Like any unfamiliar territory, the courts use language that most likely is unfamiliar to the average person. Getting acquainted with the terminology will take some of the anxiety out of filing for bankruptcy and will help you understand the process better.
Some terminology refers to the people involved in the process. The individual filing the petition is referred to as the petitioner. The people or companies to whom you owe money are called
creditors. In addition to the bankruptcy judge and your attorney, a
trustee will be appointed to oversee the petition, schedules and payment plan, liquidating assets for disbursement to creditors in the case of Chapter 7, and receiving and disbursing payments in the case of Chapter 13.
Types of debt and property are delineated by specific terminology, too. Secured debt is money owed that is backed by property, such as a home in the case of a mortgage or a car backing an auto loan.
Unsecured debt, conversely, is money loaned to you, based solely on the creditor's evaluation of your ability to repay, such as that issued by credit card companies.
Bankruptcy estate is the term used to describe all assets in which you have an interest.
Voluntary transfer refers to the transfer of property with your consent.
Liquidation is the sale of property for the purpose of repayment of debts.
Means testing is the process by which the court decides whether you qualify to file for
Chapter 7. It compares your income over the past six months with median incomes for same-size households in your area. The second part of means testing applies to petitioners with income above the median and is used to determine whether your disposable income is sufficient to repay at least 25 percent of your debt over five years.
The Bankruptcy Petition is the primary document your attorney will file to initiate proceedings.
Schedules are detailed supplemental documents that list your assets and liabilities. During
pre-bankruptcy planning, your attorney will help you arrange your assets to take advantage of all exemptions that apply to you, and to convert nonexempt assets to exempt status when it is appropriate to do so. The
plan is your description of how you intend to repay your creditors over a specified timeframe, relevant in
Chapter 13 filings but not in Chapter 7.
Exemptions are allowances provided by Bankruptcy Code or state law that protect certain assets.
Homestead exemptions protect some or all of the equity in your home, and many states exempt items called
tools of the trade, which are owned by the debtor and needed in order to earn a living. And finally,
discharge refers to the court-ordered release from debt that follows bankruptcy proceedings. Following discharge, creditors are prohibited from taking any action intended to collect the discharged debt.
Being familiar with bankruptcy terminology will help you move through your case with greater understanding. Your attorney will be happy to explain any additional terms that you don't understand. Contact a
Kansas bankruptcy attorney at the firm today for a better understanding of the bankruptcy process.