ADVERSARY PROCEEDING: A lawsuit filed in the bankruptcy court which is related to the debtor’s bankruptcy case. For example, complaints to determine dischargeability, and complaints to determine the extent and validity of liens.

ARREARAGES: The amount you are behind in making payments. For example, if your monthly payment is $500, and you are three payments behind, your arrearages are $1,500.

ASSETS: Items that you own or have a legal interest in that have value. Your house, car, bank accounts, cash, household goods and furnishings, are all considered assets, even if you are making payments on them and don’t own them outright.

AUTOMATIC STAY: As soon as a bankruptcy is filed, the Bankruptcy Court enters an Order that immediately stays, or stops, all collection actions against you. This means that foreclosures, garnishments, attachments, lawsuits, collection calls and letters, and even regular monthly bills are stopped.  The automatic stay prohibits beginning or continuing law suits; collection calls; repossessions; foreclosure sales; garnishments or levies.

The stay does not stop an eviction proceeding if the landlord has already obtained a judgment of possession prior to the bankruptcy case being filed, §362(b)(22). The stay also would not apply in a situation where the eviction is based on “endangerment” of the rented property or “illegal use of controlled substances” on the property, §362(b)(23).

The automatic stay remains in effect until a judge removes (lifts) the stay at the request of a creditor; the debtor receives a legal elimination of the debt (discharge) or, the item of property is no longer 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.

In Chapter 7, the stay may prevent immediate foreclosure on a debt secured by real estate but the stay will expire, and the creditor freed to proceed when the debtor gets a discharge.  (This assumes that there is no non-exempt equity in the property for the bankruptcy estate.) In Chapter 13, the stay remains in effect for the life of the Chapter 13 plan.

AVOIDANCE: Also known as “lien avoidance” - The Bankruptcy Code permits the debtor to eliminate (avoid) some kinds of liens that interfere with an exemption the debtor has claimed. The trustee may also avoid a preferential transfer to a creditor made before the bankruptcy case was filed. 

BANKRUPTCY ESTATE: The sum total of the debtor’s legal and equitable interests as of the commencement of the case. This is the collection of assets and legal rights that a trustee administers for the benefit of creditors.

BANKRUPTCY PETITION: Legal papers filed with the Court that begins a bankruptcy case.

CHAPTER 7: In a Chapter 7 bankruptcy case, a Debtor’s unsecured debts (often credit card bills, doctors’ bills, and personal loans) are eliminated; this is also referred to as a “liquidation” of debt. Most people can keep their home, car and all of their belongings, but if you can’t bring your mortgage or car payments current quickly, you may lose your house or car. 

CHAPTER 11: The Chapter of the Bankruptcy Code that deals with business reorganizations and individual reorganizations of people who have too much debt to qualify for Chapter 13. Secured debt exceeds the threshold of $1,010,650.00.

CHAPTER 12: A special type of bankruptcy offering protections for farmers.

CHAPTER 13: A typical Chapter 13 bankruptcy sets up a three to five year payment plan for your debts. A Chapter 13 usually saves your home and car, and most possessions if an acceptable repayment plan can be established. You will need to restart your regular monthly mortgage and car payments after the case is filed. 

CHAPTER 13 PLAN: When you file for Chapter 13, you propose a plan to the Court to repay your creditors some or all of the money you owe. Referred to as the Chapter 13 Plan, it is approved by the court at the Chapter 13 Confirmation Hearing.

CLAIM: In bankruptcy cases, a Creditor, someone you owe money to, files a Proof of Claim to tell the Court how much you owe them.

COLLATERAL: Property that is security for a loan. An example is a car loan—if you don’t make the monthly payments, they can repossess the car, because the car is collateral for the loan.

CONFIRMATION HEARING: In a Chapter 13 case, this is a Court hearing for the Judge to approve your Chapter 13 Plan. In many cases, it is not necessary for you to appear for this meeting; your attorney works in advance with the Chapter 13 Trustee.

CONSUMER DEBTS: Obligations incurred for personal, family or household purposes. Taxes are not consumer debtor; neither are business debts.

CREDITOR: Someone you owe money to.

DEBTOR: What the Court calls someone who files for bankruptcy.

DEBTS: Money you owe.

DISCHARGE: The legal term for wiping out your debt through bankruptcy. When a debt is discharged, it cannot be legally collected, although a lien that secures the debt is not automatically wiped out.

EQUITY: If an asset of yours would sell for more than it would cost to pay any liens and the costs of sale, it probably has equity. For example, if your car would sell for $10,000, you have a car loan of $8,000, and it would cost $1,000 to sell the car, you have $1,000 in equity. Most household goods and furnishings and clothing, since they bring in very little if sold, do not have much equity.

EXEMPTIONS: Each state has different lists of assets you can keep in bankruptcy. These are called “Exemptions.” In New York, the federal exemptions are not available, state law governs.  In New Jersey, you can choose (elect) federal or state exemptions.

FEES:  Filing your bankruptcy papers with the court will cost money.  Low income households may qualify for reduced fees or fee waiver.  In New York for example, filing a Chapt. 7, there is a $245 filing fee; $39 administrative fee; $15 Trustee surcharge, totaling $299.  A Chapt. 13 filing has a $235 filing fee; $39 administrative fee, totaling $274. There will be additional costs if Filing Motions and Responding to Creditor Objections are made.  These range about an additional $200.  (Please note that fees can change at any time.)

FORECLOSURE: According to Black’s Law Dictionary, to foreclose means to shut out; to bar; to terminate.  As foreclosure is applied to real estate, it means to terminate all rights of the homeowner in the property covered by the mortgage.

INDEMNIFY: To guarantee against any loss which someone else might suffer. Used to describe the obligation of one spouse in a divorce to assume debts of the marriage and see that the other spouse is not forced to pay.

LIEN: The legal document that lets a creditor use collateral for a loan. A car loan is a lien on the car, and a mortgage is a lien on a house. In some cases, you can reduce or eliminate a lien in bankruptcy.

LIQUIDATED: A debt for a known number of dollars; an unliquidated debt is one where the exact amount owed has not been determined, such as an injury claim before trial.

NON-DISCHARGEABLE DEBT: Debt that cannot be wiped-out (discharged) through a bankruptcy. Non-dischargeable debts can be enforced by the creditor after the bankruptcy case is over. Some examples of non-dischargeable debts are alimony / maintenance, child support, most student loans and taxes.

MANDATORY CREDIT COUNSELING PRE-FILING AND DEBT MANAGEMENT COURSES:  Before you can file, you must complete a credit counseling course with one of the court approved credit counseling services.  The session lasts approximately ninety minutes.  A list of approved counselors is provided on the bankruptcy court’s website and from the Law Office of Michele A. Peters.  A certificate of completion must be submitted with your papers. When you've completed all the other parts of your bankruptcy, you will not receive the "discharge" until you complete a course in debt management.  You may qualify for free or reduced rates.

MEANS TEST:  a mathematical formula that establishes the form (Chapter) of bankruptcy you qualify for: Chapter 7, Chapter 11, Chapter 13.  This formula takes into account your monthly / annual income; the amount and kind of debts; and other aspects of your financial situation.  The forms are approximately forty pages in length and very detailed.

MEETING OF CREDITORS: A hearing which all debtors are required to attend; usually scheduled three to six weeks after a case is filed. Also called the “341 Meeting”, it is conducted by the United States Trustee.  Few creditors rarely appear. Most 341’s are brief, and consist of the Trustee verifying your identity, asking a series of questions, and going into detail about anything unusual that appears on your filed documents detailing your financial situation (Schedules).

PERSONAL PROPERTY: Everything that isn’t real estate—cars, cash, furniture, etc.

PETITION: The document that, when filed with the Bankruptcy Court, begins the bankruptcy case. Events that happen before the Petition is filed are called “Pre-Petition,” and events that happen after the Petition is filed are called “Post-Petition.”

PREFERENCE: A transfer to a creditor in payment of an existing debt made within certain periods prior to the filing of a bankruptcy case. The trustee can avoid certain preferential payments for the benefit of all creditors.

PREPETITION: Claims or events arising before the filing of a bankruptcy case.

PRIORITY DEBT: A debt that has to be paid in full through a Chapter 13 Plan. Some taxes and domestic support obligations are typical priority debts. Priority debts are not dischargeable unless they are paid in full.

PROOF OF CLAIM: The document that creditors file with the Bankruptcy Court stating how much the creditor is owed. If a creditor doesn’t file a Proof of Claim, it generally doesn’t get paid through the bankruptcy.

REAFFIRM: To assume personal liability after bankruptcy for a debt that would otherwise be discharged in the bankruptcy case.

REINSTATEMENT: An agreement with your mortgage lender letting you pay off your arrearages over time.

RIGHT TO RECISSION: Unlike New York which does not allow the right of recission, New Jersey allows through N.J.S.A. 2A:50-63(d), the Right of Recission in the procedure known as a deed in lieu of foreclosure.  Specifically, N.J.S.A. 2A:50-63(d) requires that the deed in lieu of foreclosure state clearly that the debtor has a seven day right of recission.  This means a right to annul (cancel) the contract by returning the parties to the positions they had before the contract.  The homeowner must cure the deficiency -- make all the payments that were due.
[New York allows a 2 year right of recission in tax foreclosure actions. Please speak to an attorney for further information and clarification.]

SCHEDULES: The documents filed with your Bankruptcy Petition that list your assets, debts, income and expenses.

SHORT SALE:  In legal terms - a short sale does not exist.  A short sale exists only because a lender allows it to exist.  Technically a short sale occurs when a home is sold and the proceeds fall short of what is owed on the mortgage and the lender agrees to allow the sale to take place by accepting the reduced loan amount. However, the bank may pursue a deficiency judgment against the homeowner in New York State.

SECURED CREDITOR: A creditor whose loan is backed by (secured) by some type of goods (collateral) which you agreed to give to the creditor if you fail to make the agreed upon loan payments. Most mortgages and car loans are secured.  Mortgages are secured by the house and car loans are usually secured by the vehicle.  If the payments are not made, the creditor can foreclose on the house or repossess the car.

TRUSTEE: In a Chapter 7 case, the Trustee is the person who conducts the Meeting of Creditors and is responsible for recovering any assets that aren’t exempt. In a Chapter 13 case, in addition to conducting the Meeting of Creditors, the Trustee receives payments from the debtor under the Chapter 13 Plan and pays the creditors.

UNSECURED CREDITOR: A creditor whose loan is not secured by collateral. Most credit cards, doctors’ bills and personal loans are unsecured.