The following are common terms in every bankruptcy case. Keep in mind that these terms are not to be used as legal advice. In order to have a clear understanding of your case, you will want to discuss your bankruptcy intentions with a bankruptcy expert. Every situation is very distinct which is why the bankruptcy law provides various chapters to address different circumstances. To speak with an attorney about bankruptcy, you may contact the Bankruptcy Attorney at 424-285-5525.
341 Meeting: the 341 meeting also known as the creditors meeting is a meeting where the debtor meets with the creditors before a debt is discharged. Under Section 341 of the Bankruptcy Law, it is required to meet with debtors before a person is allowed to discharge their debt through a bankruptcy. If you fail to show up to your creditor's meeting, you may have your bankruptcy case dismissed.
Automatic stay: a protection under the law that prevents debt collectors from pursuing any debt collecting activity after a bankruptcy has been filed. Under automatic stay laws wage garnishments, foreclosures, and lawsuits may not be pursued by creditors or debtors after a bankruptcy is filed or after the debt has been discharged.
Bankruptcy: a procedure that aims to provide financial relief for debtors that cannot repay their secured or unsecured debt. Bankruptcy allows single entities, to more complex entities such as limited liability corporations, municipalities, and businesses to seek financial relief through debt forgiveness or debt adjustment procedures.
Bankruptcy Code: also known as the government bankruptcy law under title 11 of the United States Code.
Bankruptcy Judge: a judicial officer that can make decisions over bankruptcy cases
Bankruptcy petition: a single individual may voluntarily file a bankruptcy petition under any given chapter that applies to their type of debt and situation. In some cases, creditors may file a bankruptcy petition for their debtors if they meet certain criteria. When a creditor files a bankruptcy petition it is known as an involuntary bankruptcy.
Chapter 7: A Chapter 7 bankruptcy is also known as a ‘liquidation’ most commonly used by individuals that have no hope of repaying their debts. When a person can no longer pay their debts or there is no hope of repayment, the debtor may file a Chapter 7 liquidation. This type of bankruptcy allows a trustee to collect any non-exempt property from the debtor and later sell the items in return for money. When the debtor's property is sold off, the money will be used to pay off any creditor that the debtor owes. If the liquidated property is sold off and then there is a surplus, the trustee will cut you a check for the difference. However, in most cases, there isn’t enough money to go around meaning that some creditors will never be paid in full. After filing a Chapter 7 bankruptcy, the debtor is protected by automatic stay laws that prevent any creditor from pursuing any debt collecting activity. A chapter 7 bankruptcy is right for individuals that wish to have a clean start, however, for the debtor to have a clean start he or she must make sure that the debt is dischargeable. Certain debts such as student loans, tax debts, or marital debts may not be discharged through any form of bankruptcy.
Chapter 9: Chapter 9 otherwise known as ‘municipal bankruptcy’ is a type of bankruptcy that is filed by more complex entities such as a city, county, school district, and town. Upon filing a Chapter 9 bankruptcy the municipality is protected through the automatic stay laws that apply to other chapters in the bankruptcy code. In Chapter 9, a property may not be liquidated so this chapter attempts to find a common ground between the debtor and the creditor. In most cases debt can either be refinanced through a new loan, partially forgiven, or adjusted in a way that would allow the debtor to make payments. Chapter 9 requires that the debtor and creditor establish a plan for repayment that will work for both entities.
Chapter 11: Chapter 11 is known as the ‘reorganization’ of debt. Single entities may reorganize or restructure their debt with their debtors through a Chapter 11 or through a Chapter 13. Chapter 11 works very much like Chapter 13 in that it allows certain individuals to maintain their business without having to sell a property to pay back their debt. Unlike with Chapter 7 liquidation, the debtor is allowed to keep all of their property so long as they are able to establish and agree on a plan of repayment with their creditors. A Chapter 11 may also help individuals or small business owners to discharge some of the debt, modify payments, and allows the individual or business owner to make decisions about what type of property they should sell. A Chapter 11 is usually more time consuming and expensive which is why if you qualify for a Chapter 13, you may want to consider another plan for bankruptcy.
Chapter 12: Chapter 12 is a form of bankruptcy that is meant to alleviate financial stress for farmers and fisherman and it works very much like a Chapter 13 bankruptcy. The debtor may file under this chapter 1) if they are a fisherman or a farmer, 2) if they have an annual income, 3) if they have disposable income, 4) if their debt is under a certain amount. Like with Chapter 13, Chapter 12 allows debtors to pay back their debt in three to five years without having to pay any unsecured debt in full. Under this chapter, a debtor may keep their property giving them the option to choose what items to sell in order to pay back the debt.
Chapter 13: Like with Chapter 11, a Chapter 13 allows single, married, or small business owners (sole proprietors) to file a Chapter 13 bankruptcy. A Chapter 13 bankruptcy is a five-year repayment program that allows individuals with an income to pay back a portion of their debt while allowing them to retain their property. Unlike with Chapter 11, under Chapter 13 the debtor must not owe over a certain amount and must have enough disposable income. Disposable income will be handled and distributed to creditors by a trustee for three to five years depending on the debt repayment program. Upon completion of the three to five-year repayment program, the debt will be completely wiped out. Under automatic stay laws, upon filing a Chapter 13 there may be no debt collecting activities from creditors or other debt collectors. In addition, after the dischargeable debt is wiped out a debt collector may not legally pursue any debt collecting activity.
Chapter 15: Chapter 15 allows foreign debtors and creditors to participate in U.S bankruptcy cases. This type of bankruptcy allows foreign courts to cooperate with a bankruptcy procedure in a U.S court.
Discharge: frees the debtor from paying back dischargeable debt as described in Bankruptcy Code. When debt is discharged the creditors may no longer pursue any collection of debt including harassing telephone calls, texts, emails, and/or lawsuits.
Dischargeable debt: debt that a debtor is not obligated to pay back when filing for a Chapter 7 or Chapter 13. Debt that is dischargeable include 1) credit card debts, 2) medical bills, 3) payday loans, 4) past due bills, and 5) personal loans.
Exempt Property: property that cannot be taken away from a debtor. In some cases, a debtor is able to file certain properties as exempt so that they may keep the property during a bankruptcy. Individuals may be able to keep their tools for work, a motor vehicle if it is under a certain value and other properties that usually hold little value.
Joint Petition: a bankruptcy petition filed by married couples. When you file with your spouse you will only be required to pay the bankruptcy fee once.
Liquidation: under Chapter 7, liquidation is the selling of the debtor's non-exempt items with the earnings used to pay off creditors. A trustee will be in charge of selling the items and using the proceeds to pay off the creditors.
Motion to lift the automatic stay: If a debt collector or creditor wishes to pursue any debt collecting activity after a bankruptcy has been filed, a debt collector will have to ask the courts for permission. A motion to lift stay will usually be honored if the creditor or petitioner is able to prove that the debtor is committing some type of fraud.
Non-dischargeable debt: debts that cannot be wiped out through a bankruptcy proceeding. These types of debts include student loans, tax debt, child or marital support debt, and home mortgages. A debt may also be non-dischargeable if the loan provides specific language about the repayment period.
Objection to dischargeability: an objection allows the creditor to present any findings that may show that the debtor is committing or has committed some type of fraud in relation to the debt incurred.
Objection to the exemption: a creditor may pursue some of the debtor's property from being exempt. For example, a creditor may file an objection if they believe that the exempt property holds enough value to satisfy a greater portion of the debt.
Plan: a detailed program that demonstrates how a debtor will pay back the debt over three to five years.
Trustee: A trustee is a person that is in charge of acting as a middleman between the debtor and the creditors after a bankruptcy has been filed. A trustee is in charge of reviewing any debt repayment program and is usually the person in charge of repossessing properties during a liquidation under Chapter 7. In Chapter 7, the trustee is in charge of selling the debtors repossessed property and then using the earnings to pay off any creditor. In Chapter 13, the trustee has the responsibility of overlooking the agreed upon repayment program. The trustee will be in charge of receiving payment from the debtor and then distributing that money to pay off the creditors.
Non-exempt property: in a bankruptcy non-exempt property is an asset that cannot be protected by the exempt laws. In Chapter 7, the non-exempt property is sold or auctioned and the earnings are used to pay off the creditors.
Lien: a lien is a hold on a property that is placed by a creditor. For instance, a creditor may put a liens on your property so that when the property is sold, they may claim some of the earnings. A liens cannot be discharged through a bankruptcy.
Liquidation: the selling of repossessed items with the earnings used to pay off creditors.
Motion to Lift Automatic Stay: a request that is filed by a creditor in order to pursue a claim after a bankruptcy has been filed. Automatic stay protects debtors from any debt collecting activity. If a creditor wants to pursue a claim after a bankruptcy they must prove that you are committing some form of fraud.
Non-dischargeable debt: is debt that cannot be discharged through any chapter in the bankruptcy code. Non-dischargeable debt can include any government or state loan, student loans, and alimony or child support debt. Non-dischargeable debts vary so it is important to consult with a bankruptcy attorney in order to understand the type of debt you have.
Objection to Discharge: a creditor can object to a discharge either if they prove that the debtor provided faulty information or that the debtor is committing some form of fraud.
Reaffirmation Agreement: is when the debtor agrees to pay off a dischargeable debt so that he or she may keep the property.
Statement of Financial Affairs: when you file a bankruptcy you will have to provide a statement that includes your income, transfers of an estate, and any lawsuits that you may have been charged by a creditor.
The United States Appointed Trustee: an officer that is appointed by the Justice Department to oversee any bankruptcy case. Their duty is to ensure that the debtor remains faithful to the repayment program.
To learn more about bankruptcy you encouraged to speak with a bankruptcy attorney. A bankruptcy attorney is capable of assessing your case and will help you choose the correct chapter for your circumstances. To speak with the Bankruptcy Attorney, you may contact our office at 424-285-5525.