As you are preparing to go through bankruptcy or are going through the process of filing, being familiar with some of the most commonly used bankruptcy terms and their definitions can be extremely helpful to staying informed about what is happening and what you can expect from the process. The following is an overview of common bankruptcy terms along with their definitions:
- Arrears: Past-due payments on a specific debt, typically used as “the debt is in arrears” and generally used to refer to mortgage payments
- Automatic stay: A legal injunction that prevents creditors from contacting or otherwise trying to collect on debts that a borrower owes. An automatic stay immediately goes into effect once a person has filed for bankruptcy and specifically prevents creditors from garnishing a borrower’s wages, foreclosing on his home and filing lawsuits against him to try to collect unpaid debt.
- Bankruptcy estate: All property and other assets that a borrower owns at the time he files for bankruptcy. Bankruptcy courts will assess which assets of the bankruptcy estate can remain in the borrower’s possession (based on permitted exemptions) and which can be liquidated to pay off creditors.
- Bankruptcy mill: Businesses that handle a large number of bankruptcy cases, heavily rely on non-attorney staff and ultimately provide insufficient, low quality legal services to borrowers. In many cases, bankruptcy mills miss court deadlines, cut corners and bungle bankruptcy filings, which can cost indebted borrowers a significant amount of money.
- Chapter 7 bankruptcy: A type of federal bankruptcy filing that is also referred to as liquidation bankruptcy due to the fact that it involves liquidating some of a borrower’s assets in order to dissolve unsecured debt and pay off some creditors. As of 2005, borrowers need to pass a means test.
- Chapter 13 bankruptcy: A type of federal bankruptcy proceeding in which borrowers – with the help of bankruptcy courts – develop 3- to 5-year repayment plans for their outstanding debt. Chapter 13 bankruptcy is also referred to as repayment or reorganization bankruptcy and is typically the best option for those who don’t pass the means test to file for Chapter 7 bankruptcy or who have filed for Chapter 7 bankruptcy within the past seven years.
If you are facing seemingly insurmountable debt and are looking for a financial fresh start, contact the trusted Colorado debt relief and bankruptcy lawyers at the Law Office of Jon B. Clarke, P.C. Our experienced legal professionals are committed to providing each of our Clients with the debt relief assistance they need, and we will work tirelessly to ensure that our Clients’ cases are resolved as favorably and efficiently as possible. For a thorough assessment of your situation, along with expert advice regarding the best manner in which to move forward to unburden yourself from debt, call us at (866) 916-3950.