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Bankruptcy Information

The process of Bankruptcy may at first seem complex and overwhelming. There are many terms like: stay of execution, Chapter 7, chapter 13. The bankruptcy process is at first intimidating. With a little understanding some of the terms that are used in bankruptcy, you will find that the Bankruptcy court is there to help and protect you. There are no executions.

Assets - Anything owned by the debtor. This includes tangible and intangible property such as: real estate, stocks, bonds, cash, jewelry,: business reputation, the right to file a lawsuit against someone, the right to receive a tax refund, etc. . To file a bankruptcy, you must compile a list of all of your assets, and provide them to your attorney.

Bankruptcy - The legal process where a business, entity or individual declares it's inability to pay all debts in a timely matter. Bankruptcy is part of Federal law (Title 11 of the United States Code). Bankruptcy Law takes precedence over, or supersedes any state, or local laws.

There are four types of bankruptcy filings, they are named after the chapter of the federal Bankruptcy Code that defines them. They are: Chapter 7, Chapter 11, Chapter 12, and Chapter 13.

Chapter 7 - This form of bankruptcy is available to individuals, or businesses, statistically it is type of bankruptcy that is most often filed. It is also called Liquidation. Essentially, this type of bankruptcy involves listing all of the bankrupt entity's assets, and all of their debts. For most people filing chapter 7, most assets are Exempt. If there are Non- Exempt assets, this property is are liquidated to pay the creditors on a pro rata basis. Most of an individual's property is considered exempt and is not liquidated. Even real estate with little or no equity may be exempt from liquidation.

Chapter 11 - This form of bankruptcy is available to businesses, or corporations. This is referred to as a reorganization bankruptcy. The business continues to operate under the watchful eye of the Court. The Bankruptcy provides protection from the collection efforts of creditors so that the business may get back on it's feet and pay creditors a percentage of all debts, if that is all the business can afford to pay. Unsecured creditors may receive less than secured creditors.

Chapter 12 - This form of bankruptcy is available to family farms. This is referred to as a reorganization bankruptcy. The family farm continues to operate under the watchful eye of the Court. The Bankruptcy provides protection from the collection efforts of creditors so that the farm owners can get back on their feet and pay creditors a percentage of all debts, if that is all they can afford to pay. Unsecured creditors may receive less than secured creditors.

Chapter 13 - This form of bankruptcy is available to individuals, married couples, and families. This is referred to as a reorganization bankruptcy. The individual or couple must have an income, which may include disability, workers compensation, social security payments. The Bankruptcy provides relief from creditors so that the individual or family can get back on it's feet and pay creditor's percentage of all debts. Unsecured creditors may receive less from the bankruptcy court than secured creditors. In a Chapter 13 the family pays monthly, as much as it can afford, and pays off only as much debt as they can afford to pay.

Charged Off - This means that the creditor has written the debt off on their taxes as a business loss. You still owe the creditor the debt. This is the worst rating a creditor can give you on your credit report.

Collateral - An item or property that is security for a debt. This property may have a perfected lien encumbering transfer of the property. . In bankruptcy proceedings, a creditor that holds a lien on property has more rights than a creditor that does not. If the debtor wants to keep the property, usually he must pay the entire debt associated with it.

Confirmed - When a reorganization plan in a chapter 11, 12, or 13 is approved by the court and it is binding on all parties, the reorganization plan is said to be "confirmed"

Conversion - A bankruptcy may be filed under one chapter and then changed or converted to a filing under a different bankruptcy chapter.

Creditor - The person or entity to whom the debt is owed. To file a bankruptcy, you must compile a list of all of your creditors, and how much you owe each one. You will have to provide your attorney this information.

Debtor - The person or entity that owes the money to the creditor. This is usually the one that filed the bankruptcy.

Discharged - A debt that is discharged in bankruptcy can not be collected or legally enforced unless there is an existing lien.

Exempt - The debtor gets to keep all of his exempt assets. Exempt assets are not subject to liquidation and used to pay creditors. Bankruptcy exemptions vary from state to state.

Lien - A claim on real or tangible property that secures a debt

Means Test – Debtors may not have the opportunity to file a Chapter 7 bankruptcy if the family income exceed the median income in the state of residence. The median income is the midpoint of all families of a similar size. If your family income is higher than half of the families in the state you may be forced to file a Chapter 13 reorganization. The means test analyzes many factors including income and expenses, to ascertain if the debtor is eligible for a Capter 7 bankruptcy or mus file a Capter 13.

Meeting of Creditors - The debtor is required to appear before the bankruptcy trustee and affirm under oath the information contained in the debtor’s bankruptcy petition . The debtor must answer questions about his or her assets, liabilities, and income.

Non Dischargeable - A debt that cannot be discharged in bankruptcy. Taxes, that have been incurred in the past three (3) years, child and spousal support, and student loans are usually non dischargeable.

Petition - This is the document that is filed with the bankruptcy court that initiates the process in any bankruptcy. The petition discloses all assets and debts, even debts one intends to repay. Upon the filing of the petition the Court issues an order requiring all collection efforts to stop, including lawsuits and foreclosures. This is called the Bankruptcy Stay, because it stops (stays) all collection efforts. For a lawsuit to proceed, the creditor must seek and be granted Relief from Stay

Proof of Claim - A creditor must file a proof of claim for the bankruptcy court to recognize the debt. In a Chapter 13 bankruptcy, there may be debts that the debtor wants to be paid : car loans, mortgage arrearage, non dischargeable taxes and student loans, etc. If the creditor does not file the proof of claim, the debtor’s attorney will file the proof of claim, so that the creditor shares proceeds. paid to the Trustee by the Debtor.

Reaffirmation Agreement - A reaffirmation agreement, reaffirms a specific debt that would normally have been discharged by the bankruptcy court. You may choose to sign a reaffirmation agreement on a car loan or home mortgage so that you are able to keep the collateral. If a reaffirmation agreement is signed, the debtor remains liable for the debt, even if it would have been discharged.. it is advisable to consult your attorney before signing a reaffirmation agreement.

Relief from Stay - A creditor may petition the bankruptcy court to issue a relief from the automatic stay. If the bankruptcy court grants the creditor the relief from stay, the creditor is permitted to proceed with collection efforts, including repossession, foreclosure and liquidation (public sale).

Schedules - The schedules are part of the bankruptcy petition that contain the lists of all of the debtor’s assets, exptions, debts, income, budget, lease obligations and co-debtors.

Secured Creditor - A creditor whose debt is secured by a lien.

Trustee - The bankruptcy court appoints a trustee in any bankruptcy to represent the combined interests of all the creditors.

Unsecured Debt - Any debt that is not secured by collateral or a lien.

The content within this website is intended for review and educational purposes. All content and information provided within this site are only of a general nature and do not intend to apply to any specific circumstance or case. This site is not to be construed as either providing legal advice or establishing an attorney-client relationship between the reader and Paul Allen Bayer Co. , LPA As laws are constantly changing, we attempt to continuously update this site to provide accurate and precise information. However, Paul Allen Bayer Co. , LPA is not to be held responsible for outdated materials. We disclaim responsibility for any errors contained within this site, including inaccuracy of omissions or commissions. If you have any questions you should always contact an attorney. At Paul Bayer Co., LPA we always remain ready to meet with you to help you with your legal problems.

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