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Common Terms in Bankruptcy Proceedings

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This glossary of terms is designed to demystify the bankruptcy process and provide a brief explanation of some of the most common terminology in bankruptcy proceedings.

Bankruptcy Terms To Know Infographic
Title BANKRUPTCY TERMS TO KNOW Throughout a bankruptcy proceeding youll likely come across some legal terms particular to bankruptcy proceedings that youll need to know Here are some of the most common and important ones from Experian 1 MEANS TEST The Bankruptcy Code requires people who want to file Chapter 7 to demonstrate that they do not have the means to repay their debts The requirement is intended to curtail abuse of the bankruptcy code The test takes into account information such as income assets expenses and unsecured debt If a debtor fails to pass the means test their Chapter 7 bankruptcy may either be dismissed or converted into a Chapter 13 proceeding 2 BANKRUPTCY TRUSTEE The person appointed by the bankruptcy court to act on behalf of creditors The Trustee reviews the debtors petition liquidates any non exempt property under Chapter 7 filings and distributes proceeds to creditors In Chapter 13 filings the trustee also oversees the debtors repayment plan receives payments from debtor and disburses money to creditors 3 CREDIT COUNSELING Before youll be allowed to file bankruptcy youll need to take an online or over the phone financial counseling course with a credit counseling agency Once you file youll be required to also complete a course in personal financial management before the bankruptcy can be discharged 4 EXEMPT PROPERTY State and Federal law determines what a debtor may be allowed to keep but generally items like money in the bank household goods work tools a personal vehicle or equity in a primary residence may be exempt 5 LIQUIDATION The sale of debtors non exempt property The sale turns assets into a liquid form cash which is then disbursed to creditors 6 DISCHARGED BANKRUPTCY When bankruptcy is complete you will receive a discharge eliminating dischargeable debts 7 SECURED DEBT Debt backed by reclaimable property For example your mortgage is backed by your home For an auto loan the vehicle itself is collateral Creditors of secured debt have the right to seize the collateral if you default on the loan 8 UNSECURED DEBT A debt for which the creditor holds no tangible collateral such as credit cards

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