Abandonment – Technically when you file bankruptcy, all your property goes into the bankruptcy “estate”. Then you exempt most or all of it. If you have non-exempt assets, the bankruptcy estate may abandon them back to you because of low value. When clients receive abandonment’s, they tend to worry that they are going to lose property. On the contrary, abandonment normally means that you get to keep the property. Most debtors who file bankruptcy do not lose property.
Adversary Proceeding – A lawsuit within the bankruptcy, most often based on a creditors claim of non-dischargeablity, for example by “loading up” (see below) on charge cards. If you have had recent large credit card use when you file bankruptcy, you should discuss that with your attorney. See Bankruptcy Mistakes for some of the common problems that can lead to an adversary proceeding like loading up on debt just before filing bankruptcy.
Automatic Stay – Takes effect as soon as you file your bankruptcy and prevents wage garnishment and collection of most debt. Our bankruptcy law makes the automatic stay self enforcing so no order from the Judge is required after you file bankruptcy.
Bankruptcy- A legal process that allows you to get a fresh financial start by discharging debt you cannot pay. In some cases, you may need to pay back portions or all of your debt in a Chapter 13 Bankruptcy. Your attorney can tell you if you are likely to succeed in a full discharge (Chapter 7 Bankruptcy) or may need to consider a repayment (Chapter 13 Bankruptcy).
Bankruptcy Appellate Panel (BAP) - A panel of bankruptcy law Judges who hear bankruptcy law cases on appeal.
Bankruptcy Law Cases- The Judge made law that guides bankruptcy professionals and your case. For example, a recent United States Supreme Court ruling confirmed that Individual Retirement Accounts (IRA’s) are normally exempt when you file bankruptcy.
Bankruptcy Code- The statutory law (drafted by legislative bodies) that guides bankruptcy professionals and you. Most bankruptcy statutes are found in the United States Code although each state has statutory bankruptcy law as well.
Bankruptcy Court- A Court that specifically handles bankruptcy law. Unlike most areas of law, we have our own Judges and Clerks of Bankruptcy Court. Bankruptcy law is so specialized and it is more practical to have Judges who can focus on bankruptcy law matters, although Bankruptcy Judges can hear other matters too.
Bankruptcy Estate – When you file bankruptcy under Chapter 7, in theory your property goes into an “estate” to be liquidated (sold). However, because most debtors’ property is exempt from the estate, usually no property is liquidated. If you think you have any property that may be at risk in filing bankruptcy, or if you have property that is very important to you, you should discuss those items with your bankruptcy attorney before you file bankruptcy.
Bankruptcy Law Judge – The Federal Judge who is appointed specifically to hear and rule on bankruptcy cases. Bankruptcy Judges are bankruptcy law specialists.
Chapter 7 Bankruptcy Law – Often called “liquidation”, however, your attorney can normally tell you before you file bankruptcy if any of your property is non-exempt. If all of your property is exempt, your case should result in a “no asset” report. This means there are no assets to be distributed and you keep everything. Most bankruptcy cases are “no asset”. With Chapter 7 Bankruptcy you do not have a repayment.
Chapter 11 Bankruptcy Law – A bankruptcy law allowing for reorganization, normally involving corporations or partnerships, but rarely used for individuals (and expensive when it is). Few consumers file bankruptcy under Chapter 11, although for some high profile debtors a Chapter 11 can make sense, usually because they have lots of assets.
Chapter 12 Bankruptcy Law – Family Farm Bankruptcy law Chapter. Some states provide sufficient exemptions for farmers to file bankruptcy under Chapter 7. Even if your state allows you to file bankruptcy under Chapter 7, your attorney may suggest that you consider Chapter 12 bankruptcy or Chapter 13 bankruptcy as well.
Chapter 13 Bankruptcy Law- Involves repayment of at least part of the debt owed, over either 3 or 5 years. Debtors with high income may be required to file bankruptcy under Chapter 13. Other debtors may choose a Chapter 13 bankruptcy in order to try and save their home, get better treatment on back taxes or for other reasons. If you fail in Chapter 13 bankruptcy (normally due to inability to keep up with the payments) you may be able to convert to Chapter 7 bankruptcy.
Confirmation – Approval of a Chapter 13 bankruptcy plan.
Conversion - Occurs when a case cannot continue as a Chapter 7 bankruptcy and must be moved into a Chapter 13 bankruptcy repayment. Cases can also convert from Chapter 13 to Chapter 7, most often due to an inability to make the Chapter 13 plan (monthly) payments.
Creditor - Any bank, credit union or other party to whom a debtor owes money when they go bankrupt. You must schedule (list) all your creditors on your bankruptcy petition, even if you intend to repay them. If you file bankruptcy and leave creditors off, in some cases the debt will not be discharged.
Creditor Meeting - The hearing you attend after you file bankruptcy, also referred to as the 341 Examination. Your attorney will be there with you to make sure your rights are protected.
Debtor - One who is in debt to another (this is you in the bankruptcy context).
Discharge - You will receive a Bankruptcy Discharge in the mail, normally a few months after your hearing and around three months after you file bankruptcy. It refers to credit card, medical and other debt that you will never have to pay due to your bankruptcy discharge.
Dischargeable Debt – Debt which you can get rid of when you file bankruptcy; credit cards, medical, misc. debt. Student loans and child support are the two major exceptions to discharge after you file bankruptcy. Back taxes get more complicated, some are discharged after you file bankruptcy, others are not.
Dismissal- If you fail to do something important after you file bankruptcy like provide documents required by the Court, your case can be dismissed. In this case you would be back in the same position as when you started and your creditors could resume collection efforts.
Equity - How much value you have in an asset. For example, if your home would sell for $100,000, and you owe $90,000 then you have $10,000 in equity. If your car would sell for $5,000 and you owe $8,000, you do not have any equity. Owing more than the value of the asset, is often referred to as being “upside down.” Equity matters when you file bankruptcy since the amount you can exempt may be limited by your state or federal law.
Exempt - Refers to assets you get to keep when you file bankruptcy. As a practical matter, most people keep all their assets when they file bankruptcy given a reasonable amount of legal pre-bankruptcy planning. If you do have non-exempt assets, your attorney can tell you before you file bankruptcy how to handle that. The exemptions you can choose from depend on your state bankruptcy law.
Foreclosure – When you file bankruptcy and are not keeping your home, this is the legal process lenders must go through to recover your home so it can be sold. If you are surrendering your home when you file bankruptcy the bank will probably foreclose after you file bankruptcy, but you will normally discharge the debt from the home so you will owe nothing.
Fresh Start – Your ability to discharge debt you cannot afford to pay through bankruptcy allowing you to start anew. The United States Constitution protects your right to start fresh through bankruptcy. Without the ability to get a fresh start with bankruptcy, people could lose their homes, lose their jobs and end up on welfare. The public good is served by allowing people to start anew, get back on their feet, pay taxes and support themself and their families.
Joint Bankruptcy Petition – A bankruptcy filed by husband and wife. Under our bankruptcy law, spouses can normally file bankruptcy jointly or solo.
Loading Up – Large recent use of credit cards before you file bankruptcy, includes cash advances and balance transfers. If you load up before you file bankruptcy you may need to repay part or all of the recent usage. The bankruptcy law disfavors debtors who charge up their credit cards right before they file bankruptcy.
Means Test- For those who file bankruptcy and are earning over the state median income, the means test applies IRS collection guidelines to your income and then generally requires that debtors who file bankruptcy and can pay at least $100/month toward past due debt file bankruptcy under Chapter 13 (repayment) instead of Chapter 7 (full discharge). The means test is part of the 2005 revisions to the bankruptcy law.
No Asset - Refers to a bankruptcy case in which the debtor (you) will not lose any assets to the bankruptcy estate. Most people who file bankruptcy end up with a no asset case. You should receive a No Asset Report in the mail before discharge.
Objection to Exemptions – If you file bankruptcy and the trustee or another party believes you did not properly exempt an asset, they can file and objection. Your attorney would normally handle this if it happens. The bankruptcy law limits the instances in which the trustee can object to your exemptions when you file bankruptcy.
Petition - The document that is prepared and filed with the Bankruptcy Court to start your case. It includes listings of all your assets, debts, income etc. Under our bankruptcy law, if you file bankruptcy with a defective petition, your case may be dismissed.
Plan – Applies to those who file bankruptcy under Chapter 13. The plan is a detailed description of how a Chapter 13 bankruptcy case will proceed. Your attorney will prepare this from information you provide before you file bankruptcy.
Preference Payment - Large payments made to family members within one year of filing bankruptcy. Under the bankruptcy law, reference payments can be recovered by the estate and distributed to all creditors. You should consult with your attorney before making preference payments. Large payments made to non-family members can be recovered by the trustee if made within 90 days of filing bankruptcy, so you should consult with your attorney if you have recently made such a payment. Normally, home, car and other payments to secured creditors are fine. The bankruptcy law discourages debtors from giving money to family to avoid giving it to creditors when you file bankruptcy.
Pre-petition Bankruptcy Planning – The legal efforts permitted by our bankruptcy law to manage protection of your assets when you file bankruptcy. Your bankruptcy attorney will tell you what bankruptcy planning is permissible under our bankruptcy law before you file bankruptcy.
Proof of Claim – A creditors written statement describing why they believe you owe them money when you file bankruptcy. The bankruptcy law allows for creditors to each get their share of any funds that are available when you file bankruptcy. Most of this occurs with Chapter 13 bankruptcy.
Reaffirmation – After you file bankruptcy, if you have debt you are keeping (such as home/car), some creditors may request that you sign a document agreeing to abide by the terms of your original contract. Your attorney can advise you whether you should sign a reaffirmation in any given case.
Redemption - If you owe more than your car is worth the bankruptcy code allows you to get a new loan, pay off the old loan at fair market value and save money on your car. These loans are available to people in bankruptcy from www.722redemption.com via US Bank.
Repossession – The bankruptcy law process creditors must go through to gain title to vehicles or other property surrendered when you file bankruptcy. Most people who file bankruptcy continue making payments and do not have any repossessions. Bankruptcy law recognizes that you need to be able to get to work, so most debtors get to keep their car when they file bankruptcy.
Secured Loan - Home, car and similar loans where the creditor can foreclose or repossess if you do not pay. Hence, when you file bankruptcy you can normally either keep your home or car and continue payments, or surrender and discharge all of that debt, even if they sell the property short. Our bankruptcy law normally allows people who file bankruptcy to stay in their homes if they wish.
Substantial Abuse – Bankruptcy law changes in 2005 limit who is eligible for a full discharge under Chapter 7. Substantial abuse concerns debtors who have too much income (given their expenses) to qualify for a Chapter 7 bankruptcy discharge. If your income seems to be too high for a successful Chapter 7 discharge, your attorney will normally tell you up front so you can consider other options including filing a chapter 13 bankruptcy.
Surrender - Giving a home, car or other secured property back to the creditor after you file bankruptcy instead of reaffirming. If you surrender during a bankruptcy the bankruptcy law normally allows you to discharge all the debt to the creditor.
Trustee – In most district, once you file bankruptcy the "panel trustee" is appointed by the Bankruptcy Court to represent creditors and examine you at your creditor meeting concerning availability of assets to the estate and accuracy of your petition. In most districts there is also a United States Trustee and Assistant United States Trustee who work with the panel trustees. The Bankruptcy law provides for trustee’s in most areas because our bankruptcy court Judges are too busy to oversee every person when they file bankruptcy.
Bankruptcy Law Terms Confusion
Bankruptcy clients sometimes use the word "dismissal" when they mean "discharge". There is a big difference. If a bankruptcy case is dismissed, it means you did not get a successful discharge of debt. If a bankruptcy case is discharged it means you did get rid of your credit card, medical and other dischargeable debt. So don't make the mistake of telling a creditor that your bankruptcy was dismissed; they may think they can start collecting again.
The "bankruptcy estate" confuses people. When you file bankruptcy, your property becomes part of the "bankruptcy estate". Then you get to exempt certain property from the estate and keep it. In theory the remainder of your property is sold to pay creditors. But because bankrupt people do not have very much valuable property, and what they do have tends to be within legal bankruptcy exemptions, few cases actually result in liquidation of any of your property. Part of your bankruptcy attorneys job is to review what property you have before you file bankruptcy and help you make sure you keep as much as possible if not all your property.
A fair number of clients confuse Chapter 7 with Chapter 13.
Chapter 7 is the full discharge and Chapter 13 is the repayment.
Equity seems to be a source of great wonderment for some people. Unfortunately, banks try to obscure equity by talking about affordable monthly payments and failing to mention the total purchase price. Too many people fall for that and have no idea they owe a lot more than their car or other asset is worth. Understanding how much equity you have in an asset is key to deciding if you want to keep it when you file bankruptcy.
Current Market Value - Amount Owed = Equity
Some bankrupt people think it is strange that banks still foreclose even though they are filing bankruptcy. However, the bank cannot regain possession of the home without foreclosure. They still have to comply with state law in order to re-sell the house.