You can't really fix a car if you don't know the names or functions of most of the pieces. A cake won't turn out great if you aren't familiar with the ingredients or instructions. The same can be said of really any important or detail-intensive task in life, and bankruptcy is no exception.
If you want your bankruptcy filing to be successful, you're going to want to know some of the basic and common glossary terms and definitions. At Jackson & Oglesby Law LLC, our Muncie bankruptcy lawyers always want to do what we can to make bankruptcy easier for our clients, so we have set up a quick list of bankruptcy terms you should know. Consult it for a fast reference, or feel free to call us at 888.713.5148 or contact us online for any questions or concerns.
Common Bankruptcy Terms You Should Know
- Automatic stay: The initial draw to bankruptcy for many filers, an automatic stay is a court order that prevents creditors from harassing their debtors for money owed, or for using garnishments, until your bankruptcy concludes. As the name implies, it is created the moment your bankruptcy filing is submitted, even if your bankruptcy is eventually declined.
- Chapter 7: The most frequently-used bankruptcy type for people with unpayable debt, Chapter 7 is sometimes called liquidation bankruptcy because it seeks to eliminate all debts entirely, with the possibility of exchanging collateral property, like a home or automobile.
- Chapter 13:For people with overwhelming but manageable debt, Chapter 13 bankruptcy reduces, not eliminates, most of your debt and restructures that new amount into a 3- or 5-year payback plan; this process generally lets people hold onto most or all of their personal property.
- Discharge: Bankruptcy's end goal is discharging debt, or the legal term for releasing a debtor for their liability to pay back a debt amount to a lender or creditor.
- Exemptions: Each state has a list of items or assets that a bankruptcy filer can consider an exemption, which is something that cannot be collected by creditors, no matter how much debt they are owed. If given the choice, most people will want to make their household an exempt piece of property first.
- Lien: The ability to acquire a piece of property from a debtor and sell it again. Liens are granted to banks and creditors by bankruptcy courts, usually, after the massive debt has been discharged through Chapter 7 filings.
- Means test: Before a person can use Chapter 7 bankruptcy, they must pass the means test, which is a comparison of their average monthly income and total debt compared to the average monthly income and total debt of the average household in their state. Making more than the typical household, or having comparatively small debt, may make someone fail the means test.
- Priority: Creditors and lenders owed money by a debtor will be arranged by the bankruptcy court into priority. The party with the highest priority will have their debts repaid through the allotted means first, then the second party, and so on.
- Statement of intention: If you are considering filing for Chapter 7 bankruptcy, you need to make a statement of intention to let creditors know that you will attempt to discharge your secured consumer debts.
- 341 meeting: Sometimes called a meeting of creditors, the 341 meeting involves the debtor, creditors, a trustee, and any legal representatives gathering together to talk about why the debtor has the right to discharge particular debts.
Remember: for any additional questions or concerns, contact our Muncie bankruptcy attorneys today.