecured Debt - A loan or debt owed to a creditor who does not have a lien or mortgage securing the debt. Credit cards are unsecured debt and credit card companies are considered unsecured creditors. Return to top of page.
