Introduction to Bankruptcy Terminology
May 13, 2020
It's always helpful to know what terms are involved when you are seeking legal help. Bankruptcy is its own area of law with its own court, much like how Immigration has its own court, so does the Probate realm and my other love Social Security and Disability law has its own court. So though this list is not exhaustive, it is somewhat helpful to give you a bit of heads up on what at least some of it means. I'll follow this blog on 05/14/2020, with what Texas prioritizes as exempt property and it's generous.
We'll start with the basics of Bankruptcy:
A judicial order that will automatically stop a lawsuit, foreclosure, wage garnishments, and all other collection activities at the moment of filing a bankruptcy petition. Chapter 7 and 13 will be subject to a stay.
All of your legal or equity interest, in your property, at the time you file a bankruptcy petition. The estate can also include property you may have an interest in, but that someone else owns at the moment, or has an interest in it at the time you fie.
The forms based individual document you file, or your creditors file, against you which commences the bankruptcy suit. A joint petition is filed by a husband and wife.
Chapter 7 is known as "liquidation" by sale of your non-exempt property, with proceeds of your property going to pay usually consumer debts to creditors. Consumer debt is personal as opposed to business generated debt.
This Chapter involves the adjustment and repayment of consumer debt. You are able to keep your property, but there is a plan drafted for the court, of how you will repay creditors over time, called a confirmation. You agree to pay your creditors back over a 3-5 year period. The bankruptcy judge will be the one to approve the confirmation.
A claim is what your creditor is asserting against you for payment of a debt.
This is twofold. First anyone filing bankruptcy must attend credit counseling (also known as debtor education) through a non-profit credit counseling agency before he or she can file. There is also a second means which is a course in finance management in Chapter 7 & 13 cases. This latter course has to be completed before a discharge (a discharge releases you from debt) can be entered by the court.
Creditor's Meeting (also called the 341 meeting)
Here you will be questioned, under oath, by a trustee and creditors about the state of your financial affairs.
Current Monthly Income
Your average monthly income earned over the preceding 6-months before your bankruptcy case is file. This will not entail any social security (SSI) income or crime victim payments.
The person filing bankruptcy.
These are personally liable debts which are eliminated in bankruptcy.
For property, we'll use your home as an example, it's the value you still have left after creditor's and lienholder's interests are accounted for. If your house is valued at $450,000, there is a $300,000 mortgage pending, then you have $150,000 in equity.
Exemptions, Exempt Property
There are federal and state exemptions. For Texas, exempt property includes the homestead, a motor vehicle, personal property, pension and retirement, and insurance. We'll talk more about specific value amounts in another blog.
A creditor's right (a lien holder) to take away and hold or sell for repayment of debt.
Sale of property with the proceeds benefiting payment of debt to creditors.
A fixed amount of money that a creditor is claiming.
A test to determine whether you will file a Chapter 7 or a Chapter 13 based on your income.
A chapter 7 case where you have no assets to satisfy a creditor's unsecured claim against you. An unsecured claim has no promise of repayment involved. There is no mortgage or lien involved, as in a secured claim. Unsecured claims, like credit cards, involve credit given to you based on your future promise to pay.
These are debts that cannot be discharged in a bankruptcy case and include: student loan debt, child support, alimony, mortgage, debt due for deaths or personal injury due to DUI or under the influence of drugs, and restitution payments.
For Chapter 7 cases this involves continuing to pay, for example, your vehicle loan post bankruptcy, for the purpose of keeping your car that would otherwise be subject to a creditor's repossession.
This is a list detailing, on forms, your assets, what you owe and all other financial information.
The Bankruptcy Court's representative who acts for the benefit of an unsecured creditor. The trustee will review your petition, schedule(s) liquidating the estate property in Chapter 7. In Chapter 13, the trustee acts in similar fashion with a Chapter 7, but will also supervise your court approved plan, receive payments from you and then disburse those payments to each creditor.
This blog is intended for information purposes only and does not establish legal representation or financial guidance.