Even the most responsible borrowers can’t always repay their debts, so if you plan to start a business or obtain a mortgage, make sure to have an exit strategy. Bankruptcy can provide a way out of unmanageable debts. The terms and words can be very confusing. For this reason the trusted lawyers at Morgan Lawyers compiled a bankruptcy glossary for you.
Adversary Proceeding– A complaint filed in bankruptcy court to resolve a contested matter, such as whether a debtor can discharge a debt.
Assets– Any property that belongs to the debtor. During bankruptcy proceedings, debtors must disclose all of their assets to the court, though certain type of assets are exempt.
Automatic Stay– An injunction filed during bankruptcy cases to prevent creditors from trying to collect debts until the case has been resolved.
Bankruptcy– A legal procedure filed by individuals and business that cannot repay their debts. There are four main types of bankruptcy:
- Chapter 7– The most common type of bankruptcy, this procedure can be used by partnerships, corporations, individuals or families. Debtors must liquidate all of their non-exempt assets and pay the creditors with the proceeds
- Chapter 11– A bankruptcy procedure used by partnerships, corporations and individuals with substantial assets. Debtors agree to reorganize their businesses to repay the debt, often by selling some of their assets or handing over future profits.
- Chapter 12– Designed specifically for farmers, this type of bankruptcy allows debtors to keep their property and repay creditors with future income.
- Chapter 13– Designed for individuals who have regular incomes and no more than $336,900 in unsecured debt and no more than $1,010,650 in secured debt. Debtors can keep their property but must repay some or all of their debt out of future income over a specified period of time.
Collateral– Any property that can be used as a lien.
Contingent– A debt that a debtor may owe depending on future circumstances.
Indemnify– When one party agrees to protect another against possible financial losses.
Lien– Property used to secure a debt. If a debtor fails to repay his or her debt, the creditor receives the lien.
Means Test– A method to determine which debtors can repay large portions of their debts on their own and are thus ineligible for Chapter 7 bankruptcy.
Personal Property– Assets that are not tied to a particular place, such as stock options.
Petition– The document used to file a bankruptcy case. Automatic stay begins as soon as a petition is filed.
Relief from Stay– When a judge agrees to let creditors resume their collection efforts.
Schedules– A list of all of the debtor’s liabilities and assets. Debtors must include a schedule when filing a bankruptcy case.
To learn more about debt, bankruptcy, and wise borrowing, contact Morgan Lawyers today.
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