Bankruptcy Help and FAQ'sBankruptandbroke.com knows that the technical world of bankruptcy laws is difficult to navigate without a basic understanding of the specific definitions involved in bankruptcy.  Our belief is that educating debtors on the way bankruptcy works is as important as deciding to file bankruptcy to receive the relief you deserve.

Bankruptandbroke.com believes that the best representation of clients is done through helping clients understand the process and how it all works.  From our educational materials found on this site to offering 100% free evaluations, Bankruptandbroke.com is ready to get you started today!

What Do I Need To Know?

The categories are endless and depend specifically on your situation and why you believe it may be beneficial to you to file for relief under the Bankruptcy Code.  From questions about what will happen to your home, cars or property, to finding out what types of debt you will need to repay and hat types of debt you will have discharged, Bankruptandbroke.com is here with the answers!  A free evaluation will set you straight and get you started on your way to financial freedom!

Common Bankruptcy Terms Defined:

  • Adversary Proceeding:  When a lawsuit is filed relating to a bankruptcy case by a creditor attempting to assert a right of repayment through the bankruptcy court.
  • Arrearage:  The amount an individual owes in past due payments on a secured debt.
  • Assets:  Anything of value that a debtor in bankruptcy owes.  This can be personal property like jewelry, collections, or furniture.  It is also cars, homes, pensions, or Intellectual Property.
  • Automatic Stay:  The automatic injunction that is immediately in place when a bankruptcy petition is filed.  This stops lawsuits, wage garnishments and even foreclosures for the duration of the automatic stay period.
  • Bankruptcy:  The legal process by which individuals or businesses with debt problems seek relief by discharging some or all debt or structure a partial repayment plan of that debt.
  • Bankruptcy Code:  The shortened name for Title 11 of the United States Code.
  • Bankruptcy Estate:  This makes up the interests that a debtor has in certain property when the debtor files for bankruptcy.
  • Bankruptcy Judge:  The judge for the United States district Court who officiates your bankruptcy proceeding.
  • Bankruptcy Petition:  The document that a debtor initially files for relief under the bankruptcy code.  It can be filed voluntarily by a debtor, or forced upon by creditors through a process called an involuntary case.
  • Chapter 7:  This is a chapter of the bankruptcy code whereby individuals and businesses file.  This is known as a total liquidation because the it entails either having little to no assets or allows certain assets to be sold to pay a portion of a debtors debts.
  • Chapter 11:  The chapter of the Bankruptcy Code whereby a mainly a partnership, corporation or other business entity “reorganizes” their debt to make payments more manageable and to stay in business.  Many businesses have filed Chapter 11 bankruptcies, including large airlines and consumer shopping stores.
  • Chapter 13:  The chapter of the Bankruptcy Code that allows an individual to restructure their own personal debt through a repayment plan that lasts between three and five years so that they may keep certain assets.  Chapter 13 is common for stopping foreclosure and repossessions.
  • Claim:  When a debtors creditor asserts their right to be paid from the sale or repossession of some of the debtors property or assets.
  • Confirmation:  This happens when a bankruptcy judge approves the plan devised in a Chapter 11 bankruptcy reorganization or a repayment plan under Chapter 12 or Chapter 13.
  • Creditor:  The person or entity that a debt is owed to.
  • Credit Counseling:  This relates to two things that a debtor must do during the bankruptcy process. A debtor must first complete credit counseling from a court approved credit counseling agency (usually done with a short phone call) prior to filing the bankruptcy petition.  Second, a debtor must undergo a course in personal financial management, prior to having a discharge entered and after filing of the bankruptcy petition (this is also usually done over the phone).
  • Creditors Meeting:  This is another term for the 341 meeting that debtors and their attorney(s) attend to answer questions asked by the bankruptcy court trustee.
  • Current Monthly Income:  This is calculated by taking the debtors income over the past six-months prior to filing the bankruptcy petition and averaging the amount out.
  • Debt:  The amount of money that a debtor owes.
  • Debtor:  The individual or business entity that owes money r a debt to a creditor.  This is who or what files for relief under the bankruptcy code.
  • Debtor-In-Possession:  Referencing a debtor involved in a Chapter 11 bankruptcy case because the debtor still retains their assets so it can (usually) stay in business and continue operations.
  • Debt Relief Agency:  This is a fancy name for a law firm or other organization that assists individuals or businesses in filing for bankruptcy and charges a fee for doing so.  Specific disclosures must be given by these organizations to comply with the Federal Law.
  • Defendant:  The person or business that is being sued.
  • Discharge:  When the bankruptcy court and/or trustee releases the debtor from any further liability to pay certain debts that they have determined to be dischargeable.  This prevents creditors from continuing further taking further action against debtors to collect on those debts in the future.  It prohibits collectors from furthering calls, letters and any other type of personal contact attempting to collect the debt that was owed.
  • Dischargeable Debt:  The bankruptcy code allows certain debts to be discharged, meaning the debtor does not have to repay the debt to the creditor.
  • Disposable Income:  Basically, any income a debtor has left over after payment of whatever expenses are necessary.  Current Monthly Income minus expenses (expenses calculated by IRS standards).
  • Equity:  The amount of value a debtors property minus whatever liens, loans or other encumbrances exist on a certain piece of property.  (Example:  Home worth $100,000 with a mortgage of $80,000; the amount of equity is $20,000).
  • Exemptions:  The Bankruptcy Code allows certain types of property to be kept by debtors that file for bankruptcy.  State laws also allow certain types of property to be kept by debtors as well.  This can be things such as homes, cars, tools used for work, and many other things.
  • Fraudulent Transfer:  When a debtor attempts to hide ownership of property prior to or after filing of the bankruptcy in an effort to either hide the property entirely or to hide the true value of the property.  (Example:  selling a painting worth $1,000 to a friend for $10).
  • Involuntary Petition:  When a creditor forces a debtor into bankruptcy without the debtors consent.  There are many requirements that a creditor or group of creditors must follow to force an individual into bankruptcy through the filing of an involuntary petition.
  • Joint Petition:  When both a husband and wife file for relief under the Bankruptcy Code together on one petition.
  • Judgment:  An order of court given to a creditor allowing that creditor to use remedies of collection against a debtor such as wage garnishment. Liens against property, or other methods.
  • Lien:  Used when a creditor has the right to either hold, take or sell the property of the debtor for security over a debt or for the repayment of a portion of the debt owed.
  • Liquidation:  The sale of property owned by a debtor.  The proceeds of the sale of the debtor’s property is then used to pay some of the creditors.
  • Means Test:  the bankruptcy Code, section 707(b)(2).  This is a special calculation to determine an individuals eligibility for chapter 7 bankruptcy.  This determines whether there is an abuse of the bankruptcy procedure by the debtor, whether they should be allowed to file Chapter 7, or whether the case should be converted to a Chapter 13 bankruptcy.
  • Net Income:  An individual’s take-home pay.
  • No-Asset Case:  A Chapter 7 bankruptcy case where a trustee determines that there are no assets available to liquidate to pay for a portion of the debts owed.
  • Nondischargeable Debt:  These are debts that cannot be erased through bankruptcy.  Some of these debts include child support, certain types of taxes, and debts owed arising out of personal injury caused by driving under the influence.
  • Personal Property:  Property and interests that are owned by someone besides real estate.  Examples of this include:  cars, jewelry, clothing, stocks, etc.
  • Plan:  The specific payment plan that is set up through the filing of a Chapter 11 or a Chapter 13 bankruptcy.  The debtor makes payments for the duration of the plan, between three and five years.
  • Plaintiff:  An individual or business entity that files the complaint and is the party suing the defendant.
  • Preferential Debt Payment:  When a debtor pays a creditor within ninety-days prior to filing their petition and it is more than that particular debtor would have received in the debtors Chapter 7 case.
  • Priority:  The method that the Bankruptcy Code ranks unsecured claims to determine the order in which those claims will be paid if there is less than enough money to pay all the claims in their entirety.
  • Priority Claim:  This is an unsecured claim that is entitled to be paid before other unsecured claims.
  • Proof of Claim:  A statement, in writing, that verifies a document filed by the creditor that states why the debtor owes the creditor money.
  • Reaffirmation Agreement:  A written agreement that a Chapter 7 debtor signs to promise to continue paying a debt, like an auto loan, after the bankruptcy, so that the debtor can continue to keep the property.
  • Real Property:  Land and anything on the land, like a house.
  • Schedules:  The detailed lists that a debtor files with their petition that shows all of the debtors assets, liabilities and all other financial information related to the debtor.
  • Secured Creditor:  A creditor that holds a claim or debt against a piece of property that the debtor owns, such as a claim against a car or an appliance.Secured Debt:  A debt that is backed by some type of collateral.  This is usually the case for a mortgage, car, appliance or other piece of property that is purchased that could be repossessed or foreclosed upon.
  • 341 Meeting:  The meeting of creditors that is required under the Bankruptcy Code.  The debtor is questioned by a trustee, under oath, and usually recorded, about their finances and debts.
  • Trustee:  The representative of the bankruptcy court whose job it is to officiate your bankruptcy case.  Trustees will help to devise the payment plan in a Chapter 13 case, a plan of reorganization in a Chapter 11 case, or a determination of no assets or a liquidation of assets in a Chapter 7 case.
  • Unsecured Claim:  A claim or a debt that the creditor holds no collateral or assurance of payment as a creditor would with a mortgage for a home or a lien on other property.
  • Voluntary Petition:  When a debtor decides to file a petition for bankruptcy on his or her own volition.