Bankruptcy Terms

Bankruptcy's superpower, the Automatic Stay is instant relief that happens in most bankruptcy cases at the moment of filing. Think of it as a giant legal forcefield protecting you from any collection action by your creditors. With the exception of the ongoing collection of domestic support, virtually everything is frozen while a bankruptcy is in effect. Once you file a bankruptcy, on one can call, write, sue, garnish, foreclose, levy or do anything else that might make a creditor happy to collect a debt without permission of the Court. In most cases, the Automatic Stay stays in effect until the bankruptcy is discharged, replacing temporary relief with permanent.

What people think of as "straight bankruptcy". Legally, your assets stand good for your debts, but most people seeking bankruptcy only have assets (house, car, furnishings, retirement accounts) that are protected by exemptions. For eligible people, Chapter 7 is the fastest way to a discharge as there are no payments to make.

Bankruptcy Court supervised repayment plan. If there is a reason Chapter 7 won't work for you, Chapter 13 gives you three to five years to repay all or some portion of your debt according to a plan proposed with the filing of your bankruptcy.

Anyone you owe money. In bankruptcy, we divide creditors into three rough categories. Secured creditors have a lien on something, like a house or car, they could take if you stop paying them. Unsecured can be priority, like taxes or child support, which means you will have to pay the debt even if you file for bankruptcy and non-priority, which are the debts you get to discharge, like credit cards and medical bills.

Generally, anyone who owes money, but in Bankruptcy that is how the petition describes the person seeking relief. Bankruptcy isn't adversarial, there's no "me v. them", the case will be referenced with "in re: John and Jane Doe, Debtors".

The ultimate goal of almost all personal bankruptcies, the discharge is the order from the Bankruptcy Court that comes at or near the end of a Chapter 7 or Chapter 13 and tells the world that the listed debts no longer legally exist, unless they are debts that under the Bankruptcy Code, can't be discharged, e.g. child support, most taxes, most student loans.

The bankruptcy itself. What a bankruptcy is, at its core, is a complete and accurate picture of the Debtor's financial world. In addition to identifying information like name, address and social security number, the petition contains schedules detailing what a Debtor owns, owes, makes and spends with a Statement of Financial Affairs covering other items such as property transfers or lawsuits. I always say 90% of success in bankruptcy is just getting the petition right.

In all cases under Chapter 7 and 13, the Court will appoint a trustee to administer the case. It is the trustee who will review your petition and documents and conduct the required hearing. In a Chapter 7, it is their job to look for and distribute any non-exempt assets. In a Chapter 13, they receive and distribute payments,