Definitions for Common Bankruptcy Terms
These are some bankruptcy definitions for common terms that come up during the bankruptcy process. These definitions are not legal advice nor are they exhaustive.
Assets in bankruptcy are anything tangible or intangible that is capable of being sold or transferred for value. It must have a positive economic value to be considered an asset.
Bankruptcy is a right under Federal Law which allows consumers and businesses to eliminate or repay some or all of their debts while under the protection of the Federal Bankruptcy Court. It is authorized under Title 11 of the United States Code (the bankruptcy code). There are four types of bankruptcy available to an individual, but Chapter 7 Bankruptcy and Chapter 13 Bankruptcy are by far the most frequently filed personal bankruptcies.
Chapter 7 Bankruptcy:
This is a liquidation form of bankruptcy. The debtor(s) liquidates all non-exempt assets to pay their creditors. Whatever they are unable to pay is then discharged in the bankruptcy. In many Chapter 7 bankruptcies, the debtor(s) will not have to pay anything to their creditors. Certain debt is non-dischargeable in a bankruptcy and will remain owed after the bankruptcy is complete.
Chapter 13 Bankruptcy:
This is a reorganization form of bankruptcy. The debtor(s) make a certain payment to their creditors for a 36 to 60 month period. After the completion of this period whatever dischargeable debt is left will be discharged. Certain debt is non-dischargeable in a bankruptcy and will remain owed after the bankruptcy is complete.
This is the person owed money. A creditor in bankruptcy is the individual or entity that makes a claim or objection in the bankruptcy.
Debt in bankruptcy is an obligation (usually monetary) owed by the debtor to a creditor.
This is the person who owes the money. A debtor in bankruptcy is the individual(s) who files the petition.
These are protections provided by the Federal Government under 11 U.S. Code § 522, which allow you to keep certain assets. Some States may not use the full set of Federal Exemptions and instead use their own set of exemptions. It is important to know and understand your State’s rules.