The following are some additional bankruptcy terms and definitions that will be extremely helpful to staying informed about what is happening during the bankruptcy process.
As a continuation of An Overview of Bankruptcy Terms and Definitions (Part 1), here are some additional key terms commonly involved in bankruptcy proceedings:
- Discharge: The legal term that refers to debt that is eliminated through the bankruptcy process. While a number of unsecured debts can be discharged by bankruptcy, debt that doesn’t qualify to be discharged includes student loan debt, child support payments and any other court-ordered payments (such as restitution or spousal support payments).
- Exemptions: The types of property (including the maximum allowed value for such property) that is not considered to be part of the bankruptcy estate that will be liquidated to pay off creditors. Exemptions can include – up to a maximum allowed value – a borrower’s home, car and personal items, such as jewelry, clothing, musical instruments and job-related tools.
- Fair Debt Collections and Practices Act (FDCPA): A federal statute that was first enacted in 1977 and amended a number of times since, one of the most important amendments were passed in 2006. The FDCPA is intended to get rid of potentially abusive creditor practices (used in an effort to collect debt) and to give borrowers recourse to holding abusive creditors legally accountable for abusive behaviors.
- Garnishment: A court-order to seize part of a debtor’s wages in an effort to collect on unpaid debts.
- Secured debt: Debt that is secured by some form of collateral. Mortgages are the most common type of secured debt that borrowers filing for bankruptcy have.
- Unsecured debt: Debt not secured by some form of collateral. The most common examples of unsecured debt involved in bankruptcy cases is credit card debt and debt associated healthcare bills.
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