Bankruptcy Terminology Glossary

If reading all the information on bankruptcy has you feeling like you are reading Latin, you are not alone. Bankruptcy has a myriad of technical terms and phrases that can easily seem like a foreign language. Below you will find a list of some common terms used in the bankruptcy arena and their plain English definitions.

The first two you need to know are:

Creditor
This is the company or person you owe money to. For example, your credit card companies or a bank you have a loan with.

Debtor
This means you. Since you own the creditors money, you are in debt to them, thus making you the debtor.

Now that you understand who the information you are reading is referring to, you can read through the list below of common terms you may see while researching or filing bankruptcy.

341 Meeting
A meeting of creditors where the debtor is questioned under oath by their creditors, a trustee, examiner, or the United States trustee about the debtor's financial affairs.

Adversary Proceeding
A lawsuit arising within or related to a bankruptcy case in progress that is begun by filing a complaint with the court.

Asset
This refers to anything you own that is worth money. It can be something large, such as a car or something small that most people overlook when thinking of their assets, like a good set of silver packed in the attic. Anything that you own outright that can be sold for cash is an asset, regardless of if the value is 10,000 dollars or 1 dollar.

Automatic Stay
When you file your bankruptcy petition with the court, you are awarded an automatic stay once the papers are stamped by the court clerk. This means that your creditors have to stop attempting to collect any debts from you, may not obtain judgments against you or take your property to satisfy a debt under the current laws.

Bankruptcy Code
Title 11 of the United States Code is the law that governs all bankruptcy proceedings. Bankruptcy is ruled by federal law, and with some exceptions, is the same in every state. If state law conflicts with federal bankruptcy law, federal law prevails.

Conversion
A conversion occurs when you change your mind about which bankruptcy type you want after filing the initial petition. So, if you file Chapter 7 and then decide to go with a Chapter 13 after you have already filed the Chapter 7 paperwork, this would be a conversion.

Dismissal
While dismissals can occur for a variety of reasons, your bankruptcy case can be dismissed at any time if you fail to comply with any rules or fail to meet your responsibilities as set forth in the bankruptcy court. If a case is dismissed, the creditor and debtor go back to the original rights they had before any bankruptcy petition was filed.

Discharge
This is the legal elimination of debt through a bankruptcy case.

Exemptions
The kinds and values of property that is not legally in reach of the creditor or trustee. There are a variety of types of assets that can exempt from filing proceedings. Each state has its own set of rules regarding exemption allowances. For example - a home to live in, clothes to wear, the furniture in your home and a car to drive are some of the more common exemptions allowed.

Personal Property
Any assets you own that are not considered Real Property.

Real Property
As set forth in federal law, Real Property is anything not actually attached to the ground. Your car would not be Real Property, but your house or a parcel of land you own would be.

Reaffirmation Agreement
These are used so that the creditor can keep and continue to pay on items they do not wish to file bankruptcy on. These agreements are usually used by people who are claiming bankruptcy, but wish to keep their home or car that they are making payments for. If you are up to date with your payments, most creditors will agree to a reaffirmation agreement.

Relief from Stay
This is a court order that is requested by a creditor, which if awarded, lifts the Automatic Stay you were granted the moment the papers were stamped by the county clerk. If a Relief from Stay is granted, you will receive notice from the bankruptcy court.

Schedules
These are what the list of assets and liabilities you must provide the court with to start a bankruptcy case are commonly referred to.

Secured Debt
This is an item where the creditor is owed for something that they could take away from you if you fail to meet payments. For example, if you fail to make the required payments on your car, it can be repossessed by the creditor.

Trustee
This is basically the person who works for the bankruptcy court who is assigned to deal with your case. The trustee is impartial, which means they do not work for either the interests of the debtor and the creditors.

Unsecured Debt
This means a debt that you owe that they can not come and collect a physical item for if you don't pay. Most consumer debt is unsecured, such as credit cards. If you don't pay your VISA bill, they can not come and take the food processor you purchased on the card. This makes the debt unsecured.

However, while they can't take your personal belongings, they can attempt to collect the debt. This means they can call you repeatedly on the telephone or turn the bill over to a collection agency that will promptly begin a calling campaign and possibly put a blemish on your credit report. In some cases, if the amount of debt is substantial enough, a creditor may be able to get a judgment against you.

While they are many more terms often used in the bankruptcy arena, these are the most common that you will be confronted with. If you have any suggestions for additions to this list, please contact us and let us know.