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Bankruptcy Terms
Adversary Proceeding
A lawsuit filed in the bankruptcy court which is related to the debtor's bankruptcy case. Examples are complaints to determine the dischargeability of a debt and complaints to determine the extent and validity of liens.
Arrears
The amount that is unpaid and overdue as of the date the bankruptcy case is filed. The word "arrears" is usually used when referring to back child support, back alimony owed, or the amount that is past due on mortgage payments (including interest and penalties).
Assets Personal possessions of value, including cash, real estate, vehicles and investments.
Automatic Stay
An injunction that stops lawsuits, foreclosure, garnishments and all collection activity against the debtor the exact date a bankruptcy petition is filed Bankruptcy: By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities.
Avoidance
The Bankruptcy Code permits the debtor to eliminate (avoid) some kinds of liens that interfere with (or impair) an exemption claimed in the bankruptcy. Most judgment liens that have attached to the debtor's home can be avoided if the total of the liens (mortgages, judgment liens and statutory liens) is greater than the value of the property in which the exemption is claimed. This is sometimes called "lien stripping."
Avoidance Powers Rights given to the bankruptcy trustee or the debtor in possession to recover certain transfers of property such as preferences or fraudulent transfers or to void liens created before the commencement of a bankruptcy case.
Bankruptcy Code
Title 11 of the United States Code governs bankruptcy proceedings. Bankruptcy is a matter of federal law and is, with the exception of exemptions, the same in every state. When federal bankruptcy law conflicts with state law, federal law controls.
Bankruptcy Estate The estate is all of the legal and equitable interests of the debtor as of the commencement of the case. From the estate, an individual debtor can claim certain property exempt; the balance of the estate is liquidated in a Chapter 7 to pay the administrative costs of the proceeding and the claims of creditors according to their priority.
Chapter 7
Chapter 7 bankruptcy is a process provided for under United States federal law by which you are entitled to a fresh start. Chapter 7 may eliminate most kinds of unsecured debt. It is usually designed for someone with no assets
Chapter 11
A reorganization proceeding in which the debtor may continue in business or in possession of its property as a fiduciary. A confirmed Chapter 11 plan provides for the manner in which the claims of creditors will be paid in whole or in part by the debtor.
Chapter 12
A simplified reorganization plan for family farmers whose debts fall within certain limits. Chapter 12 was not renewed when it expired this session of Congress.
Chapter 13
Chapter 13 is an interest-free debt repayment plan through which you consolidate your debts and make a payment on your debt over a 3 to 5 year period. This type of bankruptcy is often used to save a house from foreclosure or to save a car from repossession.
Collateral The property that is subject to a lien as for payment of a debt or performance of a contract. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral.
Confirmation
The process by which the Bankruptcy Judge approves a plan of reorganization of a debtor in a Chapter 13 case.
Conversion Cases under the Bankruptcy Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the Chapter of the Code that governs it changes, it remains the same case as originally filed.
Credit Report A report outlining an individuals credit history, public records and credit worthiness.
Creditor Any person or business that a debtor owes money to.
Debtor Any person who is liable to another for money.
Default Failure to make payments within a specified period of time governed by the original contract.
Delinquency Failure to make payments when payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more of the credit bureaus.
Denial of Discharge
Penalty for debtor misconduct with respect to the bankruptcy case or creditors as a whole. The grounds on which the debtor's discharge may be denied are found in 11 U.S.C. 727. When the debtor's discharge is denied, the debts that could have been discharged in that case cannot be discharged in any subsequent bankruptcy. The administration of the case, the liquidation of assets and the recovery of avoidable transfers, continues for the benefit of creditors.
Dischargable
Debts that can be eliminated in bankruptcy. Certain debts are not dischargeable; that it, they may not be discharged through bankruptcy or may only be discharged through Chapter 13. Family support and criminal restitution are examples of debts which cannot be discharged. Debts incurred by fraud can only be discharged in Chapter 13.
Discharge The legal term for the order eliminating a debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien that secures the debt may survive the bankruptcy case.
Equity
A homeowner's financial interest in a property. Equity is the difference between the value of the property and the amount still owed on its mortgage and other liens.
Exempt Property that is exempt is removed from the bankruptcy estate and is not available to pay the claims of creditors. The debtor selects the property to be exempted from the statutory lists of exemptions available under the law of his state. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy.
Exemptions
Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. What property may be exempted is determined by state and federal statutes, and varies from state to state.
Fiduciary
One who is entrusted with duties on behalf of another. The law requires the highest level of good faith, loyalty and diligence of a fiduciary, higher than the common duty of care that we all owe one another. The debtor in possession in a Chapter 11 is a fiduciary for the creditors, owing loyalty to the creditors and not the shareholders of the debtor.
Fair Market Value
The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept. Foreclosure: The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Garnishment
A court-ordered method of debt collection in which a portion of a person's salary is paid to a creditor. The process by which a judgment creditor seizes money, which is owed to his judgment debtor, from a third party known as a garnishee.
General Unsecured Claim
Creditor's claim without a priority for payment for which the creditor holds no security (or collateral). If the available funds in the estate extend to payment of unsecured claims, the claims are paid in proportion to the size of the claim relative to the total of claims in the class of unsecured claims.
Lien
A charge upon real or personal property for the satisfaction of a debt or discharge of an obligation. Examples would include: judgments, taxes, mortgages, deeds of trust, etc.
Liquidated A debt that is for a known number of dollars is liquidated. An unliquidated debt is one where the debtor has liability, but the exact monetary measure of that liability is unknown. Tort claims are usually unliquidated until a trial fixes the amount of the liability of the tort feasor.
Non-dischargable
A Chapter 7 case in which the trustee determines, after the applicable exemptions, that there are no significant assets to liquidate. The debtor retains all of their real and personal property.
No Asset Case A debt that cannot be eliminated in bankruptcy. Non dischargeable debts remain legally enforceable despite the bankruptcy discharge.
Perfection
When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A mortgage is perfected by recording it with the county recorder; a lien in personal property is perfected by filing a financing statement with the secretary of state. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An unperfected lien can be avoided by the trustee.
Personal Property Property that is not real property or affixed to real property, such as cars, stock, furniture, etc.
Petition The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as "prepetition", happening before the bankruptcy petition was filed, and "post petition", after the bankruptcy.
Preference
A transfer to a creditor in payment of an existing debt made within certain time periods before the commencement of the case. Preferences may be recovered by the trustee for the benefit of all creditors of the estate.
Pre-petition Claims
or events arising before the commencement of the bankruptcy case, that is, before the filing of the bankruptcy petition. Generally only pre petition debts may be discharged in a bankruptcy proceeding.
Priority The Bankruptcy Code establishes the order in which claims are paid from the bankruptcy estate. All claims in a higher priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority share pro rata. Claims are paid in this order: 1) costs of administration 2) priority claims and 3) general unsecured claims. Secured claims are paid from the proceeds of liquidating the collateral which secured the claim.
Priority Claims Certain debts, such as unpaid wages, spousal or child support, and taxes are elevated in the payment hierarchy under the Code. Priority claims must be paid in full before general unsecured claims are paid.
Proof of Claim
Document a creditor files showing how much money is owed to them by the debtor, together with all supporting evidence of such claim. There is usually a deadline in which to file a Proof of Claim.
Property of the Estate The property that is not exempt and belongs to the bankruptcy estate. Property of the estate is usually sold by the trustee and the claims of creditors paid from the proceeds.
Reaffirm
The debtor can choose to reaffirm debts that would otherwise be discharged by the bankruptcy. Generally, when a debt is reaffirmed, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing: the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn't pay.
Relief from Stay A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits. Relief can be absolute, for example, permitting the creditor to foreclose on property, or limited, as for example, allowing the recordation of a notice of default.
Repossession
Once in default, as defined by the creditor in the security agreement, occurs, the creditor can: repossess the collateral by self-help (depending on state law) or with the aid of a court order, dispose of the collateral by public or private foreclosure sale, retain the collateral in satisfaction of the debt, terminate the debtor's right of redemption, add the costs of repossession and foreclosure to the unpaid balance of the debt, and pursue the debtor for any remaining unpaid balance or deficiency.
Schedules
The debtor must file the required lists of assets and liabilities to commence a bankruptcy case, collectively called the schedules.
Secured Debt
A secured debt is one where the creditor takes personal or real property as collateral. A creditor whose debt is secured has a right to take property to satisfy a debt in default. For example, most homes are burdened by a secured debt in the form of a mortgage. This means that the lender has the right to take the home if the borrower fails to make payments on the loan.
Trustee
A private individual or corporation appointed in bankruptcy filings who represents the interests of the creditors in the bankruptcy estate.
Unsecured A claim or debt is unsecured if there is no collateral that is security for the debt. Most consumer debts are unsecured.
Unsecured Debt
A debt is unsecured if you have simply promised to pay a creditor a sum of money at a particular time, and you have not pledged any real or personal property as collateral for that debt. Generally, credit cards and medical bills are unsecured debts.
What is Chapter 7 Bankruptcy?
Chapter Seven Bankruptcy in Maryland is a type of bankruptcy that is designed to totally remove all your debt and start you over with a clean slate. A proper filing by a Maryland Bankruptcy Lawyer will result in obtianing a court order for your creditors to stop collection efforts on the debts you owe them.
A Maryland Bankruptcy Laywer can identiy what debts will be eliminated and which will not prior to your case being filed.
A Maryland Bankruptcy Lawyer will be able to idemtify what assets you and what you may have to surrender.
This is why Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy."
In liquidation, Chapter 7 bankruptcy allows you to select property that you are eligible to keep according to a list of state or federal exemptions. A Maryland Bankruptcy Lawyer will be able to assist you in identifing what assets will be covered by various exemptions that wil be available for your. The bankruptcy court will provide you with both lists; you should seek qualified advice of a Maryalnd Bankruptcy Lawyer when deciding which list to follow and determining which items you own that qualify.
While chapter 7 bankruptcy seeks to commit you to giving over any value that you do have to your creditors, it is not designed to impose crippling measures on you. For example, the bankruptcy court will not deem it proper to repossess your car when you are using the car to get to a job so you can continue working.
Once you file for chapter7bankruptcy, the bankruptcy courts appoints an individual known as the "trustee" to supervise your case. There is a hearing known as a "meeting of creditors" that usually takes place around one month after your bankruptcy has been filed. This meeting is to allow the trustee to examine you under oath at your hearing, review your legal forms and ask any questions related to your filing. A Maryland Bankruptcy Lawyer will be able to assist you at your hearing. Even though the name of this hearing implies that your creditors will be present, the fact is that they are seldom actually at the meeting.
If you have any non-exempt property at the time of this meeting, you are usually obligated to turn over the property ownership or its cash equivalent to the trustee. These meetings, while they might seem intimidating, are usually brief and very to-the-point. They get the following stages of your bankruptcy processing in order, and usually within 3 to 6 months of this meeting you will receive official notice from the court that all of your debts have been discharged. This signals the closure of your chapter 7 bankruptcy case.
What is Chapter 13 Bankruptcy?
When you owe more debt to your creditors than you can currently handle and have decided to file for personal bankruptcy, Chapter thirteen bankruptcy can provide some very helpful solutions to help you get your finances back in order.
Chapter 13 bankruptcy uses the bankruptcy court as a mediator between you and your creditors in order to re-organize your debts and create a way for you to repay either all your debt or a part of it. A Maryland Bankruptcy Lawyer can assist you in drafting a plan of reorganization.
Total repayment is not always deemed necessary under chapter 13 cases- the court will consider the amounts and types of your owed debts to reach a decision on the repayment amount. Chapter 13 bamkruptcy also ends collection attempts made by your creditors and grants you protection from other measures such as repossession, utility shutoff, and wage garnishment.
Can I file bankruptcy without a lawyer?
Remember the old adage that "he who represents himself has a fool for a lawyer"? There is some truth there.
The paralegal services and on line bankruptcy providers try to characterize filing bankruptcy as "just filling out forms". That's just as true as seeing tax preparation as "just filling out forms"; and the tax forms come with instructions written for the non professional. Bankrutpcy forms don't.
The more assets you have to lose in a botched bankruptcy, the more it is worth your while to pay a lawyer to protect them in a bankruptcy proceeding.
What can go wrong when you represent yourself
The bankruptcy amendments of 2005 have now studded the Bankruptcy Code with situations in which dismissal of cases is automatic and the relief available when you refile is strictly limited. The means test forms, new in October,2005, are difficult to get through and easy to bungle.
Congress was upfront that it wanted to discourage consumers from filing bankruptcy and made the process substantially more complex and the consequences of mistakes more costly.
Chapter 13 is not well suited for debtors in pro per (representing themselves) since it has lots of unwritten rules and local customs that just aren't easily discoverable to the layman or even the generalist lawyer. More on paying for a Chapter 13.
Corporations and partnerships cannot, by law, represent themselves.
Is yours a "simple" case?
We recommend that you visit a lawyer, get an overview of your situation and any issues that are presented in your case. Initial consultations are frequently free or at a reduced cost. Find a bankruptcy lawyer. See Paying for bankruptcy.
Perhaps a better alternative is to save up money to get an attorney's help, or consider filing a Chapter 13 where the legal fees can be paid over time through the plan.
A maryland bankruptcy lawyer should be knowledgeable of maryland bankruptcy court decisions.
A maryland bankruptcy lawyer should be knowledgeable of maryland bankruptcy local rules of he maryalnd bankruptcy courts.
A maryland bankruptcy lawyer should have litigation experience in the event your case is contested
A maryland bankruptcy lawyer should be able to identify situations prior to filing when creditors contest cases.
A maryland bankruptcy lawyer should understand when an abuse of credit has occurred that could trigger a case being contested.
A maryland bankruptcy lawyer get a clar and complete understanding of the facts in each case prior to making a recommendation to file.
A maryland bankruptcy lawyer should explain all alternatives to the cleint prior to filing any documents with the court.
A maryland bankruptcy lawyer should consider all alternatvies for the client prior to making a recommendatio nto file.
A maryland bankruptcy lawyer communicate throughout the case all documents received by the trustee.
A maryland bankruptcy lawyer communicate throughout the case all documents received by from creditors.
A maryland bankruptcy lawyer be available to all client questions throughout the case.
Q. I just don't seem to be getting anywhere--I'm robbing Peter to pay Paul. How can bankruptcy help?
A. You are getting buried by interest rates that can run up to 22%, and more! There are a number of possible solutions. A straight bankruptcy under Chapter 7 is one, and a reorganization under one of the other chapters, particularly Chapter 13, is another. See Chapter 7 and Chapter 13 of our site.
Q. I have enough money to pay some of my bills, but not all of them. How can I handle my creditors?
A. Relax! Straight Bankruptcy under Chapter 7 or a reorganization under Chapter 13 are certainly possibilities. In any bankruptcy chapter, the creditors are forbidden to contact you one the bankruptcy petition is filed. See those areas of our site.
Q. I can't pay my bills now, but I'll be able to do it soon, if I could just get the creditors to wait a bit longer. Can a bankruptcy help?
A. Yes! Under reorganization provisions of the Bankruptcy Code, we can often prepare a plan that will defer some, most, or even all of your payments (under limited circumstances) if you have an event that is to occur in the future. Some examples: a house closing, a personal injury case, a worker's compensation case, an inheritance, a new job that will be starting. See Chapter 11 and Chapter 13 of our site.
Q. I just can't take the phone calls any longer! What can a bankruptcy do?
A. We'll stop those calls! The filing of any kind of bankruptcy acts as a "stay", or hold, on any kind of collection activities by creditors, even tax creditors! Let us take the calls for you! That's our job!
Q. How does bankruptcy give me protection from my creditors?
A. The filing of the bankruptcy acts as an automatic stay on the collection efforts of your creditors. In a Chapter 7 bankruptcy case, the unsecured creditors (those who do not have security for their debts, unlike a mortgage creditor or the holder of the title to your car, who do have security) will usually have their claims eliminated, or discharged. Under the reorganization bankruptcies, such as Chapter 11, Chapter 12, or Chapter 13, the creditors will generally have to wait so see how you are going to treat them under the Plan of Reorganization. There are always exceptions, so consult with your bankruptcy attorney for more information, and keep on reading!
Q
A. For most people, Chapters 7, 11, 12 (for farmers only), and 13. See our site under each chapter for explanations of each, or better yet, come see us in our office.
Q. Will I lose my existing credit cards?
A. Not in all cases, but in most. But this shouldn't be a big surprise: this is bankruptcy, after all.
Still, in many Chapter 7 cases, some creditors will ask you if you want to reaffirm their debt. That means that you would continue to pay part or all of the debt in exchange for a chance to keep your credit. These offers should be considered carefully, with the advice of your attorney. You may wish to keep their credit, but you don't want to get yourself in financial difficulty again!
In Chapter 13 cases, you will not have use of your credit cards, except in the rare circumstance when you have kept a card with a balance of zero at the time of filing of the bankruptcy, and you absolutely need the card for business purposes. There may be other exceptions, but not many.
Q. Can I use my credit cards now to get money or buy things, and then file bankruptcy?
A. I hope you're kidding. This is fraud, pure and simple. It is also against the law, if the moral issue isn't enough of a deterrent.
Q. Does that mean I won't have credit for all those years?
A. Not at all. You may be surprised to know that most of our clients have been able to obtain credit again within a year or so after their Chapter 7 bankruptcy filing, and within a year after the completion of their Chapter 13 Plan, assuming they have good employment and they are otherwise credit worthy. This is by no means a guarantee. It is, however, been the experience of many of the clients who have reported back to us.
Q. Will I be able to get my credit back?
A. In most cases, yes. There are several ways, most revolving around the continued payment of a car or truck, or a mortgage payment, or another type of secured creditor such as one that has an interest in furniture or an appliance. We'll be glad to explain this to you at our office visit.
Q. I owe the IRS money. What can a bankruptcy do for me?
A. In some cases, particularly with older income tax debt, the tax debt may be able to be discharged in the bankruptcy. In other cases, the bankruptcy laws may be able to help you reorganize in such a way that your payments would be much lower in the bankruptcy than they might ever be from the IRS or other taxing authorities, particularly in business cases. We'll be able to discuss this with you in more detail at our office visit.
Q. What about my business? Can it file bankruptcy too?
A. Yes. Whether you have decided to keep the business open or close the business, bankruptcy should be considered as one alternative to allowing others to control if or when your business closes. If, for example, the business has tax problems and you are living in fear that the tax authority or landlord is going to close you down, consider the filing of one of the different types of bankruptcy so that you can catch your breath and decide on the correct course. Of course, the filing of a bankruptcy itself is a serious business decision which must be carefully thought out before you file. Let's talk about it.
We are a Designated Debt Relief Agency Under Federal Law and We Provide Legal Assistance to Consumers Seeking Relief Under the Bankruptcy Code.
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