BANKRUPTCY TERMS & DEFINITIONS

Bankruptcy terms and definitions might sometimes be difficult to get your head around at first, especially when you are in a stressful personal situation and do not feel like you have the energy to get through reading a lot of complicated paperwork. Knowing the terms frequently used in bankruptcy proceedings will make your discussions with attorneys and other parties in the case more effective and more comfortable as well. These are some of the most common terms you might come across during preparation and filing of your bancrupsycase:

Account Reaffirmation
An agreement between you and a given creditor that you will repay all or a portion of your account with that creditor, even though you have filed bankruptcy. In return the creditor agrees not to reposes property (in the case of a mortgage) or to suspend privileges (in the case of a credit card).

Automatic Stay
Filing under any chapter of the Bankruptcy Code prevents any further collection attempts, wage garnishment, or other damaging measures that might otherwise be taken against you. The purpose of a stay in Chapter 13 is to allow for extra "breathing room" while the repayment plan is drafted and approved. In Chapter 7 the stay allows the trustee the protection and time necessary to begin liquidation. There are some, but not many, exceptions to the stay.

Bankruptcy Code
Official legislation found at 11 U.S.C. §101 et. seq. ("Title 11") containing the laws for bankruptcy liquidation and rehabilitation cases. Since its passage in 1978 the Code had been modified several times.

Bankruptcy Court Clerk
The official at the Bankruptcy Court who receives all documents pertaining to your case. The clerk is sometimes responsible for scheduling hearing for bankruptcy cases as well.

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Bankruptcy Judge
The Bankruptcy Judge presides over the administration of your bankruptcy case, and makes rulings about any parts of the case that come into question. The judge moderates between debtors, appointed trustees, and creditors.

Chapter 11
Chapter of the Bankruptcy Code addressing financial reorganization and protection for businesses. Chapter 11 is designed to give businesses the chance to continue operations and gain relief from unmanageable debt.

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Chapter 13
Chapter of the Bankruptcy Code addressing financial rehabilitation for an individual with a proven income who can eventually repay at least most owed debts. Chapter 13 is designed to give individuals a fresh start and allow a reorganized payment plan suitable to all parties.

Chapter 7
Chapter of the Bankruptcy Code addressing liquidation of an individual's personal assets. Chapter 7 is designed to discharge all of an individuals unsecured debts and offer creditors a partial compensation by liquidation of the debtor's non-exempt property.

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Claim
Any right to payment put forth by a creditor.

Creditor
Any institution that has rights to payments from a creditor, for example, a credit card company.

Debtor
Any person, especially when involved in a bankruptcy case, who has payments due to a creditor, for example, a consumer who uses a credit card.

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Discharge
An order that terminates the debtor's obligation to make payments owed to creditors. A discharge "erases" your nonsecured debts permanently.

Exemption
A ruling over certain assets of a debtor that says they are not subject to repossession or liquidation in a bankruptcy case, for example, a car that is necessary for the debtor to get to a place of employment.

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Federal Rules of Bankruptcy Procedure
Puts forth all the procedures of bankruptcy law. Besides the Federal Rules of Bankruptcy Procedure, each local district as well as each individual Bankruptcy Judge may also have distinct additional rules.

Foreclosure
The loss of the right to the property that is being paid for by a mortgage. A mortgage represents security/collateral for the money that is borrowed in the form of real estate. A foreclosure is put into effect when payments are not made on a timely basis or as outlined in the mortgage agreement.

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Involuntary Petition
When creditors file to place a debtor into bankruptcy. Since the movement is one that is being forced onto the debtor, the option to file under Chapter 13 is usually not granted.

Lien
A monetary claim against a property that has to be met before full ownership of the property is granted. For example, in a home loan, the mortgage company technically owns the house until you have satisfied the lien- in other words, until you pay them the amount owed for the mortgage.

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Proof of Claim
Documentation filed by a creditor to "prove" the amounts owed by the debtor. This is essentially a detailed account history of your activity with the creditor.

Secured Claim

A claim that has collateral of equal or greater value than the amount of the claim, for example a mortgage.

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Secured Debt
Debts that have collateral attached to them in the form of a lien on property, for example mortgage, car loan, or sometimes IRS tax liens.

Trustee
The court-appointed representative who sees over your assets in a bankruptcy case. In Chapter 7 the trustee is in charge of liquidating your assets. In Chapter 13, the trustee participates in the formation of your new payment plan.

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Unsecured Claim
A claim that has no collateral to secure its value or that has collateral of lesser value than the amount of the claim.

Unsecured Debt
Debts that have no claim on personal property or any other physical item you own, such as credit cards, student loans, medical bills, or utility bills for services that have been shut off or disconnected.

Voluntary Petition
When a debtor voluntarily files for debt relief under one of the chapters of the Bankruptcy Code. The filing of the voluntary petition puts the automatic stay into operation.

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