Terms You Need to Know Concerning Bankruptcy

Creditor — This is the person or company you owe money to because they extended credit to you.

Debtor — This is YOU. You owe debts, so you are a debtor.

Secured Debt — This is a debt you owe for an item that could be taken away from you if you don’t pay the bill. For instance, if you don’t make your house payment, the creditor (or bank) you owe can repossess your house.

Unsecured Debt — This is a debt you owe for something that cannot be taken from you. For instance, anything you charge on a credit card is an “unsecured debt.” If you don’t pay the MasterCard bill this month, they cannot come and take whatever you bought with the credit card. All they can do is harass you on the telephone until you pay the bill, turn the bill over to a collection agency, or attempt to get a judgement against you (depending on the amount you owe them.)

Asset — This is something you own that has resale value. Your car, TV set, computer, stocks, bonds, bank accounts, piggy bank, clothes, bed, etc. are all things that have some type of value that could be turned into cash. These types of things are your assets.

Discharge — This is what happens when your debts are erased and you have completed your bankruptcy.

Exemption — There are exemption allowances allowed by the Bankruptcy Court to protect the assets you own that you need to keep in order to live a normal life. For instance, you need a house to live in, a car to drive, transportation to maintain the car, clothes to wear, medicine refills, personal care items, etc. The law allows you to keep these types of items by allowing you exemptions on them. When anything you own is totally exempt from the bankruptcy, no one can take it away from you.

Automatic Stay — The moment a bankruptcy is filed, all creditor activity to collect debts, obtain judgments, or obtain property of a debtor to satisfy adebt is completed stopped. This is the protection provided to you as a consumer under the Bankruptcy law in the United States.

Relief From Stay — This is a court order, requested by a creditor, who asks the court to lift the Automatic Stay that was immediately put in place when the debtor filed the bankruptcy petition. If a creditor is granted a Relief from Stay, the debtor will receive notice from the court of its existence and the bankruptcy attorney can prepare a Motion on the debtor’s behalf to request the court to remove the Relief from Stay. (Of course, there must be a lawful reason to do so.)

Reaffirmation Agreement — This is what you file with the court if you decide to pay a creditor outside your bankruptcy. For example, you may want to reaffirm with Bob’s Auto Sales when you file your Chapter 7 bankruptcy petition, because you want to keep making payments on your car since you need it to get back and forth from work.

Trustee — This is a real “live” person that works for the Bankruptcy Court who normally oversees the entire process from beginning to end concerning your bankruptcy.

Conversion — This is when you start out by filing one chapter of bankruptcy and decide later to file another chapter. For example, you originally file a Chapter 7 but decide to convert to a Chapter 13.

Dismissal — Among other things, your bankruptcy case can be dismissed at any time if you fail to comply to any rules, don’t turn over asset monies that are requested by the Trustee or if you convert from one Chapter of bankruptcy to another. Your case is “discharged” if you completely pay off your Chapter 13 or when your Chapter 7 is legally finished.