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This page highlights some of the important terminology you may come across when filing for bankruptcy. Check back often as we update this page weekly. If there are additional terms or information related to the bankruptcy process you would need to know more about please contact us today!

Bankruptcy

In law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most instances, to discharge the debtor from further liability. In the United States, bankruptcy is controlled by a federal law adopted in 1898 and amended several times, as by the Chandler Act (1938) and the Bankruptcy Reform Act (1978).

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  • Adversary Proceeding
  • Arrears
  • Collateral
  • Creditor
  • Debtor
  • Delinquency
  • Garnishment
  • Lien
  • Non-Dischargeable
  • Perfection
  • Reaffirm
  • Repossession
  • Unsecured
  • Unsecured Debt
A lawsuit filed in the bankruptcy court which is related to the debtor's bankruptcy case. Examples are complaints to determine the discharge ability of a debt and complaints to determine the extent and validity of liens.
The amount that is unpaid and overdue as of the date the bankruptcy case is filed. The word "arrears" is usually used when referring to back child support, back alimony owed, or the amount that is past due on mortgage payments (including interest and penalties).
The property that is subject to a lien as for payment of a debt or performance of a contract. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral.
Any person or business that a debtor owes money to.
Any person who is liable to another for money.
Failure to make payments when payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more of the credit bureaus.
A court-ordered method of debt collection in which a portion of a person's salary is paid to a creditor. The process by which a judgment creditor seizes money, which is owed to his judgment debtor, from a third party known as a garnishee.
A charge upon real or personal property for the satisfaction of a debt or discharge of an obligation. Examples would include: judgments, taxes, mortgages, deeds of trust, etc.
A Chapter 7 case in which the trustee determines, after the applicable exemptions, that there are no significant assets to liquidate. The debtor retains all of their real and personal property.
When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A mortgage is perfected by recording it with the county recorder; a lien in personal property is perfected by filing a financing statement with the secretary of state. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An unperfected lien can be avoided by the trustee.
The debtor can choose to reaffirm debts that would otherwise be discharged by the bankruptcy. Generally, when a debt is reaffirmed, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing: the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn't pay.
Once in default, as defined by the creditor in the security agreement, occurs, the creditor can: repossess the collateral by self-help (depending on state law) or with the aid of a court order, dispose of the collateral by public or private foreclosure sale, retain the collateral in satisfaction of the debt, terminate the debtor's right of redemption, add the costs of repossession and foreclosure to the unpaid balance of the debt, and pursue the debtor for any remaining unpaid balance or deficiency.
A claim or debt is unsecured if there is no collateral that is security for the debt. Most consumer debts are unsecured.
A debt is unsecured if you have simply promised to pay a creditor a sum of money at a particular time, and you have not pledged any real or personal property as collateral for that debt. Generally, credit cards and medical bills are unsecured debts.

 

 


  • Chapter 7 Chapter 7 bankruptcy is a process provided for under United States federal law by which you are entitled to a fresh start. Chapter 7 may eliminate most kinds of unsecured debt. It is usually designed for someone with no assets.
  • Chapter 11 A reorganization proceeding in which the debtor may continue in business or in possession of its property as a fiduciary. A confirmed Chapter 11 plan provides for the manner in which the claims of creditors will be paid in whole or in part by the debtor.
  • Discharge The legal term for the order eliminating a debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien that secures the debt may survive the bankruptcy case.
  • Petition The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as "prepetition", happening before the bankruptcy petition was filed, and "post petition", after the bankruptcy.