Navigating any portion of the legal system can be very confusing to non-lawyers. Lawyers and judges and sometimes creditors become so accustomed to the legal language they use that they sometimes forget that many debtors do not often understand the terms they use. While there are many difficult legal terms in bankruptcy proceedings, some basic terms often used are explained below.
- 341 Meeting—A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, an examiner, or the U.S. Trustee about his or her financial affairs.
- Automatic Stay—An injunction that automatically stops lawsuits, foreclosure, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed.
- Bankruptcy Estate—All interests of the debtor in property at the time of the bankruptcy filing. The estate technically becomes the temporary legal owner of all of the debtor’s property.
- Bankruptcy Trustee – Appointed to manage, oversee, facilitate, or handle certain aspects of a bankruptcy. In a Chapter 7 bankruptcy, the trustee liquidates assets. In other types of bankruptcies, the trustee may hold a meeting with creditors to form a repayment plan or other structural change.
- Chapter 7, Chapter 11, and Chapter 13 – Chapters of the Bankruptcy Code under which a person or entity may file a petition for bankruptcy. Different chapters permit different debtors with an avenue to file for bankruptcy. Each chapter provides a different result. Chapter 7 eliminates all dischargeable debt. Chapter 11 allows entities to reorganize in order to repay debt. Chapter 13 allows individuals with sufficient income to repay debt over time.
- Creditor – A creditor is generally the person or entity who has loaned money to the debtor and now seeks repayment of that money.
- Debtor – The debtor is the person or entity that has borrowed money and is being asked to repay the money. This is the person who files a bankruptcy petition asking for relief from the repayment of debts.
- Discharge – The elimination of debt. Chapter 7 allows dischargeable debts to be eliminated. Dischargeable debts include debt to credit card companies.
- Exempt assets—Property that a debtor is allowed to retain, free from the claims of creditors who do not have liens on the property.
- Liquidation—A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.
- Nondischargeable Debt—A debt that cannot be eliminated in bankruptcy. Nondischargeable debt includes court orders to pay child support and debt to the Internal Revenue Service.
- Nonexempt Assets—Property of a debtor that can be liquidated to satisfy claims of creditors.
- Petition—The document that initiates the filing of a bankruptcy proceeding, setting forth basic information regarding the debtor, including name, address, chapter under which the case is filed, and estimated amount of assets and liabilities.
