Glossary of Terms

341 Meeting
In a bankruptcy proceeding, a meeting of the creditors at which the debtor is questioned under oath by creditors, a trustee, an examiner, or the U.S. Trustee about his or her financial affairs.

Assets
An asset is personal possessions of value, such as cash, real estate, vehicles, and investments.

Automatic Stay
An injunction that stops lawsuits, foreclosure, garnishments and all collection activity against the debtor the exact date a bankruptcy petition is filed.

Bankruptcy Petition
A formal request for the protection of the federal bankruptcy laws. (There is an official form for bankruptcy petitions)

Credit Counseling
Credit counseling is a prerequisite to filing bankruptcy. During your credit counseling session, you will learn about alternatives to bankruptcy, and following the session, you will receive a certificate of completion.

Chapter 7
The Chapter of the Bankruptcy Code providing for ”liquidation,” that is, the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors. In order to be eligible for Chapter 7, the debtor must satisfy a “means test.” The court will evaluate the debtor’s income and expenses to determine if the debtor may proceed under Chapter 7.

Chapter 11
A reorganization bankruptcy, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.

 Chapter 13
The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income, often referred to as a “wage-earner” plan. Chapter 13 allows a debtor to keep property and use his or her disposable income to pay debts over time, usually three to five years.

Creditor
Any person or business that a debtor owes money to.

Debtor
Any person who is liable to another for money.

Discharge
The legal term for the order eliminating a debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien that secures a debt may survive the bankruptcy case.

Exempt Assets
Exempt Assets are not included in your bankruptcy filing.

Liquidation
Liquidation of your assets is when your assets are sold, and the proceeds are used to pay your debts.

Means Test
The means test uses certain parameters to determine whether a debtor may file Chapter 7 bankruptcy for a full discharge of debts. Individuals with too much income after certain expenses are prohibited from filing Chapter 7 unless they qualify as exception.

Nonexempt Assets
Nonexempt assets are included in your bankruptcy filing, and may be repossessed and liquidated.

 Petition
This is the document that initiates a bankruptcy case.  The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as “prepetition”, happening before the bankruptcy petition was filed, and “post petition”, after the bankruptcy.

Reaffirmations
Reaffirmation of your loans is when you agree to new terms with your lenders during the bankruptcy process and do not seek to discharge your debt or cease your access to credit.

Secured Debt
Secured debt is secured by collateral, such as an automobile or home. Secured creditors have the right to your collateral in the event you default on payments. Typically, secured debt is not fully discharged in bankruptcy and secured creditors are entitled to certain privileges.

Unsecured Debts
Unsecured debt, such as credit card debt and medical debt are not secured with collateral. During the bankruptcy process, creditors of unsecured debt are not able to repossess your personal property.