Bankruptcy Terms

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Automatic Stay - Precludes and halts all collection activities from creditors and even the IRS. You can even get seized property back from the IRS in a chapter 13 or chapter 11.

Assets - Assets are generally anything of value. For example: property, real estate, cash, notes, stocks, bonds, accounts receivables, securities, and any other item of value that could be used to pay off debt.

Chapter 7 Bankruptcy - Straight bankruptcy- may be voluntary or involuntary. Liquidation of all non-exempt assets. Taxes in order of precedence - Federal Income Tax, Withholding tax, Employment tax, Excise tax, Customs and duty tax, Any pecuniary loss penalty on any of the foregoing.

Chapter 13  Bankruptcy- Simply put, is the reorganization of consumer debt with a new payment schedule. 

Chapter 11 Bankruptcy- An individual may file under this chapter but it is used primarily for business debt. Like a chapter 13, this chapter halts collection activities an allows the business debtor to restructure their payments. This applies to business debt that exceeds $250,000 in unsecured debt and $750,000 in secured debt. Total debt may not exceed $2,000,000.00

Conversion- If the court believes the petitioner can pay all or a part of his bills it can deny a chapter 7 and convert to a chapter 13.

Cramdown - The courts authority to force acceptance by creditors, stock holders, irs etc of a reorganization or liquidation plan as empowered by the bankruptcy code.

Creditor - A person or entity to whom money is due, or one who has extended credit and has a vested interest in getting paid.

Discharge - To release from debt after fulfilling ones obligations

Exemption - Assets that cannot be touched by creditors during bankruptcy proceedings. 

Insolvent - Unable to pay ones debts.

Involuntary Bankruptcy - This is when creditor take legal action against a debtor and files petition in court.

Secured Debt - debt that is backed by collateral. For example: mortgage or car loan.

Substantial Abuse- dismissal of a chapter 7 filing because income of petitioner is sufficient to service debt.

Tax Abatement- After a bankruptcy court has discharged any tax liability as outlined in the bankruptcy codes, a form (3870) will be filed with the IRS as official notice. 

Trustee - Person appointed to oversee the completion of a bankruptcy filing.

Unsecured Debt - debt that is not backed by collateral. For example: credit cards, medical bills, utility bills. 

Voluntary Bankruptcy - This is when the debtor takes the initiative to file bankruptcy on their own rather than being forced by creditors.