Bankruptcy Terminology Glossary
Considering filing for bankruptcy in or around St. Peters? The legal team at Adams Law Group is here to help.
Understanding Common Bankruptcy Terms
Bankruptcy law can be complex, and much of this is due to the number of legal terms that you will hear used throughout the process. While many of us can understand terms like “debtor” and “discharge”, many times when these and other terms are put together in a long document detailing legal formalities, it can become complicated quickly.
Below, you’ll find a list of some of the most commonly used legal terms that you’ll likely hear throughout the bankruptcy process. We hope this will help you with understanding some of the legal jargon.
If you need further help with understanding anything bankruptcy related or filing for Chapter 7 or Chapter 13 bankruptcy, the St. Peters attorneys at Adams Law Group are here to help. Reach out to us today and we’ll get you started with a free consultation.
Bankruptcy Terms: A-E
Adversary proceeding – A lawsuit filed in bankruptcy court that is directly related to the debtor’s bankruptcy case. It is started by a complaint being filed with the court such as a complaint to determine the dischargeability of a debt or a complaint to determine the validity of a lien.
Assets – Property owned by the debtor. Some examples include stock options, homes, vehicles, etc.
Automatic stay – An injunction issued by the bankruptcy court prohibiting collection activity including lawsuits, foreclosures, and garnishments.
Ballot Date – In a Chapter 13 bankruptcy, the ballot date is the deadline for accepting votes on a reorganization plan.
Bankruptcy – The name of the legal procedure for addressing debt problems of both individuals and businesses.
Chapter 7 – Also known as liquidation bankruptcy, Chapter 7 is the most common form of bankruptcy filed. It allows individuals to liquidate assets to pay off creditors and discharges some unsecured debt to afford them a fresh start.
Chapter 13 – This chapter of bankruptcy allows the debtor to pay off their debt through a repayment plan that lasts from three to five years.
Claim – A creditors declaration of the right to payment for debts from the debtor.
Consumer bankruptcy – Bankruptcy proceedings for an individual.
Consumer debt – Debts that have been incurred on the individual level as opposed to debts occurred for a business.
Creditor – The individual, institution, company, or other entity that the debtor owes money to.
Debtor – The person who has filed bankruptcy and owes money to creditors.
Discharge – The act of releasing the debtor from certain debts.
Dischargeable debt – Any debt that the bankruptcy court will allow the elimination of the debtor's liability.
Equity – The value that remains of the debtor’s interest in property after any liens and interests have been considered.
Exempt – Describes property that cannot be collected by creditors.
Bankruptcy Terms: F-J
Foreclosure – The forced sale of real estate property that the debtor has failed to make payments on.
Garnishment – The collection of a percentage of the debtor’s paycheck by a court order to pay off a specific debt.
Grace period – A period where a debtor does not have to make payments on a specified debt.
Insider – When used in consumer bankruptcy, this describes anyone the debtor is related to, any partners, or any corporation in which the debtor is considered a person-in-control. Others can be considered insiders as well depending on the individual case details.
Joint administration – A court approved mechanism in which two cases can be administered together as long as there are no conflicts of interest. This allows the two parties to share resources.
Joint petition – A bankruptcy petition that is filed by a husband and wife together.
Bankruptcy Terms: K-O
Lien – A charge upon property that is designed to secure the payment of a debt. The creditor may have the right to take, hold, or sell the property to secure payment.
Liquidation – The sale of the debtor’s property where the proceeds are used to pay debt owed to creditors.
Liquidation claim – A creditor’s right or demand to receive a specified amount of money for a debt.
Means test – This test is conducted for Chapter 7 bankruptcies to determine if the debtor has the ability to pay back some or all of their debt. In order to file a Chapter 7 bankruptcy, an individual must pass their state’s means test.
Meeting of creditors – Also sometimes referred to as the 341 meeting. During this meeting, the bankruptcy trustee who has been appointed by the court will question the debtor under oath about their debt, income, and other pertinent information. Although it is called the Meeting of Creditors, the creditors rarely attend.
Nondischargeable debt – Debts that cannot be discharged through a bankruptcy filing. Some dischargeable debts include mortgages, child support, and alimony, among others.
Objection to discharge – The objection of the debtor being released from liability from specified discharged debts by the creditors or trustee.
Objection to exemptions – An objection from a trustee or creditor in regards to the attempt of the debtor to claim certain property as exempt.
Bankruptcy Terms: P-T
Petition – The document that is filed by the debtor or creditor that opens the bankruptcy case.
Priority claim – Certain debts are given priority status over others. A priority claim is an unsecured debt that will be paid back before any other unsecured debt is paid. Examples may include alimony or child support.
Proof of claim – An official statement filed by the creditor verifying a debt that is owed to them by the debtor.
Schedules – Documentation submitted by the debtor, usually along with their initial petition. It lists the debtor’s liabilities, assets, and other financial information.
Secured debt – A debt where a creditor has a lien and can collect certain property if the debt is not paid. Examples include a mortgage for a home, a loan for an automobile, or a tax lien.
Trustee – Appointed by the bankruptcy court in every Chapter 7 and Chapter 13 bankruptcy, the trustee’s duty is to review the debtor’s schedules, conduct the 341 meeting, and represent the creditors in the bankruptcy case.
Bankruptcy Terms: U-Z
Undersecured claim – A debt secured by property where the property is worth less than the debt.
Unscheduled debt – A debt that should be listed on the debtor’s schedules but is not.
Unsecured debt – Debt without collateral. With unsecured debt, the creditor does not have the right to collect property or other assets as payment for the debt. Examples may include personal loans, medical bills, or credit card balances.
341 Meeting – Also known as the Meeting of Creditors, this is the meeting where the bankruptcy trustee questions the debtor under oath about their liability, property, income, and other financial information. The trustee represents the creditors as the creditors are invited but rarely attend.
In Need of Assistance With a Bankruptcy Case?
At Adams Law Group, we are dedicated to helping our clients find a fresh start through bankruptcy. We believe that everyone deserves the freedom to move forward without fear of their past holding them back. Reach out to the team of St. Peters bankruptcy lawyers at Adams Law Group today to learn more.