Secured Debt: When you made a major purchase and are making payments to a creditor, you most likely signed a “security agreement.” After you file your Chapter 7, you may need to make arrangements to pay these creditors or to return the property. If the property has been lost, stolen, sold or given away, you must explain in details the events.
Unsecured Debt: This includes most credit cards, medical bills, bank charges, repossession or foreclosure balances, etc. Some creditors may exert a security interest if you have purchased large items with a credit card.
Priority Debt: These are unsecured debts that are generally not dischargeable. Priority debt includes wages, salaries and commissions you owe to employees, security deposits and rent deposits that you hold, and certain federal, state and local taxes and certain student loans.
Voluntary Petition: The first two pages of the document you file with the court. This is your request to the court for protection under the Bankruptcy Code.
Statement of Financial Affairs: The statements you provide to the court stating your income, your expenses, etc.
Schedules: These are the statements you provide to the court stating your debts.
Filing Fee: The fee the court charges to administer your bankruptcy which is paid by you at the time of filing. Fees vary from state to state, so you should call the Bankruptcy Court where you live to find out the exact amount.
Automatic Stay: The automatic stay is one of the most important features of modern bankruptcy law. Under 11 USC §362, essentially all attempts to collect debts owing on the date a petition is filed are automatically stayed. Creditors who persist in their efforts to collect debts after a petition is filed may be held in contempt. A creditor’s only recourse is to wait for the termination of the bankruptcy or seek relief from the automatic stay.
§341 Meeting of Creditors: This is a brief meeting with the Bankruptcy Trustee who has been assigned to your case. Your creditors are notified of the meeting and may come to the meting to ask questions of you or of the trustee. This is an opportunity for you to tell your creditors what you intend to do with secured property. §341 refers to the section of the U.S. Bankruptcy Code that requires that you meet with the trustee and any creditors who wish to question you.
Dischargeable Debt: Most debt is dischargeable in a Chapter 7 Bankruptcy. Exceptions include most federal, state and local taxes due, wages and/or benefits owed to employees, most student loans, some taxes child support, alimony/maintenance, fines and court costs for criminal convictions, etc.
Surrender: Property that you own and owe money on which you will give back to the creditor in exchange for having the debt discharged. An example would be a car or other vehicle, which you give back, but there is still a balance due. The balance then becomes an unsecured debt and is dischargeable.
Reaffirmation: If you have property or a credit card that you want to keep, you can reaffirm the debt with the creditor, i.e. you agree to pay off the balance in return for keeping the account.
Dismissal: The court may dismiss your case and you lose all protection from your creditors. The court may dismiss your case if you fail to attend the §341 meeting, if you have given false or incomplete information on your paperwork, or if you fail to provide the documents that the Bankruptcy Trustee requests. Your case can be Voluntarily Dismissed by you if your circumstances change.
Discharge: This is the final step, where the court finalizes your bankruptcy, your debts are discharged and you’re ready to begin your Fresh Start.
Disposable Income: Income received by the debtor and spouse that is not reasonably necessary for the support of the debtor, debtor’s spouse and the debtor’s dependents.
Lien Avoidance: Creditors who have a valid lien on estate property are holders of secured claims who must be satisfied up front and do not share pro rata with other creditors. The debtor’s ability to avoid a lien is when the lien is a judicial lien or a nonpossessory, nonpurchase money security interest of a specified type impairs an exemption. The trustee may under certain circumstances be able to avoid a lien. See BRA §522(f). A proceeding by a debtor to avoid a lien under section 522(f) requires a court to determine, but is done on motion and does not require a full-blown adversarial action. BR 4003(d).
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