The following is a list of common bankruptcy terms used by attorneys and judges.
The unpaid and overdue amount as of the date the bankruptcy case is filed. The word “arrears” refers to the amount that is past due on mortgage payments (including interest and penalties), back child support, or back alimony owed.
Personal possessions of value including cash, real estate, vehicles and investments.
A court order that halts lawsuits, foreclosure, garnishments and all collection activity against the debtor by creditors. The order stops collection efforts from the date a bankruptcy petition is filed, allowing the individual to restructure or remove themselves of debts and liabilities.
A legal procedure for resolving debt problems of individuals and businesses (specifically, a case filed under one of the chapters of title 11 of the United States Code)
The bankruptcy judges in each district (a unit of the district court).
A formal request for the protection of the federal bankruptcy laws.
A bankruptcy case filed to a particular Chapter of the Bankruptcy Code. Bankruptcy proceedings are Chapter 7 liquidations and reorganization proceedings of Chapters 9, 11, 12, and 13.
A private individual or corporation appointed in all Chapter 7 and Chapter 13 cases to represent the interests of the bankruptcy estate. The trustee manages funds, makes payments to creditors, and gathers non-exempt property for liquidation.
A specific division of the Bankruptcy Code. Three Chapters contain general rules applicable in all bankruptcy proceedings. The remaining five Chapters comprise the specific types of bankruptcy proceedings (7, 9, 11, 12, 13).
Chapter 7 bankruptcy may eliminate most unsecured debts by removal of debt or liquidation of assets, usually used by someone without any assets.
Chapter 7 Trustee:
A person appointed in a Chapter 7 case to represent the interests of the bankruptcy estate and the creditors. The trustee reviews petition and schedules, liquidates the property of the estate, and make distributions of payment to creditors.
A reorganization of funds in which an interest-free debt repayment plan which consolidate debts and allows for payments to be made over a 3 to 5 year period. This is often used to save a house from foreclosure or to save a car from repossession.
Chapter 13 Trustee:
A person appointed to administer a Chapter 13 case. A Chapter 13 trustee’s responsibilities are overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.
The property that is subject to a lien, as for payment of a debt or to satisfy a contract.
The general name for proceedings, such as assignments for the benefit of creditors, compositions, and bankruptcy. The proceedings deal with the claims of creditors to avoid the disruption and inequality of individual creditor action.
A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.
A debt incurred by an individual primarily for personal purposes.
Consumer No Asset Bankruptcy:
A Chapter 7 bankruptcy proceeding for an individual in which there are normally no assets available for distribution to creditors. It is the most common and simplest of all bankruptcy proceedings
Government entity authorized to resolve legal disputes. Judges sometimes use “court” to refer to themselves in the third person, as in “the court has read the briefs.”
A report that outlines an individual’s credit history.
Any person or business that a debtor owes money to.
Refers to (1) the briefing from a nonprofit budget and credit counseling agency that individual debtors are required to attend prior to filing under any chapter of the Bankruptcy Code; and (2) the instructional course in personal financial management in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.
Any person who owes and is liable to another entity for money.
The debtor’s ownership interest in property.
A detailed description of repayment terms to creditors’ claims over a fixed period of time.
The loss that results when a debt is undersecured. When the collateral securing the debt is worth less than the amount owed.
The debtor fails to make payments when payments are due. Payments are considered delinquent if they are more than 30 days late.
The legal term for the elimination of a debt through a bankruptcy action. It renders the debt no longer enforceable against the debtor.
Debts that can be eliminated in bankruptcy. Certain debts cannot be discharged through a bankruptcy action. Family support payments and criminal restitution payments are examples of debts which cannot be discharged. Debts incurred by fraud can only be discharged in Chapter 13.
The act of terminating a bankruptcy proceeding.
All income that is not essential for the maintenance or support of the debtor or family.
Disposable Income Test:
A test for confirmation, of a Chapter 12 or 13 plan, that requires the debtor to list all sources of disposable income. Disposable income is that portion of the debtor’s income not necessary for the maintenance and support of the debtor or family.
A person’s financial interest in their property. Equity is equal to the difference between the value of the property and the amount owed on the property.
Property that is exempt is not part of the bankruptcy estate and cannot be used to pay the claims of creditors. The laws of each state outline the various items of property that are exempt. The debtor gets to keep exempt property following dismissal from bankruptcy.
Exemptions are the lists of the property that are protected from liquidation by creditors or the bankruptcy trustee. Each state outlines the various exemptions allowed under it’s bankruptcy code.
A contract between a debtor and a creditor that allows an extension of time in which to pay debts.
The legal process by which a forced sale of the property at public auction with the proceeds of the sale being applied to the debt.
A court-ordered method of debt collection in which a portion of a person’s salary is paid directly to a creditor.
Home Equity Loan:
A consumer loan secured by a second mortgage, allowing home owners to borrow against their equity in the home. A home-equity loan is basically a line of credit secured by using your home as collateral.
A type of exemption prohibiting an individual’s home from being seized and liquidated. State law provides for a homestead exemption.(522(d)(1) of the Bankruptcy Code provides a federal homestead exemption)
Refers to general living expenses including the rent or mortgage, food consumed within the home, and utilities.
A charge upon property for the purposes of satisfying a debt.
A process by which a debtor’s assets are sold to satisfy the debt to creditors.
A test used to determine eligibility for filing Chapter 7 bankruptcy. If the debtor’s median income is below a threshold, they are eligible for Chapter 7. If an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code, the case will be dismissed (generally to chapter 13). Abuse is determined if the debtor’s aggregate current monthly income more than $10,000, or 25% of the debtor’s unsecured debt. (Section 707(b)(2) of the Bankruptcy Code)
A debt that cannot be eliminated in bankruptcy.
Property of a debtor that can be liquidated to satisfy debts to creditors.
Property that is not real property, such as cars, stock, furniture, etc.
The initiating document in a bankruptcy case. The filing of the petition represents an order for relief and implements the automatic stay.
Income sufficient and stable enough to support performance of a Chapter 13 plan by an individual. Regular income includes wages or salary, pension, social security, and commission.
A bankruptcy proceeding where a debtor draw up a plan to repay creditors while allowing the debtor to retain their assets.
Once in default, the creditor can repossess the collateral, retain the collateral in order to satisfy the debt, terminate the debtor’s right of reclaiming the collateral, add the costs of repossession and foreclosure to the unpaid balance of the debt, and pursue collection efforts of the debtor for any remaining unpaid balance.
Documents that detail the assets and liabilities to initiate a bankruptcy case.
A secured debt is one where the creditor takes personal or real property as collateral in the event of default. In default, the creditor whose debt is secured has a right to take property to satisfy a debt.
Statement of Financial Affairs:
A fundamental bankruptcy pleading consisting of a questionaire concerning a debtor’s financial transactions.
Statement of Intention:
A notice given to advise any affected creditor of the debtor’s intention regarding the collateral. The notice must be given within 30 days after a filing. The debtor may reaffirm the contact, redeem or return the collateral, or avoid the lien under specific defined circumstances.
A private individual or corporation appointed in bankruptcy filings who represents the interests of the creditors in the bankruptcy estate, manages money and takes possession of non-exempt assets.
A debt is unsecured if you have simply promised to pay a creditor a sum of money without putting up any real or personal property as collateral.
A non-bankruptcy legal proceeding whereby a creditor seeks to claim the future wages of a debtor.
Shmucher Law, PL, a bankruptcy law firm, represents debtors, creditors, and trustees in bankruptcy matters throughout Broward and Miami-Dade counties.