Bankruptcy is a commonly discussed subject that impacts the lives of many people and businesses every year. During the bankruptcy process, you are likely to hear a handful of words and terms you in which you may not be familiar. The legal world comes with its own language and jargon that can be intimidating and confusing.
Continue scrolling to learn some of the most common and important terms about bankruptcy.
341 Meeting — A meeting where the debtor is questioned under oath by creditors, a trustee, examiner, or a U.S. trustee about their finances.
Bankruptcy Trustee — This is an individual apportioned by the court to act on behalf of creditors. In Chapter 7 filings, this person reviews the debtor’s petition, conducts liquidation, and distributes earnings to creditors. In chapter 13 filings, this person oversees the debtor’s repayment plan, receives money from a debtor, and then distributes money to creditors.
Claim — A creditor’s assertion of their right to payment from a debtor or their property.
Credit Counseling — Before you can file for bankruptcy, you must meet with a non-profit budget and credit counseling agency. After you file, you will complete a perianal financial management course before bankruptcy can be discharged.
Discharge — A release of a debtor from liability for dischargeable debts.
Exempt Property — Property or equity in property that a debtor is allowed to keep.
Lien —A charge on specific property designed to secure payment of debts or performance of an obligation.
Liquidation — A sale of a debtor’s non-exempt property where the proceeds are used to repay creditors.
Means Test — The calculation used to determine whether a person has the means or not to repay their debts in Chapter 7 bankruptcy. If the test is failed, the case may either be dismissed or turned into a Chapter 13 filing.
Non-Dischargeable Debt — Debts that cannot be eliminated in bankruptcy.
Priority Claim — An unsecured claim that is entitled to be paid before other unsecured claims are paid that are not given priority status.
Proof of Claim — A written declaration describing the reason a debtor owes a creditor.
Reaffirmation Agreement — An agreement made by a debtor who has child Chapter 7 bankruptcy to continue paying dischargeable debts after bankruptcy so that the debtor can keep assets instead of having them repossessed.
Secured Debt — Debt that is back by mortgages, a pledge of collateral, or another lien.
Statement of Financial Affairs — A series of questions a debtor is required to answer in writing regarding income sources, property transfers, lawsuits by creditors, etc.
Undersecured Claim — A debt secured by property that is worth less than the amount of debt.
Contact The Law Offices of Charles W. Daff
Understanding these words is beneficial when going through the bankruptcy process. However, knowing these terms is likely not enough to handle filing bankruptcy alone. If you are facing bankruptcy, hiring a knowledgeable and experienced attorney will help you throughout this complicated process. If you are in the Santa Ana area and need legal representation, call The Law Offices of Charles W. Daff to schedule your free initial consultation today.