Learn Common Terms Used with Bankruptcy
The more you know about bankruptcy terms, the more you will feel comfortable discussing bankruptcy issues. This is a brief list of the most common terms that you will hear.
- 341 Meeting: This required meeting allows creditors to review your finances to ensure that you qualify for bankruptcy.
- Assets: An item of value, such as a house or vehicle.
- Automatic Stay: A court order protecting you from creditors harassing you for debt collection purposes.
- Bankruptcy: A legal way to eliminate debt or create easier debt payment schedules.
- Chapter 7: A form of bankruptcy that allows you to eliminate all debt in 3-5 months. May require liquidating some or all assets.
- Chapter 11: Allows small and large businesses to remain in business and restructure their debt payments to creditors.
- Chapter 13: With Chapter 13 you can keep your assets, such as your home and vehicle, and make debt payments for 3-5 years.
- Claims: A creditor has the right to collect on debts.
- Confirmation Hearing: A Chapter 13 bankruptcy hearing where the court evaluates and approves of your debt payment plan.
- Creditor: The entity to whom money is owed.
- Credit Counselling: A required class that teaches financial principles and budgeting strategies.
- Debtor: An individual or business that owes money.
- Discharge of Debt: A process of completely eliminating debt.
- Equity: The portion of property, such as a home or vehicle, that you own.
- Exempt Assets: Property that is protected by bankruptcy law and cannot be seized.
- Foreclosure: Property is seized by a creditor. Most commonly occurs with homes.
- Garnishment: When a creditor takes money directly from your paycheck to pay off debts.
- Liquidation: Assets are sold to pay off debts.
- Means Test: A way to see if you qualify for income standards that meet Chapter 7 eligibility.
- Non-Exempt Assets: Assets that may be sold or taken legally to pay for unpaid debts.
- Payment Plan: A Chapter 13 benefit that allows you to space out debt payments over 3-5 years.
- Petition: The document that you submit to the court to begin the process of filing bankruptcy.
- Secured Debt: Debt that has collateral to back it up (most common with mortgages and car loans).
- Trustee: The person legally responsible to oversee your bankruptcy case.
- Unsecured Debt: Debt that usually has higher interest rates because it is not backed by physical assets such as a home or car.