bankruptcy information: What You Need to Know

Bankruptcy Information: Helpful Terms to Know

When you look for bankruptcy information, it is easy to get mired down in the terminology involved in the process. Equity, discharge, secured and unsecured debt, trustee, 341 meeting: all of these are important in the process of filing for bankruptcy. Here are some common terms in the bankruptcy process and how they apply to you.

First, it is helpful to have a good knowledge of the kinds of bankruptcy. You may hear chapter 7 and 13 thrown around, but don’t really know the difference. Chapter 7, also called “liquidation bankruptcy,” is when your assets are liquidated in order to pay some of the debt you owe. The remaining debt is then eliminated, or discharged, leaving you with a fresh start. Chapter 13 bankruptcy reorganizes your debt and creates a payment plan. You may only have to repay a portion of your debt and can keep many more assets than with chapter 7.

Unsecured debt is debt that required no collateral, like credit card debt and certain types of loans. Unsecured debt is able to be discharged. Secured debt, like mortgages and car loans, are generally not discharged. Filing bankruptcy does not alter the loan: you can keep the home or car if you continue to pay the bills each month. If you do not make payments, the creditor can move to repossess and liquidate the asset. Certain assets are exempt, such as retirement funds, some household items, vehicles, and homes. The value of the assets you can claim as exemptions vary according to federal law and state law. When you file for bankruptcy, you need to check what your state’s exemption laws are, and if you have to take them or the federal exemptions.

The next term you should know is petition. This is the paperwork you file with the bankruptcy court, announcing your intention of filing for bankruptcy. In your petition, you will need to provide your name, social security number, employer information, salary and wage information for the past six months, a list of all your creditors, a list of all your major property, a list of all sources of income, a list of financial accounts (bank accounts, savings bonds, etc.), a list of monthly expenses, and copy of tax returns for the previous two years. The fee for filing a bankruptcy petition is $299 for chapter 7 and $274 for chapter 13. A petition preparer is a business that is not authorized to practice law. They prepare your documents for you.

If you decide to handle your bankruptcy case yourself, you are known as a pro se debtor. You enjoy the all the rights under the law, and are responsible for fulfilling the duties of a bankruptcy case.

After you file for bankruptcy, you will receive an automatic stay. This means that any action creditors have been taking must cease, this includes foreclosure and eviction actions, collection calls, or any other attempt to contact you or collect money.

After you file, you will have to meet with creditors at a meeting known as a 341. In this meeting, which you are required to attend, you are questioned by creditors and a trustee. You are entitled to have your lawyer present, who may also question you. Creditors do not have to attend this meeting. The trustee is an appointed court official who reviews the bankruptcy petition, oversees the liquidation of property, and makes distributions to creditors.

These are the basic terms that are necessary to know. There are, of course, many more, which makes having a lawyer that much more helpful. When looking for bankruptcy information, it is hard to get lost in the terms. Take the time to find out what each term means; because legal language can be difficult to understand, consult a lawyer. It is always best to avoid bankruptcy if you can – through debt settlement or other alternatives – but if you can’t know as much as you can about the process.