Some people may not think it’s important to actively participate in your bankruptcy case, but in reality, educating yourself and getting involved can have a significant impact on your case. One of the most misunderstood aspects of bankruptcy is all the technical jargon. Knowing some of the important bankruptcy terms can ensure that you get the most out of your bankruptcy filing.
bankruptcy petition– is the initial document presented to the court to start a case. This document contains all the details about the assets, debts, income and financial history of the debtor. The debtor must include information related to all their debt accounts and assets. It is extremely important that the bankruptcy petition is filled out accurately, as any incomplete or inaccurate information could result in a delay or dismissal of the case.
Chapter 7 Bankruptcy– is a form of bankruptcy that works to eliminate debts through the liquidation of assets or the cancellation of creditors. Not everyone qualifies for Chapter 7, and only those who pass a means test will be eligible to file for Chapter 7. A debtor can resolve their debts with little out-of-pocket cost through a Chapter 7 bankruptcy, but they will suffer more credit damage as the debts will be marked as satisfied through bankruptcy rather than paid.
media test– is the test used to determine if a person qualifies for Chapter 7 bankruptcy. This test compares the debtor’s income to the state’s median income level. To qualify for Chapter 7 bankruptcy, the debtor’s income must be less than the median income for the state of residence. If the income is greater than the median income, the debtor will not be eligible for Chapter 7, but may qualify for Chapter 13 instead.
Chapter 13 Bankruptcy– is a form of bankruptcy that works to reorganize a debtor’s debts by developing a payment plan. The Chapter 13 plan will outline the terms of debt repayment and creditors will need to adhere to this repayment structure. The debtor will be eligible to keep their assets during the process, as long as they make consistent payments towards the payment plan. A Chapter 13 results in less credit damage since the accounts will be considered paid and satisfied at the end of the plan.
Unsecured debts– are debts that are not guaranteed with a good as collateral. Common examples are credit cards, medical bills, and utility bills. These debts can be easily discharged in any type of bankruptcy filing.
Secured debts– are debts that are secured against an asset as collateral. Common examples are mortgage and car loans. The creditor retains the right to seize and liquidate the asset if the debtor defaults on the debt, so they are best resolved through Chapter 13 where the debtor can maintain possession of the asset while working to pay off the debt.
Credit Counseling Course– is a course that provides information on debt education, smart money management, smart use of credit, and debt management options. The course is required for the case to be discharged. If the course is not completed on time, a debtor may find their bankruptcy case dismissed.
bankruptcy discharge– is the completion and closure of a bankruptcy case. It marks the end of the case and declares the debtor absolved from any future responsibility for the debts.
bankruptcy dismissal– is the denial of a bankruptcy case. The court may dismiss a case for non-payment, failure to follow rules, failure to take a required step, or if it suspects fraudulent actions on behalf of the debtor.