subject: Bankruptcy Filing Terms And What They Mean [print this page] Like any other branch of the law, bankruptcy law is rife with legal terms and jargon. As a debtor, youll be faced with more than a few of these termsand while your bankruptcy lawyer can explain a few things, its important to understand them yourself as well. Here are some of the bankruptcy terms you may encounter during your filing and what they mean for you.
Chapter 7 and Chapter 13
These refer to the types of bankruptcy available to individuals. More than half consumer bankruptcies are filed under Chapter 7, which involves selling off assets to pay off as much debt as can be covered, and discharging the rest. Chapter 13 is meant for those who have regular income, and involves paying off debts over three to five years in a court-approved repayment plan.
Discharge
Debts that are wiped out in a bankruptcy are said to be discharged. Discharged debts can no longer be collected by creditors. Only certain debts are eligible for discharge in bankruptcy; it usually applies only to unsecured debts such as credit cards. Debts secured by a lien, such as a home mortgage, must still be paid in full after bankruptcy.
Priority Debt
These are debts that have to be paid even in bankruptcy, as described above. They can only be discharged when they are paid in full. Debts to the government are the most common example. Student loans, child and spouse support, and some types of taxes are also considered priority debts.
Exemptions
In Chapter 7 bankruptcy, debtors are allowed to exempt certain assets from liquidation. In most cases, you will be able to keep your home or car, unless, in some states, they exceed a certain value. The rules vary from state to state. Medical aids and work tools are also usually exempted in a bankruptcy.
Liquidation Value
This refers to the value for which non-exempt assets can sell; for example, the amount of money in a bank account or how much clothing and jewelry would sell for if sold privately or in a yard sale. It is not to be confused with the replacement value or the sale pricethe value of an asset depends on the asset itself and current market conditions.
Schedules
Your bankruptcy petition will be accompanied by forms known as schedules. This is where you provide lists of your real and personal property, secured and unsecured debts, assets exempt from the bankruptcy estate, income, monthly expenses, and co-debtors.
