Bankruptcy Terminology Continued – Terms You Need To Know
In this follow up article, we will discuss more bankruptcy terminology most commonly used. The next term exempt, is a description of any property that a debtor may prevent creditors from recovering. Sometimes in a chapter 7 case if there is property of the debtor’s that is nonexempt the trustee can sell that property and pay creditors.
There are limits of exemption amounts for each category that varies from state to state. It is best to confer with your experienced bankruptcy attorney to find out what the limits are in your state.
Family farmer or fisherman are terms used in a chapter 12 bankruptcy case and is an individual, individual and spouse, corporation, or partnership engaged in farming or fishing operation meeting certain debt limits and other statutory criteria for filing a petition under this chapter of the Bankruptcy Code.
Bankruptcy trustee’s look for fraudulent transfers, which is a transfer of the debtor’s property made with the intent to defraud or for which the debtor receives less than the transferred property’s value. In cases like that, it could cause the bankruptcy case to be dismissed and possibly sanctions held against the debtor.
A fresh start, is the characterization of a debtor’s status after bankruptcy, for example free of most debts, which is one of the purposes of the Bankruptcy Code.
The insider term is used meaning any relative of the debtor or of a general partner of the debtor, partnership which the debtor is a general partner, a general partner of the debtor or corporation which the debtor is an officer, director or person in control. The Statement of Financial Affairs asks this question and if it is true, it must be answered truthfully.
A joint administration is a court approved mechanism under which two or more cases can be administered together, assuming of course, there are no conflicts of interests, separate businesses or individuals can pool their resources and hires the same professional.
A joint petition is common and it is when a husband and wife file together.
Liquidation is a term used in a chapter 7 case and it means the sale of the debtor’s property with the proceeds of that property used to pay creditors.
Which brings us to a related term liquidated claim, and that is a creditor’s claim for a certain amount of money.
This next term implemented when the bankruptcy law changed in October of 2005 and that term is the means test. The means test used to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring the dismissal or conversion of the case (generally to a chapter 13). Abuse is presumed if a debtor’s aggregate current monthly income over 5 years, net of certain statutorily allowed expenses is more than $11,725 or 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $7,025. The debtor may rebut a presumption of abuse by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. There is a chapter 13 means test as well.
Another term used in bankruptcy is motion to lift stay, which is a request by a creditor to allow them to take action against the debtor or his/her property that would otherwise be prohibited by the automatic stay. Creditors usually request this motion when they want to recover secured property, for example a home or car. Most chapter 7 cases are considered no asset cases, meaning there are no assets to recover that could be used to satisfy a portion of a creditor’s unsecured claim. However, if assets are uncovered by the trustee then the chapter 7 case is converted to an asset case and a notice to creditor’s is sent advising them to file a claim and gives them a specific amount of time in which to file that claim.
This brings us to a nondischarageable debt. Debts that cannot be discharged in a bankruptcy, an example is a home mortgage, debts for alimony or child support, certain taxes, debts for most governmental funded or guaranteed educational loans or benefit overpayments, debts rising from death or personal injury caused by an intoxicated driver, or under the influence of drugs and debts for restitution, or a criminal fine included in a sentence on the debtor’s conviction of a crime.
There are more terms in the Bankruptcy Code that will be covered so we will explain those in the next article. If you are thinking about filing for bankruptcy contact an experienced bankruptcy attorney to discuss your situation.