Bankruptcy Terminology – Continued
Many consumers that file bankruptcy do not have a clue about what the terminology means. In this article, we will continue to explain in non-technical language what some of the terms used in bankruptcy mean. We left off with Confirmation, which describes the bankruptcy’s judge’s approval of a plan of reorganization or liquidation in chapter 11 cases or a payment plan in a chapter 12 or 13 case.
The term Consumer Bankruptcy is a bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts, which brings us to the term Consumer Debts, which are debts incurred for personal, as opposed to business needs.
Sometimes in a bankruptcy case, there are Contested Matters that are matters other than objections to claims that are disputed but are not within the definition of an adversary proceeding contained in Rule 7001, which we discussed in an earlier article.
A Contingent Claim means a claim that may be owed by the debtor under certain circumstances for example where the debtor is a cosigner on another person’s loan that fails to pay.
Credit Counseling is a common term in the bankruptcy world these days. Generally, it refers to two events in individual bankruptcy cases, the first is individual or group briefing from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code. The second is the instructional course in personal financial management in chapters 7 and 13 that an individual debtor must complete before a discharge is entered. There are exceptions to both requirements on certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrators have determined that, there are insufficient approved credit counseling agencies available to provide the necessary counseling.
The Creditors Meeting which is also called the 341 meeting, is a meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, an examiner or the U. S. trustee about his/her financial affairs. This meeting is usually very short and most of the time the creditors do not even show up.
The next term is current monthly income, which is the average monthly income received by the debtor over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from a spouse, or non-debtor’s income, if there is not joint filing, but this does not include social security income and certain other payments made because the debtor was the victim of certain crimes.
A debtor is a person who has filed a petition for relief under the Bankruptcy Code using any chapter of the Code for protection. Defendant is used in the bankruptcy arena as well as the litigation areas and it is an individual or a business against whom a lawsuit is filed.
The discharge terminology is used in bankruptcy meaning a release of a debtor from personal liability for certain dischargeable debts pertaining to the Bankruptcy Code, a discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditor from taking any action towards the collection of those debts. This means the creditor is prohibited from calling, sending letters, filing a lawsuit, or executing on a judgment against the debtor on the discharged debt.
This brings us to what a dischargeable debt is and that is when the Bankruptcy Code allows a debtor’s personal liability to be eliminated.
In a chapter 11 case, a disclosure statement is a written document that is prepared by the chapter 11 debtor or other plan proponent designed to provide “adequate information” to creditors to enable them to evaluate the chapter 11 plan of reorganization. If this statement is not filed within, the time the court appoints the case could be dismissed for the debtors’ failure to provide the information timely.
In a bankruptcy case for any chapter of the Bankruptcy Code equity means the value of the debtor’s interest in property that remains after liens and other creditor’s interests are considered. One example of this is if a house is valued at, $100,000 is subject to an $80,000 mortgage then there is $20,000 of equity in the property.
There is a term in the bankruptcy schedules for executory contract or lease that generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed and the debtor can either assume the lease or reject it. If it is rejected it must be surrendered back to the creditor.
There is still a lot of terms used pertaining to bankruptcy that still need to be covered. When you file a bankruptcy petition and hire an experienced bankruptcy attorney, they will have the knowledge of all the terms used pertaining to your case so if you are not sure of what they mean your lawyer can interpret for you so you will understand.