Source: https://www.norcalbkattorney.com/faq/bankruptcy-common-terms
Timestamp: 2017-09-20 13:01:06
Document Index: 280247528

Matched Legal Cases: ['§ 7001', '§ 365', '§ 541', '§ 1306', '§ 101', '§ 506', '§ 341', '§ 523']

Sacramento Bankruptcy Common Terms & Questions | Sacramento Bankruptcy Lawyer
The world of bankruptcy is a very confusing place to be with a terminology that most people are unversed with. Familiarizing yourself with some key terms that you will hear or have already begun hearing will assist you in understanding your particular bankruptcy case with more ease. Please contact us at 916-800-7690 or by sending us a direct email if you would like to discuss any of the below terms in greater detail.
Adversary proceeding – A lawsuit that is initiated in a bankruptcy case that is considered a separate proceeding than the actual bankruptcy. Just like a civil case, the adversary proceeding is initiated when someone (i.e. the trustee, a creditor, or the debtor) files a complaint. There are several reasons someone could file an adversary proceeding. A non-exhaustive list can be found in Federal Rule of Bankruptcy Procedure § 7001.
Assume – In a bankruptcy, you have the option to either assume or reject any current leases you are obligated on. If you “assume” the lease, you are telling the Court that you wish to maintain the terms of the lease and continue making the required payments. Assuming a lease is governed by 11 U.S.C. § 365(p).
Automatic stay – The automatic stay is an injunction that prohibits credits from performing certain actions against the person who filed bankruptcy (i.e. the debtor). Please refer to our detailed discussion of the automatic stay by clicking HERE.
Bankruptcy – Bankruptcy is a process where consumers or business entities can eliminate or repay their debts under the protection of the Federal Bankruptcy Court.
Chapter 13 – Chapter 13 is a chapter of the bankruptcy code that allows the debtor (i.e. person filing for bankruptcy relief) to reorganize his/her debts by entering into a 3-5 year repayment plan. During this period, the debtor will pay back certain debts in full, certain debts at a lower ratio, and certain debts will be discharged in full. For a more in depth discussion on Chapter 13, please refer to our comprehensive analysis by clicking HERE.
Chapter 7 – Chapter 7 is a chapter in the bankruptcy code that allows the debtor (i.e. person filing for bankruptcy relief) to eliminate his/her personal obligation on certain debts. Once the chapter 7 is filed, the trustee that is administering the case will liquidate the debtor’s assets (if any are available for liquidation) and take those funds to pay certain creditors in the case. From there, the remaining debts will be eliminated unless they are excluded from discharge per the bankruptcy code. In the vast majority of Chapter 7 cases, the debtor keeps all of his/her assets and none are liquidated. Click HERE to read a more detailed breakdown of the Chapter 7 process.
Cram Down – Cram down is a process in Chapter 13 cases wherein the amount owed on a secured loan can be reduced to the fair market value of the asset (i.e. the vehicle) and the debtor (i.e. person filing for bankruptcy) is only responsible for paying that reduced amount. This cannot be done on your primary residence.
Credit Counseling – The requirement that all debtors must receive a briefing from an approved credit counseling agency within 180 days prior to the filing of their bankruptcy case. Under rare circumstances due to incapacity, disability, or being on active duty military, certain debtors are not required to complete said counseling.
Creditor – Someone who the debtor (i.e. person filing for bankruptcy) owes money to or who claims that the debtor owes him/her money.
Debtor – The person (or people) who files for relief under the Bankruptcy Code.
Discharge – A federal court order that is issued at the end of your bankruptcy case that releases you from your personal obligation to pay back your dischargeable debts. This court order also prohibits the creditors from communicating with the debtor regarding that discharged debt.
Equity – The current value of the asset minus any secured loans attached to said asset. This is important in bankruptcy cases for several reasons such as protecting your assets and avoiding liens.
Estate – The bankruptcy estate of the debtor is all legal or equitable interests the debtor has in any asset at the time of the bankruptcy filing. The bankruptcy estate is governed by 11 U.S.C. § 541 and § 1306.
Exemptions – Certain property that the debtor owns is protected from the reach of unsecured creditors. Each state is given their own “exemption” limits in order to do this. The “exemptions” are used to show which property the debtor has designated as protected from the unsecured creditors. Refer to our Bankruptcy Exemptions page for a thorough analysis.
General Unsecured Debt – A general unsecured debt is one which has no special assurances of repayment, such as a mortgage on a home. An example of this type of debt is a credit card.
Insider – Relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control. See 11 U.S.C. § 101.
Lien – A lien is a security interest that a creditor has over a certain asset of the debtor to ensure repayment of the debt. Common liens are mortgages and car loans.
Lien Strip – If in a Chapter 13 bankruptcy, the debtors can prove to the Court that the current fair market value of their home is less than the amount owed on their first mortgage, the Court would enter an Order valuing the home at that amount and upon the completion of the Chapter 13, the creditor would be statutorily obligated to reconvey it’s second deed of trust. See 11 U.S.C. § 506(a) and Federal Rule of Bankruptcy Procedure 3012.
Liquidation – See Chapter 7.
Means Test – The Means Test is used both in Chapter 7 and Chapter 13 cases. In a Chapter 7, the purpose of Means Test is to determine if the debtor’s household income is low enough to file for relief under Chapter 7. In a Chapter 13, the Means Test’s main functions are to determine whether the debtor qualifies for a 3-year plan or whether he/she will be required to complete a 5-year repayment plan; and secondly, how much money, if any, the debtor will be required to pay to general unsecured creditors in his/her Chapter 13 plan.
Meeting of Creditors – Per 11 U.S.C. § 341, all debtors are required to appear at a “meeting of creditors” within a reasonable time after the filing of the bankruptcy case, generally within 25-40 days. At this meeting, the presiding Trustee will get a chance to review the debtor’s filed petition and other documents and ask him/her questions regarding finances and assets. The debtor is required to answer the Trustee’s questions under penalty of perjury. Even though the hearing is called a “meeting of creditors”, it is rare for creditors to actually show up.
Non-Dischargeable Debt – A non-dischargeable debt is one that cannot be eliminated through a bankruptcy proceeding. Some examples of non-dischargeable debts are child support, alimony, and certain taxes. To see a list of non-dischargeable debts, please refer to 11 U.S.C. § 523.
Petition – The Voluntary Petition is the initial filing in your bankruptcy case wherein you disclose personal information such as your name, address, chapter you are filing, etc.
Priority Debt – A priority debt is one that must be paid back during your Chapter 13 case. The most common example of a priority debt is your recent income tax obligations. If you file a Chapter 7 instead, the discharge order will not eliminate your personal obligation to pay back the priority debt.
Proof of Claim – A statement filed by the creditors in your bankruptcy case detailing out the debt that you owe them.
Reaffirmation Agreement – A reaffirmation agreement is an agreement between the debtor and a creditor in a Chapter 7 case wherein the debtor agrees to continue paying on a dischargeable debt. The most common situation where this would come up is with auto lenders for the purposes of the debtor being able to keep the vehicle and avoid a repossession.
Redemption – In a Chapter 7, you can also motion the Court to redeem your secured asset, which means you would be allowed to keep the asset by paying the creditor the replacement value of the vehicle in one lump sum.
Schedules – A bankruptcy filing consists of several documents being filed with the Court under penalty of perjury. The schedules are a portion of these required documents and consist of Schedule A/B (Property), Schedule C (Exemptions), Schedule D (Secured Creditors), Schedule E/F (Unsecured Creditors), Schedule G (Executory Contracts and Unexpired Leases), Schedule H (Co-Debtors), Schedule I (Income), and Schedule J (Expenses).
Secured Debt – A secured debt is a type of debt that holds a security interest in a particular asset to ensure the repayment of the loan. Common secured debts are home mortgages and auto loans but can also be used for furniture, jewelry, or electronic purchases.
Statement of Financial Affairs – Another required document in your bankruptcy filing, the Statement of Financial Affairs shows to the Court and creditors details of your financial situation for the past several years.
Trustee – Appointed by the United States Trustee, the specific Trustee appointed to your case is required to administer your bankruptcy proceeding. The Trustee will review your bankruptcy petition, schedules, and all other documents filed with the Court, review additional documents such as tax returns, bank statements, and paychecks, question you under oath at the meeting of creditors, and maximize the amount of money that the general unsecured creditors get in your case.
United States Trustee – The United States Trustee is a component of the Department of Justice and is responsible for overseeing the administration of your bankruptcy case. In most cases, the debtor does not have any interaction with the United States Trustee.