Bankruptcy Terminology

Bankruptcy Terminology and Definitions

Debtor(s) – Person(s) filing Bankruptcy must be a single person or married couple.

Creditor(s) – Companies or People the Debtor owes money

Insolvency – When Debts and Liabilities exceed Assets

Secured Debt – Debt that is attached to the property (mortgage or car loan)

Unsecured Debt – Debt that is not attached to the property (credit cards, medical bills)

Default – Failure to fulfill an obligation, especially to repay a loan

Arrears – Money that is owed and should have been paid earlier

Petition and Schedules – The documents  filed with the Court to initiate a Bankruptcy in which the Debtor lists information such as all real estate owned, all personal property owned, all creditors owed money, monthly income and expenses, leases, co-debtors, and transfers of property within the last two years

Automatic Stay – The legal action whereby the filing of a Bankruptcy forbids creditors from taking any actions or contacting the Debtor

Exemptions – The amount of Value or Equity you are permitted in certain property

Equity – The value of your Home or other Personal Property after any debts against the property are subtracted from the Property’s Fair Market Value

(Home worth $350,000 – Mortgage of $125,000 = $225,000 in equity)

Means Test – The mathematical calculation used by the Court and Trustee to determine if one is eligible for a Chapter 7 Bankruptcy.  Is based on the average income in the filer’s state and county and average   expenses based on IRS standards and local standards

Discharge – When the Court relieves one of there obligation to pay debts through a Bankruptcy Filing

Trustee – An attorney hired by the court to manage and oversee your Bankruptcy Filing

341 Hearing – The court hearing you attend with your attorney to meet with the Trustee and review your Bankruptcy Filing and answer questions

Chapter 13 Plan – The Payment Plan proposed to the Trustee and Court to pay back the defaulted

Confirmation Hearing – The Court Hearing in a Chapter 13 Bankruptcy where the Trustee and Judge either accepts or rejects one’s Chapter 13 Plan proposal

Foreclosure – The Act of a Mortgage Company attempting to take ownership or sell one’s property

Repossession – When a creditor attempts to take ownership of secured personal property debt such as a Car