If you are trying to find your way through the maze of confusing terms while learning about bankruptcy, then take a few minutes and familiarize yourself with some terms you may not know, but will need to know if you file for personal bankruptcy.
The ten bankruptcy terms dicussed in this rather long artice will likely come up. You may want to bookmark this page and digest it in small doses, and link to it so others, who need to know, can use it as well.
341 Meeting or Creditors' meeting. (sometimes called Creditor's First Meeting, a misnomer). About two weeks after filing for Chapter 7, you will get a notice from the Trustee that a creditors' meeting will be held in the coming weeks, and that notice gives you the time and location. Your creditors will get a similar notice, and they could, if they chose, attend this meeting and grill you. That rarely happens, because they have bigger fish to fry in bigger bankruptcies, in which serious money is involved. But if your assets come packaged in a supersize, they may come to this first (and usually only) meeting. If a creditor should come, it would be to object to having your thier debt discharged. More typically, the meeting is a brief interchange that involves you, and the trustee. If you have a lawyer you will bring one, if not you should be reading up on how to file pro se (see below for definiation). The trustee will ask if the paperwork is honestly and fully completed. You will need to bring with you a picture ID, a social security card, and a few other things, like a copy of your last 2 years of tax returns.
Filing pro se. Pro se is what they call it when you file for bankruptcy without an attorney. It is not a good idea to represent yourself in legal matters even if you are an attorney or are legally trained. But with bankruptcy, many have to do it simply out of neccesity. Try at least to get some free advice from one of the lawyers who will do a free consult, or buy a book, do it yourself, and then buy an hour or two of consultation, at the very least. Most people make mistakes in bankruptcy because they don't understand. If you have a lot of secured debt, you would be especially advised to protect it by having an attorney in your corner.
Chapter 7 and Chapter 13. These are two types of bankruptcy named after two sections of the bankruptcy law that depicts them. Chapter 7, also known as "straight" bankruptcy, is the easiest, most common and typically briefest of the bankruptcy approaches. It is a "liquidation" bankruptcy because you agree to lose all or most of your assests, which are liquidated. You agree to this, in Chapter 7, because you also lose all your debts in the process. Despite being called a "liquidation," approach, many times your clunker and other assets end up surviving the legal jeapordy in which they are placed, or maybe they can qualify for exemption. Chapter 13 is a "reorganzation" bankruptcy in which you attempt to pay the debts in a manner that you can afford, often stretched out over 3-5 years. This works better for those who have an adequate, steady and predictable income.
Non-dischargeable or dischargeable debt. In chapter 7 many of your debts are discharged, and that means you no longer owe on these dischargeable debts, after the bankruptcy is over. While some types of debts are dischargeable, some are not. Such debt as taxes (including penalties) on the last couple years, personal injury claims, other judicial leans, and alimony and custody obligations remain debts that survive your efforts to clean the slate.
Exempt and non exempt property. You will be asked to indicate which of your assets (your furniture, your money, your car, etc.) you would like to keep (exempt from being taken). The catch is you have to chose from what can seem like a very short list, and this list, along with ceiling amounts) is either one drawn up by your state legislature, the federal government, or in some states, a combination of the two. Exempting property allows you to take some of your possessions off the table. That remaining property -- that is not exempt -- may then be taken. Different states have different exemptions, but often there is enough to exempt your car, some personal possessions and a little money to get you started again. See below for the homestead exemption, which is one that most states have allowed.
Foreclosure . A residence that is sold without cooperation from the owner because payments have become so deficient, is called a foreclosure. The bank takes back your house. Chapter 7 can delay it by several months, but it is not useful in staving off a forclosure once the clock runs out on this relatively speedy type of bankruptcy. After bankruptcy is over, the foreclosure can proceed, unless the bankruptcy court has sold it. Chapter 13 is very much designed to be able to let you keep your home, if you qualify, because you rearrange things so you will be able to pay.
Stay (automatic stay). Efforts to collect debts and legal actions, like foreclosures, are "stayed" automatically, in Chapter 7. This means simply that things are put on hold, or frozen, until the process unfolds. The Trustee temporarily holds "in trust" your stuff, until the trustee sorts it out, and during that time they are not going to fool with the creditors, and neither should you. You may have to send a letter reminding some of the more clueless creditors, but the phone should stop ringing 24-7. Sometimes banks trying to foreclose will ask for the stay to be lifted.
Homestead exemption -- Homestead exemptions are the amount -- often a substantial sum -- that you are pemitted to keep from the equity of your home, if you live in it. If you have more equity in your home than the mortgage, your creditors would be enititled to it. However with the homestead exemption you can claim at least some of that true equity as exempt, and that means it belongs to you, and not the creditors. All but a handful of states have some type of homestead exemption, but the rules vary from state to state.
Trustee -- The Trustee assigned to your case supervises the bankruptcy, providing skilled efforts on behalf of the bankruptcy judge, who is a necessary, but many times unseen part of your case. Trustees perform this task in all 50 US states but two. The trustee will seem like a judge, to the unitiated, and ask you questions under oath, to which you or your attorney will respond honestly. See the creditor's meeting above for more information.
No asset cases. A no asset cases occurs when the trustee believes that you have nothing of value above and beyond your exemptions, that can be used to pay the creditors. They often will include in that reckoning assets that exceed the exemptions but would be too big of a hassle to unload.