Bankruptcy Terms
Bankruptcy- The state, condition, or quality of being or becoming bankrupt. A person who upon his or her own petition or that of his or her creditors is adjudged insolvent by a court and whose property is administered for and divided among his or her creditors under bankruptcy law
Chapter 7- The statute regarding liquidation proceedings that empowers a court to appoint a trustee to operate a failing business to prevent further loss. In a Chapter 7 bankruptcy, the individual is allowed to keep certain exempt property. Most liens, however (such as real estate mortgages and security interests for car loans), survive. The value of property that can be claimed as exempt varies from state to state. A chapter 7 bankruptcy stays on an individual’s credit report for 10 years from the date of filing the chapter 7 petition.
Chapter 13- Chapter 13 governs a form of bankruptcy In the United States that allows individuals to undergo a financial reorganization a federal bankruptcy . The goal of Chapter 13 is to enable income-receiving debtors a debtor rehabilitation provided they fulfill a court-approved plan. This is in contrast to the goals of Chapter 7, which offers immediate and complete relief of many oppressive debts. It is a form of debt consolidation. Therefore, Chapter 7 is liquidation-or straight bankruptcy- while Chapter 13 is reorganization.
Homestead Exemption- is a legal regime designed to protect the value of the homes of residents from property taxes, creditors, and circumstances arising from the death of the homeowner spouse. Laws are found in state statutes or constitutional provisions which exist in many states in the United States. Laws designed to protect the value of a home from property taxes and creditors …
Foreclosure- To deprive (a mortgagor) of the right to redeem mortgaged property, as when payments have not been made.Also, To bar an equity or a right to redeem (a mortgage). The legal process by which an owner’s right to a property is terminated, usually due to default.
Filing for Bankruptcy- While bankruptcy cases are always filed in United States Bankruptcy court. (an adjunct to the U.S District Courts), bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often dependent upon State law. State law therefore plays a major role in many bankruptcy cases, and it is often not possible to generalize bankruptcy law across state lines.
Generally, a debtor declares bankruptcy to obtain relief from debt, and this is accomplished either through a discharge of the debt or through a restructuring of the debt. Generally, when a debtor files a voluntary petition, his or her bankruptcy cases commences. Types of Bankruptcy filing
- Chapter 7- elementary liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available
- Chapter 9- municipal bankruptcy; a federal mechanism for the resolution of municipal debts
- Chapter 11- rehabilitation or reorganisation, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganisation which typically allows companies to continue to function while they follow debt repayment plans
- Chapter 12-rehabilitation for family farmers and fishermen;
- Chapter 13- rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
- Chapter 15- ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.
Creditors- A person or firm, to whom money is due. (As opposed to a debtor) Creditor law governs situations where one party is unable to pay a monetary debt to another. There are three types of creditors. First are those who have a lien against a particular piece of property. This property (or proceeds from its sale) must be used to satisfy the debt to the lien-creditor before it can be used to satisfy debts to other creditors. A lien may arise through statute, agreement between the parties, or judicial proceedings. See, e.g., Secured Transactions and Mortgages. Secondly, a creditor may have a priority interest. A priority arises through statutory law. If a creditor has a priority his debt must be paid when the debtor becomes insolvent before other debts. For example, Congress has granted priority to debts owed the Federal government. See Federal Tax Lien Act. The final type of creditor is one who has neither a lien against the debtor’s property or is the subject of a statutory priority.
