A Short Glossary of Essential Bankruptcy Terms
Filing for bankruptcy can be an arduous process, and the complicated nature of bankruptcy is exactly why so many people choose to file bankruptcy with the help of an experienced bankruptcy lawyer. The majority of people who file a bankruptcy claim aren’t familiar with the details of what it involves; in fact, out of the 900,000+ bankruptcy cases in 2014, only 3% were business bankruptcies while the rest were personal bankruptcies.
If you’re considering filing for personal bankruptcy, the best way you can help yourself is to find an experienced and professional bankruptcy attorney. In the meantime, however, it’s a good idea to familiarize yourself with some of the most common legal terms you’ll hear during the process. Here’s a short guide to a few of the more confusing terms you may not yet know:
- Automatic stay: This occurs immediately after a bankruptcy petition is filed, and it is an injunction that stops any creditors from taking legal action against the debtor or attempting to possess property of the debtor.
- Bankruptcy petition: The document that you, the debtor, will have to file to open a bankruptcy case. In some cases where the bankruptcy case is involuntary, this petition is filed by the creditors.
- Credit counseling: This is something that all debtors must do prior to and while filing for personal bankruptcy. Credit counseling services help debtors understand the basics of financial management so that they won’t be facing another bankruptcy case again.
- Chapter 7: Chapter bankruptcy is the most common type of personal bankruptcy today. It provides a fairly quick solution to debt problems by offering liquidation for certain debts, thereby giving the debtor a chance to start fresh.
- Chapter 11: This is the most common type of bankruptcy you see in the news because it’s how businesses file for bankruptcy. Under Chapter 11, a business can petition for a reorganization of debt payments and can even facilitate a company sale or transfer.
- Chapter 13: The second type of personal bankruptcy is Chapter 13 bankruptcy. This doesn’t wipe out any debts, but instead offers help for a reorganization of personal debts. This is often a good option for anyone who can rely on a regular income, and it allows you to keep possession of your assets.
- Dischargeable debt: This refers to any debts that can be eliminated in a Chapter 7 case. A discharged debt means that the debtor is no longer liable for repayment and debt collectors must cease all forms of communication with the debtor. Not every debt can be discharged, such as student loan payments and child support payments.
Filing for bankruptcy certainly isn’t an easy process, but staying organized and asking for help when you need it is the best way to make sure that you reach financial stability again.