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Glossary/Dictionary

341 meeting - See First Meeting of Creditors

Adequate protection - The right of a person/business who loaned money to buy a particular item to be assured that the person's rights to that property will not be reduced during the bankruptcy proceedings.

Arrears - The amount that is unpaid and overdue as of the date the bankruptcy case is filed.The word "arrears" is usually used when referring to the amount that is past due on mortgage payments, child support, taxes, etc. (including interest and penalties).

Asset - Your personal possessions that have value, including cash, real estate, household possessions, vehicles and investments (including retirement accounts).

Automatic Stay - A court order, issued by the bankruptcy court when the case is filed that stops all actions, such as debt collection, suits or foreclosure. The stay happens automatically. This action protects the debtor from creditors who are trying to seize assets.

Bankruptcy - A federal court action that helps people (consumers) and companies get rid of debt and/or repay creditors. Chapter 7 and Chapter 13 are the most common for people and Chapter 11 is the most common for companies.

Bankruptcy Court - The federal court where Bankruptcy cases are heard.

Bankruptcy estate - Generally, all property that the debtor owns or has the right to when the case is filed. All of a debtor's property is under the jurisdiction (control) of the bankruptcy court until the case is over.

Bankruptcy judge - The federal judge who is responsible only for bankruptcy cases.

Bankruptcy petition - The formal document filed with the court that begins a bankruptcy proceeding.

Bar date - The last date that creditors may file a claim against the debtor.

Collateral - Something promised as security for repayment of a loan; it can be a vehicle, appliances, furniture, boat, jewelry, etc.

Chapter 7 - The most common bankruptcy for people, it is also called a "liquidation bankruptcy." If a person has property that is not exempt, the trustee has the right (and obligation) to sell that property and use the money to pay off creditors; or the person can give the trustee the value of that property. Most Chapter 7 bankruptcies in Texas do not require the person to liquefy any assets. A Chapter 7 is discharged about 90 days after the day the case is filed.

Chapter 13 - Also called a "reorganization," this bankruptcy reorganized an person's debt. The person pays the Chapter 13 trustee a court ordered amount monthly (wages are almost always garnished); the trustee then pays the creditors the amount the court ordered paid to them. A Chapter 13 usually lasts about 60 months (five years) but it can be shorter depending on the circumstances. When the court ordered time is up, whatever unsecured debt not paid by the trustee is discharged.

Claims - Proof of a creditor's right to repayment by a debtor. Claims are rarely filed in a Chapter 7, because most cases are "no-asset" cases. If the creditor wants to be paid, a claim must be filed in a Chapter 13.

Collateral - The property which is subject to a claim or a lien by a creditor (a vehicle, home furnishings, etc.). A creditor who has rights in collateral is a "secured creditor" and has the protection of bankruptcy law for that creditor's claim.

Confirmation - In a Chapter 13, a court order issued by the bankruptcy court that approves the debtor's "plan of reorganization." Confirmation takes place if there are no objections by the trustee or the creditors.

Conversion - A debtor's changing chapters in bankruptcy (e.g., converting from Chapter 13 to Chapter 7 or vice-versa). This usually happens when the debtor is unable to fund or complete the Chapter 13 "plan of reorganization."

Cram-down - In Chapter 13, a cram-down changes the claim a creditor has on a secured item, usually a vehicle, to pay less than what is actually owed on the vehicle. If the amount owed on the loan is more than what the vehicle is worth, a debtor may be able to reduce the amount owed from the loan amount to the actual value of the vehicle. It depends on how long the debtor has had the loan on the vehicle.

Credit Report - The report that gives a person's credit history, public records, etc. It is used by creditors to determine a person's credit worthiness and by bankruptcy attorneys to find out what creditors are claiming a person owes them money. Not all debt is on a credit report.

Creditor - The person/company/organization to whom the debtor owes money or some other form of legal obligation.

Debtor - The person (in a Chapter 7 or 13) or entity (Chapter 11) who is asking the court for protection from creditors under the bankruptcy laws.

Debtor-in-Possession - In a Chapter 11, the person or entity (debtor) who keeps control of property or business operations (as opposed to having a trustee operate the business).

Default - A person's failure to do some specific thing or fulfill an obligation, especially failure to meet a financial obligation. The most common default is non-payment of a debt.

Delinquency - A person's failure to make payments when payments are due. For example: most mortgage payments are due on the first day of the month. Even though a late-fee may not charged for a number of days, the payment is still considered to be late if it is not paid on the first. Consistent late payment will result in the company reporting the payments as delinquent to the credit reporting agencies/bureaus.

Discharge (of indebtedness) - A bankruptcy court order that declares the person's debts to be eliminated. They are not forgiven, they are not charged off; they are discharged (A person does NOT pay income taxes on discharged debt!)

Dischargeable Debts - Debts that can be eliminated in bankruptcy (credit cards, pay day and other personal loans, medical bills, etc.). Certain debts are not dischargeable, for example: student loans, past due child support, some taxes, criminal restitution or fines, etc.

Disclosure - The act of truthfully revealing all appropriate information concerning a person's or company's possessions, debts, etc. For instance, when a bankruptcy petition is filed, the person swears that everything they own and everyone they owe is disclosed to the court.

Equity - A person's financial interest in either real estate or personal property (like a car or camper). Equity is the difference between the value of the property and the amount still owed on a mortgage and/or other liens.

Exempt - Property that is protected from a person's creditors by either state or federal law exempt. Exempt property is not available to pay the claims of creditors. The debtor and his/her attorney select the property to be exempted under the laws of that state. The debtor gets to keep exempt property to help him/her make a fresh start after bankruptcy.

Exemptions - Exemptions are specific laws applied to the kinds and values of property that makes the property unavailable to the person's creditors. The kind and amount of property that may be exempted is determined by state and federal statutes, and varies from state to state. Texas has some of the best exemptions available in the country!

First Meeting of Creditors-341 Meeting - A formal, sworn meeting conducted in a bankruptcy case usually scheduled 30 to 40 days after filing for bankruptcy. The meeting is conducted by the case trustee with the debtor and debtor's attorney present. Any creditor may attend, but they rarely do. It is mandatory that all debtors, both husband and wife in joint filings, attend the 341 Meeting. The purpose of the meeting is to examine the paperwork filed in the case to ensure that it is accurate and to see if there is any non-exempt property available for creditors. Despite its name, there is usually only one meeting, especially in a Chapter 7 case.

Lien - A legal interest in real or personal property which secures or protects a debt; the lien may be voluntary, such as a mortgage in real property; or involuntary, such as a judgment lien or tax lien.

Liquidate - To pay off a debt by converting (changing) property to cash by selling it. Or, for a business, to sell all of the company's assets to pay off debt, distribute any remaining money to owners/shareholders and go out of business.

Matrix - A mailing list of the debtor's creditors.

No Asset Case - A Chapter 7 case where there are no assets available that could be sold (liquidated) to satisfy any portion of the creditor's unsecured claims.

Non-dischargeable - A debt that, by law, cannot be eliminated in bankruptcy, such as student loans, child support and some taxes.

Non-Exempt property - Property owned by a debtor that has no law to protect it from creditors. Property that cannot be exempted is sold (liquidated) to satisfy any portion of the creditor's unsecured claims.

Personal Property - Any property that is not real estate (land) or that is attached to real property (house, barn, etc.). Personal property includes household goods and furniture, clothing, jewelry, cars, bank and stock accounts, etc.

Petition (or "Bankruptcy Petition" or "Petition for Relief from Creditors) - The formal document filed in the bankruptcy court that begins a bankruptcy.

Preference - A payment made to a creditor during a specific time period (90 days to one year) before a bankruptcy case is filed that favors one creditor over others. The case trustee can usually recover preference payments and return the funds to the debtor's estate.

Pre-petition - Occurring before the filing of a bankruptcy petition.

Priority Debt - Debts that are unsecured but, by law, are more important than other unsecured debt. Priority debts include alimony and child support, wages owed to employees, income taxes, etc. A priority debt is paid first if any creditors are paid in a Chapter 7 bankruptcy case, and must be paid in full in a Chapter 13 bankruptcy case.

Proof of claim - A form filed by a creditor setting out its claims against a debtor.

Property of the Estate - Everything a person owns when a bankruptcy case is filed. EVERYTHING: it doesn't matter if property has a lien (house or car) or is in someone else's possession. If a debtor owns it or has ANY legal right in it, it is disclosed as property of the estate

Reaffirmation Agreement - An agreement between a debtor and a creditor that keeps that particular debt alive after the bankruptcy, it is not discharged in the bankruptcy. This usually applies to secured debt on vehicles, furniture, appliances, etc. The agreement is filed with the court and will be ordered by the court. A reaffirmation agreement is a very serious matter because once the bankruptcy is over, the debtor has to pay the debt even if something happens and the debtor no longer has the item or the item becomes useless. Also, the debtor is obligated to pay the debt and the creditor can sue or repossess if the debtor doesn't pay.

Relief from Stay - A creditor can ask the court to lift the Automatic Stay and all the creditor to take some action against the debtor or the property of the estate. If the motion is granted, only the moving party is allowed to take whatever action the court permits. Relief can be absolute, for example, permitting the creditor to foreclose on property.

Repossession - If a person is in default of a loan/note, the creditor can repossess the item (Collateral) and dispose of it by public or private foreclosure sale or just keep the item in satisfaction of the debt.

Schedules - The mandatory lists of a debtor's assets and liabilities required to be filed with the bankruptcy court to commence a bankruptcy case.

Secured Creditor - A creditor that has a lien/legal claim on the debtor's property.

Secured Debt/Secured Interest - Debt owed to a secured creditor. Secured interest is a legal claim on collateral that was agreed to by the debtor, usually to get a loan.

Set-off - A creditor's ability to pay off or reduce a debt owed to it by taking some of the debtor's property and applying it to the debt. For example, a bank may attempt to satisfy some or all of a delinquent loan by taking the debtor's deposits at the bank.

Trustee - A person appointed by the court to manage the debtor's property for the benefit of the creditors. Also known as the case trustee, this is the person who conducts the 341 Meeting/First Meeting of Creditors.

United States Trustee - A person appointed by the U.S. Department of Justice to oversee all bankruptcy cases. The U.S. Trustee's duties include scrutinizing bankruptcy documents filed in a Chapter 7 case.

Unsecured Creditor - A creditor who has no lien on the debtor's property.

Unsecured Debt - A debt that has no collateral as security for the debt. Other than debt for a house or vehicle, most other consumer debt is unsecured. For example: credit card debt, medical bills, pay day loans and signature loans, student loans, etc.

 

Contact Linda Rushing - Central Texas Bankruptcy Attorney

For additional help with Chapter 7 bankruptcy turn to Austin bankruptcy lawyer, M. Linda Rushing, PC. Call today or contact us online to schedule a free initial consultation. To make the process easy and accessible for all, payment plans are available.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

 


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