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Bankruptcy Process |
BANKRUPTCY GLOSSARY
Adversary Proceeding -
A
lawsuit filed in the bankruptcy court which is related to the
debtor's bankruptcy case. Examples are complaints to determine
the dischargeability of a debt & validity of liens.
Arrears - The amount that is
unpaid & overdue as of the date the bankruptcy case is filed.
A
Chapter 13 bankruptcy filing can "cure" arrearages such as
mortgage, automobile, child support, and alimony.
Assets - The personal possessions
belonging to the debtor including cash, real estate, vehicles,
household furnishings, jewelry, etc.
Automatic Stay -
An
injunction that stops lawsuits, foreclosures, garnishments, and
collection activity against a debtor the moment a bankruptcy petition is
filed.
Avoidance -
Elimination
(avoid) some kinds of liens that interfere with (or impair) an exemption
claimed in the bankruptcy. Most judgment liens that are attached
to a debtor's home can be avoided if the total of the liens is greater than the value of the
property in which the exemption is claimed.
Avoidance Powers -
Rights
given to the bankruptcy trustee or debtor in possession to recover
certain transfers of property such as preferences or fraudulent transfers
or avoid liens created before the beginning of the bankruptcy.
Bankruptcy Code -
Title 11 of
the US Code that governs bankruptcy proceedings. Bankruptcy is a
matter of federal law and is, with the exception of exemptions, and is the same
in every state.
Bankruptcy Estate - The
estate is all of the legal and equitable interests of the debtor as of
the beginning of the case. From the estate, an individual debtor
can claim certain property exempt; the balance of the estate is
liquidated in a Chapter 7 to pay administrative costs and claims of
creditors according to priority.
Chapter 7 Bankruptcy -
It is a
process provided under federal law by which you are entitled a fresh
start. Chapter 7 eliminates most kinds of unsecured debt and
is usually designed for someone with no assets.
Chapter 13 Bankruptcy -
Is an interest-free 5 year debt repayment
plan whereby the trustee consolidates your debt and pays your creditors.
It can save your house from foreclosure or save a car from repossession.
Collateral -
The property that is subject to a
lien for payment of a debt or performance of a contract. A creditor
with rights in collateral is a secured creditor because the claim secured by
collateral.
Conversion -
A chapter 7 case may be converted to a Chapter 13 if
the debtor is eligible.
Creditor -
Any person or business that a debtor owes money to.
Denial of Discharge -
A penalty for debtor misconduct. Debts
that could have been discharged cannot be discharged in any subsequent
bankruptcy. The administration of the case (the liquidation of assets and
the recovery of avoidable transfers) continues for the benefit of the creditors.
Discharge -
The
legal term for the order eliminating a debt in a bankruptcy case.
The debt is no longer legally enforceable against the debtor, but a
lien that secures debt may survive the bankruptcy such as a
mortgage.
Equity -
A homeowner's financial
interest in a property. Equity is the difference between the
value of the property, what is owed, and other liens.
Exempt -
Property that is removed
from the bankruptcy estate and not available to pay to the claims of
creditors. The debtor gets to keep exempt property to make a
fresh start after bankruptcy.
Exemptions -
A list of the kinds
and values of property that each state allows debtors to keep that
is beyond the reach of the trustee and creditors.
FCRA - Fair Credit Reporting Act
FDCPA - Fair Debt Collections Practices Act
Garnishment -
A court ordered
method of debt collection after a judgment is entered against the
debtor.
No asset case -
A Chapter 7 case
in which the trustee determines that there is no significant assets
to liquidate. The debtor retains all real and
personal property.
Non-dischargeable -
A debt that
cannot be eliminated in bankruptcy.
Personal property -
Property that
is not real property or affixed to real property, such as cars,
furniture, stocks, bonds, and bank accounts.
Preference -
A transfer to a
creditor in payment of an existing debt made with certain time
periods before the bankruptcy was filed. Preferences may be
recovered by the trustee for redistribution among the creditors.
Pre-petition -
Claims or events
that occurred before the beginning of the bankruptcy was filed.
Generally, only pre-petition debts may be discharged in a bankruptcy
proceeding.
Priority Claims -
Certain debts,
such as unpaid wages, spousal or child support, and taxes are
elevated in the payment hierarchy under the Bankruptcy Code.
Priority claims must be paid in full before unsecured debts.
Proof of Claim -
Document a
creditor files showing how much money is owed to them by the debtor,
together with all supporting evidence of the claim.
Property of the estate -
The
property that is not exempt and belongs to the bankruptcy estate.
Property of the estate is usually sold by the trustee and the claims
of creditors paid from the proceeds.
Reaffirm -
The debtor can choose
to reaffirm debts that would otherwise be discharged by the
bankruptcy. Generally, when a debt is reaffirmed a hearing is
required and all parties must agree--the debtor, creditor, and
bankruptcy court. The debtor is obligated to pay the debt in
full and the creditor can sue or repossess the property if the
debtor does not pay.
Relief of stay -
A creditor can
ask the judge to lift the automatic stay and permit some action
against the debtor or the property of the estate. If the
motion is granted, the moving party (but no one else) is free to
take whatever action the court permits. Relief can be
absolute, for example permitting the creditor to foreclose on
property, or limited allowing the recordation of a notice of
default.
Secured debt -
A secured debt is
one where the creditor takes personal or real property as
collateral. A creditor whose debt is secured has a right to
take property to satisfy a debt in default.
Trustee -
A private individual or
corporation appointed in bankruptcy filings who represents the
interests of both the debtor and creditors.
Unsecured -
A debt is unsecured if
there is no collateral that is security for the debt. Most
consumer debts are unsecured debts.
Unsecured debt - A debt is
unsecured if you have simply promised to pay a creditor a sum of
money at a particular time and have not pledged any real or personal
property as collateral for that debt. Generally, credit cards,
utility bills, and medical bills are unsecured. |
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