One of the most challenging things about filing for bankruptcy is understanding the language associated with it. It’s hard enough dealing with financial stress and having to make such an important decision about your financial future but to have to do so without knowing the vernacular is downright intimidating.
Luckily, working with a bankruptcy lawyer ensures things will go smoothly even if you aren’t always sure exactly what a word or phrase means. But it’s also important to get a handle on the terms associated with bankruptcy. The more you understand the better you’ll feel about filing.
What are some of the most common terms associated with filing for bankruptcy?
You’ll likely hear your bankruptcy referred to in terms of its chapter. The majority of consumers file for either Chapter 7 or Chapter 13, but there are other Chapters available. The term chapter is used to describe the bankruptcy category.
The bankruptcy means test is less of a test and more of a way to determine whether you qualify for bankruptcy and if so, which chapter is most appropriate based on your debts, assets, and income.
Your bankruptcy petition is the initial paperwork that is filed with the bankruptcy court. Petition is a commonly used legal term and in bankruptcy, it alerts the court to your desire to proceed with the bankruptcy process and it invokes the automatic stay.
The automatic stay is one of the greatest benefits of filing for bankruptcy. Officially, it’s an injunction against your creditors that restricts their ability to collect the money you owe them. The automatic stay stops creditors from contacting you and from moving forward with any attempts to collect, including foreclosure proceedings.
This is the paperwork filed with the court in addition to the petition. Bankruptcy schedules include your financial information.
The bankruptcy trustee is the person who oversees the repayment of your creditors through the liquidation of your assets. Essentially, this person is the legal representative of your creditors.
For more information about the role of the trustee, check out this information from The Balance.
Possibly the most significant benefit of bankruptcy. It occurs when the court releases you of your obligation to repay the debts you owe.
Non-dischargeable is a type of debt that does not qualify for the benefit of being discharged when you file for bankruptcy. Back alimony and child support payments, many student loan debts, and current tax debts fall into this category.
Reaffirming a debt is a process that waives the discharge on a debt per the bankruptcy court and alters your obligation to pay the debt despite your bankruptcy.
Sometimes called the Meeting of Creditors or 341 Meeting of Creditors, the 341 Meeting is an opportunity for your creditors to dispute your bankruptcy request. The gathering includes you, your bankruptcy lawyer, the trustee, and your creditors.
These terms include those most commonly heard in bankruptcy, but all cases are different and you might come across terms not included on this list. Don’t be afraid to ask your lawyer to explain a word or phrase to you. Very few people begin the bankruptcy process understanding all of the terms associated with filing and the best bankruptcy lawyers are happy to take the time to explain how the process works and what things mean.