341 meeting: The First Meeting of Creditors in which the debtor is questioned under oath by the creditors, the trustee, examiner and/or the United States Trustee about his or her financial affairs.
Automatic stay: A protection for the debtor that automatically stops lawsuits, foreclosure, garnishments and all collection activity against the debtor once a bankruptcy petition has been filed.
Bankruptcy: A legal procedure for dealing with the financial problems of individuals and companies. It refers to a case filed under the Bankruptcy Code or Title 11 of the United States Code.
Chapter 7: The chapter of the Bankruptcy Code that allows for 'liquidation' of all assets of the individual or company to clear debts. It is also known as straight bankruptcy.
Chapter 11: This is a reorganization bankruptcy. It is filed by companies or partnerships. A debtor filing for bankruptcy under Chapter 11 generally proposes a reorganization plan to keep the business alive and make it profitable and pay creditors over a period of time.
Chapter 12: The chapter of bankruptcy Code providing relief for debts of a 'family farmer'.
Claim: A creditors' assertion of right to money from the debtor or debtor's property.
Consumer debts: Debts incurred for personal reasons and not corporate requirements.
Creditor: The person/s or company/s to whom money is owed by the debtor.
Credit Counseling: consumers who want to file for bankruptcy must complete a credit counseling briefing, designed to inform them of their options in dealing with their debts, within six months prior to filing. Topics covered in the briefing include examining the underlying causes of a consumers' financial problems; a look at their budget, in terms of their income and expenses; helping them understand the debt-to-income ratio; providing guidance as to whether a debt-management plan will help the consumer; and the consequences of filing for bankruptcy and other alternatives to bankruptcy.
Debtor: The person/s or company filing for bankruptcy.
Discharge: A release issued by the court relieving the debtor from personal liability of all dischargeable debts. Generally, a discharge in bankruptcy means that a debtor's obligations are erased or wiped out. When a discharge is granted, it protects the debtor from personal liability on the discharged debt. A discharge is only available to certain debtors and for certain debts, however. For example, debtors that are not individuals cannot receive a discharge in a Chapter 7 bankruptcy.
Exemptions: This refers to assets or properties owned by the debtor that cannot be recovered by creditors. Individual debtors are entitled to keep certain assets free from the claims of creditors, under federal or state exemption laws. Typical exemptions are the homestead exemption (equity in the debtor's personal residence), cash value of insurance policies, household goods and furnishings, clothing, wages, and tools used in the debtor's job. Different states exempt different types of property and have different maximum dollar amounts. The amount of the exemption depends on whether federal or state exemptions are available and/or used.
Financial Management Course: personal financial management education class that consumers must attend before a bankruptcy can be completed, or debts discharged. The course curriculum includes budget development, money management, using credit wisely and learning about consumer resources, laws and regulations.
Fraudulent transfer: A fraudulent transfer is a transfer made by a debtor with the intent or effect of reducing the assets available to creditors. For instance, a debtor might attempt to repay a loan to a friend or family member when those funds ought rightfully to be divided between all the debtor's creditors.
Homestead: The principle place of residence of a debtor whether a house, apartment, condo or any other.
Joint Petition: A bankruptcy petition filed jointly by husband and wife.
Liquidation: The process of sale of a debtor's property and assets for cash to help repay creditors.
Nondischargeable debt: A debt that cannot be discharged by filing for bankruptcy. It survives the discharge and must be paid in full.
Plan: A debtor's detailed report on how he plans to repay arrearages owed to secured and unsecured creditors over a period of time.
Preference: A preference is a payment received from a debtor by a creditor in the ninety days before the debtor's bankruptcy filing. The trustee can recover such a payment if: (1) the debtor made the payment within ninety days of filing bankruptcy; (2) the payment was made to or for the benefit of a creditor on a pre-existing debt; and (3) the debtor was insolvent when it made the payment.
Relief from the automatic stay: Although the automatic stay prohibits collection of debts by a creditor - including secured creditors - a secured creditor can ask the bankruptcy court for relief from the automatic stay.
Secured creditor: An individual or a business holding a claim against the debtor that is secured by collateral or a lien.
Secured debt: Debt backed by mortgage, collateral or other lien.
Trustee: A court appointed official who acts as a liaison officer between the debtor and the creditor. His primary function is to act as a disbursement officer. He collects payments from the debtor and distributes the money amongst creditors. In some cases he may even help in valuing assets or creating repayment schedules.
Unsecured claim: A debt secured by property that is worth less than the amount of debt.
