If you’re considering the benefits of bankruptcy for the very first time, there’s never been a better opportunity to get back to basics, with a simple overview of common bankruptcy law terminology that’s helpful to make any filing seem less stressful or confusing.
The most common terms you will come across include:
Bankruptcy is, at its most basic level, a legal solution for an individual who (or a business that) is unable to repay debts owed to creditors. As such, bankruptcy is often an excellent option for those overwhelmed by credit card debt, mounting medical bills, or real estate difficulties, among other things.
Title 11 of the United States Code (the “Bankruptcy Code”) governs all bankruptcy proceedings. Therefore, bankruptcy is controlled by federal law.
Your bankruptcy estate includes all of your legal interests at the time you file for bankruptcy. This includes both property and assets, with certain exemptions. From the estate, you can claim certain property exempt with the balance of your estate liquidated in a traditional Chapter 7 bankruptcy to pay the costs of the bankruptcy proceeding and the claims of creditors according to their priority.
In many parts of this blog we speak in terms of “chapters.” These chapters relate to sections of the Bankruptcy Code. Each chapter represents a different type of bankruptcy that you can file and has different procedures. For example, Chapter 7 and 13 bankruptcies are typical for individuals seeking the benefits of bankruptcy. Chapter 11 bankruptcies are common for high debt individuals or businesses seeking the safe havens of debt dissolution. To figure out which bankruptcy is right for you, it’s always best to seek the help of an experienced bankruptcy professional.
A creditor is any organization or individual to whom you owe money, such as a bank, credit card company or even a friend/relative.
On the opposite end of the spectrum from creditors is the debtor, the organization or individual who is either voluntarily (or, in some cases, involuntarily) filing for bankruptcy protection.
Dischargeable debt is that which can be wiped out during bankruptcy proceedings and will not be owed to creditors. This type of debt is the most significant of your filing and may include credit card or medical bills.
Non-dischargeable debt is that which cannot be wiped out though bankruptcy proceedings and will continue to be owed to creditors after bankruptcy. One common example of a non-dischargeable debt is student loans.
The petition is the paperwork that begins bankruptcy proceedings. It is filed by the debtor, as someone seeking the benefits of bankruptcy or, in rare cases; by creditors seeking money they are owed.
As a result of the nuances and intricacies of bankruptcy law, if you find yourself facing insurmountable debt, it is essential to begin the bankruptcy process with assistance. An experienced bankruptcy attorney knows the bankruptcy process and can help throughout your case, no matter who your creditors are.
If you are a Michigan resident and are considering filing for bankruptcy and have questions regarding your eligibility or regarding any other part of the process, please contact me at [email protected] or (248) 246-6536 to schedule a free, initial consultation.