The ABC’s of Bankruptcy
Automatic stay – a court injunction that stops all collection action against the debtor. The automatic stay is effective immediately upon filing the bankruptcy
Bankruptcy estate – the debtor’s legal and equitable interest in property at the time the bankruptcy case is filed
Chapter – a section of the bankruptcy code. Some chapters are general and apply to all cases; other chapters apply only to specific bankruptcy cases.
Debtor – an individual who files a bankruptcy petition
Discharge – a court permanent injunction prohibiting the collection action against the debtor personally for any debt discharged in the bankruptcy
Equity – the value of a debtor’s interest in property after subtracting monetary liens
Exemptions – legal protections that shields property from creditor collection
Means test – a calculation of the debtor’s income and expenses meant to determine the debtor’s ability to pay creditors
No-asset case – a Chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims
Nondischargeable debt – a debt that cannot be absolved through bankruptcy and the debtor remains personally liable after the bankruptcy case has closed.
Petition – the papers filed by the debtor that commences the bankruptcy.
Plan – the debtor’s description of repayment of debt during a Chapter 13 bankruptcy
Preference – a debt that was paid prior to the bankruptcy when the debtor was insolvent and unable to pay other creditors
Proof of claim – the creditor’s claim and verification of a debt
Reaffirmation agreement – an agreement between the debtor and creditor that entitles the debtor to retain property in exchange for continued personal liability to pay a debt (common examples are a car or house loan)
Schedules – the detailed description of the property, debts, income and expenses of the debtor
Secured creditor – a creditor holding a lien against property of the debtor’s as security for payment of a debt
341 meeting – a mandatory meeting that the debtor must attend with the trustee. The debtor’s creditors are invited to the 341 meeting and are allowed to ask questions.
Trustee – an individual appointed to oversee the debtor’s bankruptcy case. This is not the bankruptcy judge.