Understanding Common Bankruptcy Terms
If you are considering filing for bankruptcy, you may feel overwhelmed at all of the terminology used as you begin to research whether or not this process would be right for you financially. Understanding common bankruptcy terms can help you understand how the bankruptcy process may benefit you. The following are some common terms that are used in many bankruptcy proceedings.
Chapter 7 – This type of bankruptcy is shorter than Chapter 13 bankruptcy, and allows a debtor to discharge (eliminate) many of their debts. Additionally, many of the assets of the debtor will be liquidated (sold) in order to pay off creditors.
Chapter 13 – This type of bankruptcy is much longer than a Chapter 7 bankruptcy and may last 3-5 years. This bankruptcy is often called a reorganization bankruptcy as it allows a debtor to keep their assets, but calls for the implementation of a payment plan in order to pay their creditors over a longer period of time.
Dismissal – If you filed a bankruptcy case and did not receive a debt discharge, this is considered a dismissal. A dismissal can occur for many reasons, including fraud or simply the failure to file the proper paperwork.
Unsecured debt – This debt cannot be used as collateral, which is when you can use an asset to pay off a debt because it has value. For example, credit card bills, medical bills, and utility bills have no value in and of themselves and therefore are considered unsecured debt.
Secured debt – These are debts that have collateral secured against them, such as a car or a home. In some cases, a creditor might repossess the collateral (property) in order to pay off the debt. Some examples could be a title loan, car loan, or a mortgage on a home.
Automatic stay – This is an order of the bankruptcy court that immediately stops all creditors from contacting you regarding your debts until the bankruptcy is completed.
Discharge – At the conclusion of your bankruptcy, some of your debts may be discharged (eliminated) and you will no longer have the legal obligation to repay them.
Exemption – Some items of your property may be exempt from liquidation during the bankruptcy process, and you will be allowed to keep those personal belongings.
Means Test – If you are attempting to declare Chapter 7 bankruptcy and have many of your debts discharged, you must pass a means test which will determine if you truly do not have enough income to pay your debts.
Petition – This is the official legal document that you will file with the bankruptcy court to start your bankruptcy proceeding. It will include important financial information regarding your assets, debts, income and financial history.
Trustee – This person is appointed by the court to handle your bankruptcy case. They will handle an investigation into your petition, make creditor payments, distribute assets and if you are filing a Chapter 13 bankruptcy, monitor your repayment plan.
Contact an Experienced Bankruptcy Attorney
Our West Palm Beach bankruptcy attorneys at Kelley, Fulton & Kaplan can help you understand your legal rights and help you determine if bankruptcy is right for you. Contact us today at 561-264-6850 for a free consultation.