An individual can become confused by certain terms used during a bankruptcy case. Today's article will help explain some of these terms in plain language:
Bankruptcy Estate - consists of all of the debtor's legal or equitable interests in property at the time the bankruptcy case is filed.
Discharge -this is what you are shooting for.
This document is issued by the bankruptcy clerk at the end of your bankruptcy case and legally relieves you of your responsibility to pay the debts that were discharged. Your attorney will tell you which debts will be discharged in your bankruptcy.
Means Test -a calculation of the debtor's income and expenses to determine the ability to pay creditors. A debtor who "fails" the Means Test is presumptively disqualified from filing a
Chapter 7 bankruptcy case and may file either under
Chapter 13 or 11. Very often, passing the Means Test is a matter of a few simple adjustments.
No-Asset Case - a Chapter 7 case where there are no assets or funds to pay unsecured creditors. The vast majority of Chapter 7s are no-asset cases.
Nondischargeable Debt - a debt that is not included in the bankruptcy discharge, usually a type of debt identified by law (e.g. child support, certain taxes, student loans, etc.)
Petition -refers to the papers filed with the court that commences the bankruptcy case. The date the bankruptcy was filed is often called the
Petition Date.
Pre-Petition / Post-Petition - identifies the time of a bankruptcy-related activity. For instance, a debt that was incurred prior to the bankruptcy filing date is a "pre-petition" debt. Income earned after the date of the bankruptcy filing is called "post-petition" income.
Preference -a debt that was paid prior to the bankruptcy when the debtor was insolvent and unable to pay other creditors. Preference payments should be avoided. Discuss any pre-bankruptcy payments with your attorney.
Proof of claim - the creditor's claim and verification of a debt filed during a Chapter 11, 13, or Chapter 7 asset case.
Secured Debt - a debt backed (protected) by collateral. If the debt is not paid, the creditor may be able to repossess or foreclose against the collateral. For instance, a car loan may pledge the car as collateral for the loan. If the borrower fails to make the payments, the lender can repossess the car. Common secured debts are auto loans, mortgages, and personal loans secured by household items.
Trustee - the individual assigned to administer the bankruptcy case. Usually an accountant or attorney, the trustee is not the bankruptcy judge.
Unsecured Debt - an unsecured debt is not secured by property. A signature loan, most credit cards, and medical bills are common types of unsecured debts.
Should you have any questions concerning bankruptcy, contact the experienced Chicago Bankruptcy Attorneys at Glanzer & Associates, P.C. at 1-312-644-2227 to discuss your specific situation, and to schedule your free, in-person consultation.