Glossary Terms for Bankruptcy
Glossary of commonly used bankruptcy terms
341 hearing: A meeting conducted by the Trustee with the Debtor(s) and their attorney present. Creditors are welcome to attend if they wish. This is a mandatory meeting for all Debtor(s). There are very limited circumstances where appearance can be waived. A case can be dismissed for failure to attend this meeting.
Abandon: If property is abandoned in the contacted of the bankruptcy, it means that the trustee is not interested in going after the property; therefore returning the property back over to the debtor and taking it from the bankruptcy estate.
Adequate protection: Payments made to secured creditors to protect them from loss due to depreciation in property.
Adversary proceeding: Lawsuit arising in a bankruptcy case that is initiated by filing a complaint. A common adversary proceeding is to strip a lien.
Asset: all types of property regardless of value; this includes real estate and personal property such as a vehicle, clothes, and jewelry but also includes things such as a PayPal account, airline reward miles, a claim again someone for which a lawsuit could be filed, etc.
Automatic stay: An injunction that prohibits creditors from taking certain actions against the Debtor such as garnishments, lawsuits, repossessions and foreclosures. The length or imposition of the automatic stay varies depending on the number of bankruptcies a Debtor has been in within the past year.
Bankruptcy estate: All interests, both legal and equitable, that a Debtor has in property at the time of the bankruptcy filing. This includes all property that Debtor has an interest in, even where another person may owe or hold the property.
Bar date: Establishes the date by which proof of claims must be filed. In order to file a proof of claim passed this date, it must be accompanied by a motion to allow late filed claim stating the reason the proof of claim was not filed timely.
Chapter 13: A repayment plan of 3-5 years depending on Debtors income. This can range from 0% to unsecured creditors all the way up to 100% to unsecured creditors based on Debtors income and certain expenses. Chapter 13 can help Debtors keep certain property allowing the Debtor(s) to pay the debts back over time.
Chapter 13 plan: A document Debtor must file showing Debtors proposal for debt repayment in a Chapter 13.
Chapter 7: A “liquidation” or sometime referred to as a “straight” bankruptcy discharges all unsecured debt, with exception of certain non-dischargeable debts. (See video)
Charged Off Debt: A term used by creditors that means the creditor does not expect to collect on the debt. It however does not mean that the debt is no longer legally enforceable.
Collateral: Property that is subject to a lien. A creditor with rights to collateral are secured creditors and are given additional protections in the Bankruptcy.
Confirmation: A court order which makes the terms of the repayment plan binding.
Consumer debt: Debts incurred for personal needs as opposed to business needs
Conversion: A case may be converted from one chapter to another chapter. For example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for a Chapter 13. If done, it remains the same case as originally filed; only changes the chapter of the Code which governs it.
Cramdown: Where a piece of collateral is purchased more than 910 days prior to the bankruptcy filing, Debtors in a Chapter 13 can “cramdown” paying only the value of the collateral rather than the loan balance.
Credit Counseling: Two classes that are required as part of a bankruptcy. The first is the credit counseling certificate or CCC. This must be done prior to the bankruptcy case being filed. The second class is the financial management court or FMC that must be done before you can receive a discharge.
Creditor: A person or company that is owed money by a Debtor.
Current Monthly Income: The average monthly income received by the Debtor in the six monthly prior to the month of the filing of the bankruptcy. This income includes wages, regular contributions to household expenses such as child support and income from a non-filing spouse. However, it does not include social security income.
Debtor: A person that owes money to a Creditor.
Default: Failure to abide by debt obligations.
Discharge: Releases Debtor from liability for dischargeable debt under the Bankruptcy Code and prevent the creditors owed those debts from taking action again the Debtor to collect the debts.
Dischargeable debts: Debts that may be eliminated after completion of a bankruptcy
Dismissal (dismissed): Termination of a bankruptcy case without a discharge
Domestic Support Obligation: Debt for alimony, maintenance or support owed to a child, spouse or governmental entity that is paid for support of the child or spouse.
Equity: Value of Debtor interest in a property that remains after liens are considered.
Executory Contract or lease: Contracts or leases under which both parties to the agreement still have duties left to perform. The debtor can either assume or reject the contract or lease.
Exempt: Certain property that the Debtor is permit to keep from unsecured creditors under the Bankruptcy Code. These exemptions vary by state based on Debtors residence.
Filing fee: The fee charged by the court to administer your bankruptcy. These fees vary depending on the Chapter of bankruptcy you are filing.
Judgment: A determination by the court that a debtor owes a creditor a certain amount of money. The creditor receives a judgment after winning a lawsuit against a debtor. The creditor can then use the judgment to collect by putting a levy on the debtors’ bank accounts, garnishing the debtors wages or putting a lien against debtors property.
Lien: An interest in property that secures a debt. Examples include a mortgage or judgment or tax lien.
Liquidation: The sale of some assets and property under Chapter 7 to generate funds to pay creditors.
Means test: Calculates Debtors past six months of income and certain expenses to determine eligibility for a Chapter 7 or partial repayment for a Chapter 13.
Meeting of Creditors: A meeting conducted by the Trustee with the Debtor(s) and their attorney present. Creditors are welcome to attend if they wish. This is a mandatory meeting for all Debtor(s). There are very limited circumstances where appearance can be waived. A case can be dismissed for failure to attend this meeting.
No-asset case: A Chapter 7 case where there are no assets available to satisfy and portion of creditors’ unsecured claims.
Non-dischargeable debts: Debts that may not be eliminated in bankruptcy
Objection to confirmation: In a Chapter, an objection for confirmation is a written statement from the trustee or a creditor of the debtor that something needs to be fixed prior to confirmation. This is something that needs to be address but should not instill panic in a Debtor. Most of the time, these issues can be resolved by the debtor attorney.
Petition: The document filed with the court that initiates Debtors bankruptcy case.
Personal property: Assets, regardless of value, such as cars, stock, furniture, bank accounts, etc.
Post-petition: Occurring after the filing of the bankruptcy
Pre-petition: Occurring before the filing of the bankruptcy
Priority debt: Unsecured debts that are not dischargeable. These include certain federal, state and local taxes, domestic support obligations and certain student loans.
Proof of Claim: A document filed by a creditor that sets forth their name, address and the amount owed as of the bankruptcy filing date. The creditor must also state whether the debt is secured or unsecured and attach documentation that supports their claim.
Reaffirmation: A new contract signed between you and your creditor that reaffirms your debt and personal liability for the debt. These are usually done for secured property such as automobile or home loans.
Relief from Stay: A creditor can motion the Court to lift the automatic stay and permit some action against the debtor or the property of the estate. If relief from stay is granted, it is limited to only the creditor that filed the motion for relief.
Repossession: The process by which a secured creditor takes back their collateral. A common form of repossession is when a car creditor comes to get a car when the Debtor has not made payments.
Secured: A loan in which the Debtor offered some asset (car, jewelry, home, etc.) as collateral for the loan. The loan is then secured against the collateral meaning that if the Debtor defaults on the loan, the creditor can take possession of the asset(s) used as collateral.
Schedules: Documents completed by the Debtor(s) that lists assets, debts, income, expenses and other required information.
Statement of Intention: A statement signed by the Debtor in a Chapter 7 bankruptcy concerning plans for dealing with secured debts and their collateral.
Surrender: Property that you own being returned to the creditor in exchanged for the debt owed against that property being discharged through the bankruptcy.
Transfer: A transaction involving your assets where property is sold, given away, retirement accounts are cashed out, shares of stocks are sold or another owner is added to a feed or title.
Trustee: The person appointed by the U.S. Trustee to oversee the bankruptcy estate.
Unsecured: Any type of debt that is not collateralized by an asset. The most common types of unsecured debt are credit cards, personal loans and medical bills.