Filing for bankruptcy is a complicated process that can be especially overwhelming for first-time filers, as they will likely not be familiar with the unique terms that are associated with the process. If you are considering filing for bankruptcy, it will be extremely helpful for you to familiarize yourself with the following terms:
- Automatic stay: a court order to immediately prevent creditors from seizing a debtor’s assets, filing lawsuits against the debt, garnishing a debtor’s wages or otherwise taking collections actions against the debtor
- Bankruptcy estate: all assets or debts that a debtor has at the time (s)he files for bankruptcy. A bankruptcy estate includes any assets in which the debtor has interest, including assets that may be jointly owned or possessed by another person.
- Chapter 7 bankruptcy: This type of bankruptcy, which is also referred to as liquidation bankruptcy, involves a debtor having specific debts (for example, credit card debts, medical bills, etc.) discharged in exchange for selling off what assets the debtor has to pay off creditors to the extent possible. Some of the debtors assets will be exempt from liquidation, and bankruptcy lawyers can help advise debtors about what types of property will be exempt from the bankruptcy estate.
- Chapter 13 bankruptcy: This type of bankruptcy involves a scheduled repayment of a debtor’s debts over a 5 or 7 year period. Chapter 13 bankruptcy will be more appropriate for individuals who have a steady income.
- Discharge of debt: The process of a debtor being no longer being legally obligated to pay back certain debts in accordance with federal Bankruptcy Code. This means that creditors will no longer be able to pursue a debt that a debtor once owed.
- Exempt property: This refers to property that a debtor will be allowed to keep, specifically property that will not be liquidated to pay off creditors. Exempt property will have maximum amounts for which a debtor can claim that his home, car, clothing, jewelry, etc. should not be included in the bankruptcy estate.
- Joint bankruptcy petition: A single bankruptcy case that represents both a husband and a wife filing for bankruptcy.
- Liquidation: The process of selling off a debtor’s non-exempt property in order to pay off his creditors (to the extent possible).
For more information about bankruptcy, as well as expert advice regarding how to best handle your debts, consult our experienced bankruptcy lawyers.