341 Meeting
See Meeting of
Creditors. TOP
↑
Adversary Proceeding
A lawsuit brought in bankruptcy
court to deal with an issue related to a case. A common
example is a lawsuit brought by a creditor
to try and keep a debt from being discharged due to fraud or some other
reason. TOP ↑
Affidavit of Debt
A statement that the bank, after getting a judgment,
files with the foreclosure court
setting down the total amount due on your mortgage,
including principal, interest, late charges, attorneys fees,
court costs and reimbursement for any taxes or insurance
payments made by the bank. TOP ↑
Arrearage
The amount that you are behind in making
payments. If your monthly mortgage
is $1000 and you are 4 payments behind, your arrearage is
$4000, plus any late charges. TOP ↑
Assets
Everything you own that has value.
Examples include real estate, jewelry, cars, bank accounts,
cash, furniture, pension plans and personal injury
claims. TOP ↑
Automatic Stay A
bankruptcy court order that stops most collection actions
against you, including foreclosure,
wage garnishments, lawsuits, bill
collector's telephone calls and the mailing of bills.
This order enters immediately and automatically when you file
for bankruptcy. If you have a bankruptcy case dismissed
and file again, however, the automatic stay will only be
temporary or may not even enter unless you ask the court for
permission. If a creditor wants
to continue a foreclosure, lawsuit or other collection action
after the automatic stay enters, the creditor must ask
permission from the bankruptcy court by filing a Motion for Relief from Stay. §362
TOP ↑
Avoid
The power of the bankruptcy trustee to
bring property that has been transferred back into the bankruptcy estate and make it available
to pay creditors. The most
commonly avoided transfers are preferences,
fraudulent conveyances, and
unperfected security interests (a lien
against property that has not been legally completely to be
effective, such as a mortgage that has
not been recorded on the land records). A debtor may
avoid certain liens, such as judgment liens, that reduce the
amount of equity that can be exempted (protected) from
creditors. §522(f);
§544 to §548 TOP ↑
Bankruptcy Code The federal law that governs bankruptcy.
The law is found in Title 11 of the United States Code.
Cornell University Law School has an Code online. TOP ↑
Bankruptcy Estate
Everything you own at the time you file bankruptcy, including
your rights to property or money, including inheritances, life
insurance proceeds and personal injury lawsuits.
However, property that you have the right to
keep through exemptions and
property that the trustee abandons
because it has little or no value, such as a home with little
or no equity, drop out of the bankruptcy
estate. In a Chapter
7 Bankruptcy, anything that may be left in the bankruptcy
estate comes under the control of the trustee and the trustee
will use it to pay your creditors. In a Chapter 13
Bankruptcy, you keep control of your property as the
debtor-in-possession. TOP ↑
Bankruptcy
Rules The rules that the attorneys,
judges, debtors, creditors and trustees must follow in
bankruptcy cases. Cornell University Law School has the Rules
online. TOP ↑
Bankruptcy Trustee
A lawyer who will supervise your bankruptcy case by
interviewing you at the meeting of creditors and reviewing your petition, schedules
and other paperwork to see if it appears accurate and
complete. In a Chapter 7 Bankruptcy, any property that
you cannot keep by using your exemptions
will be used by the trustee to pay your creditors.
In a Chapter 13
Bankruptcy, the trustee will review your Plan to see if it seems likely that
you will be able to make the payments, will recommend to the
judge at the confirmation
hearing whether or not to approve your Plan, and will
receive your monthly payments and send the money to your
creditors according to the Plan. Plan payments include a
10% fee to the trustee. The Chapter 13 trustee in
Connecticut is Attorney Molly Whiton. §323; §704;
§1302 TOP ↑
Chapter
7 A case filed under Chapter 7 of the
Bankruptcy Code that cancels most unsecured
debt, such as credit cards and medical bills. See
the Chapter 7
Bankruptcy page. TOP ↑
Chapter 11 A case
filed under Chapter 11 of the Bankruptcy Code that allows
businesses to reorganize their debt through a plan approved by
the court. Individual debtors who want to file a
repayment plan but have too much debt to qualify for Chapter
13 Bankruptcy (over $336,900 in unsecured debt or $1,010,650 in secured debt) may be able to file
under Chapter 11. Chapter 11 cases are much more complex
and difficult to complete than Chapter 13 cases. Creditors and the U.S.
Trustee take more active roles in Chapter 11.
Monthly income and expenses statements must be filed in a
Chapter 11 and these are reviewed by the U.S. Trustee at
monthly meetings. TOP
↑
Chapter
13 A case filed under Chapter 13 of the
Bankruptcy Code that allows you to get caught up on mortgages, car loans and other secured debt by having a 3 to 5 year
repayment plan approved by the bankruptcy
court. See the Chapter 13
Bankruptcy page. TOP ↑
Chapter 13 Plan
The repayment plan filed in a Chapter 13
Bankruptcy that allows you to get caught up on mortgages, car loans and
other secured debt by making
monthly payments. The plan must be approved by the
bankruptcy court at a confirmation
hearing. The plan can last
from 3 to 5 years. Depending on your income and
expenses, you may have to pay part or all of your unsecured debt through the
plan. §1321 to
§1330 TOP ↑
Codebtor
Someone, such as a co-signer, who
is responsible along with you for a particular debt, such as a car loan. If you file
a Chapter 7 Bankruptcy, the creditor for that debt can go after your
codebtor for payment. If you file a Chapter 13
Bankruptcy, the creditor cannot go after your codebtor
unless the debt was for the purchase of an item and your
codebtor got the item (for example, you co-signed a car loan
for your child to have a car). §509; §1301(c) TOP ↑
Collateral
Property that is used to guarantee the repayment of a
loan. For a mortgage,
the collateral is real estate. For a car loan, the
collateral is the car, which is why the bank will hold the
title to the car until the loan is paid. For a furniture
loan, the collateral is the furniture. Real estate can
be taken by foreclosure and
cars and furniture can be repossessed if you fall behind on
your loan payments. The loan is a secured
debt up to the value of the collateral. If the owe
more then the value of the collateral, the difference is unsecured debt. TOP ↑
Committee
See Foreclosure Committee.
TOP ↑
Confirmation
Hearing (Bankruptcy) The court hearing in
a Chapter 13 Bankruptcy
to have your repayment plan approved. For the plan the
approved, you must prove a number of things, including that
you have enough income to make the payments, that you have
made all your monthly mortgage payments
and plan payments after filing bankruptcy, that you are not
behind with any child support or alimony payments, that your
creditors will be receive as much as if you filed a Chapter 7 Bankruptcy,
and that the plan is your best effort. The trustee usually will ask the court to
dismiss your case or convert it to Chapter 7 if your repayment
plan is not approved. Your must provide the trustee with
the documentation necessary to have the plan approved before
the hearing. If the trustee is satisfied with the
documentation, he or she will recommend to the judge that your
repayment plan be approved and the judge usually will accept
the recommendation and approve the plan. See the Chapter 13
Bankruptcy page for more information. §1324; §1325 TOP
↑
Confirmation Hearing (Foreclosure)
The Superior Court hearing, held after the foreclosure auction,
to approve the sale of the property to the successful
bidder. The hearing is usually held 2 to 4 weeks after
the sale. Once the court approves the sale, the title to
the property passes to the bidder and it is then too late to
file a bankruptcy to save the property from foreclosure.
(See the Stopping
Foreclosure page.) TOP ↑
Conversion
Changing a bankruptcy case from one chapter to another.
A Chapter
13 Bankruptcy case can
always be converted to a Chapter 7 Bankruptcy. A Chapter 13
case can be converted to Chapter 11
unless the debtor has failed to file tax returns or the
Chapter 13 plan has already been confirmed. A Chapter
7 case can be converted to Chapter 13 unless the case
was previously converted to Chapter 7 from Chapter 11 ,
Chapter 12 (family farm reorganization), or Chapter 13. §348;
§706; §1307 TOP ↑
Cramdown
In a Chapter 13
Bankruptcy , reducing (or cramming down) the amount of a mortgage that is secured. The
mortgage gets split into 2 parts, the secured part is equal to the
value of the property and the rest is treated as unsecured debt. If your
Chapter 13 Plan pays unsecured creditors less than
100%, then the unsecured part of the mortgage is paid the same
percentage amount as your other unsecured debt. The
property involved cannot be your home unless one of these
three things is true: (1) you live in a multi-family
residence, (2) the mortgage is also against another property,
or (3) the mortgage is a second mortgage and the first
mortgage is more than the value of your residence, in which
case the entire second mortgage becomes unsecured although the
lien still remains against the property. Congress is
considering changing the law to allowing cramdowns on homes.
(bills HR 3609, S 2636). Cramdown example: if the
mortgage is $200,000, your property is worth only $150,000 and
your Plan pays your unsecured creditors 10%, then (1) the
secured part of the mortgage is reduced to $150,000, (2) the
other $50,000 becomes unsecured, and (3) you only have to pay
$5,000 of the unsecured part. §1322(b)
TOP ↑
Credit
Counseling Seeking professional advice on
ways to handle credit and debt. You
cannot file bankruptcy unless you have undergone credit
counseling within 180 days before filing. §109(h)
TOP ↑
Creditor
Anyone (people, banks, credit card companies, doctors,
hospitals, the government) to whom you owe money.
Creditors can be secured or unsecured, depending on whether
they hold collateral (property to
guarantee payment of the debt). TOP ↑
Debtor
In bankruptcy law, a person who files for bankruptcy.
More generally, anyone that owes money. TOP ↑
Debts
The money that you owe. A debt can be secured, unsecured,
or a combination of secured and unsecured. TOP ↑
Deed
in Lieu of Foreclosure An
agreement in which you turn your property over to the bank
that holds your mortgage
and the bank cancels the mortgage. This is generally a
good idea if you have little or no equity
in the property as it avoids bankruptcy and is better for your
credit. Usually, however, banks prefer to put a property
through foreclosure to make sure
that they get the property free and clear of second mortgages
or any other liens. (See the Stopping Foreclosure
page.) TOP ↑
Default
Judgment
A court judgment entered against
someone for failure to do something in the court case, such as
not filing an appearance form or other document or not showing
up for a court hearing. TOP ↑
Defendant The person
or entity against whom a lawsuit is brought. In a foreclosure case, the bank that has
sued you is the plaintiff and you are
the defendant. TOP
↑
Deficiency
Judgment A court judgment
requiring someone to pay the difference between what a creditor has been able to receive from
taking back collateral and the total
amount of the debt.
For example, if a mortgage
balance is $250,000 and a bank forecloses
on property worth only $200,000, the bank can ask the court to
enter a deficiency judgment for the $50,000 difference.
A deficiency judgment is an unsecured
debt and can be discharged in
bankruptcy. TOP
↑
Discharge The legal
term for wiping out your debt through
bankruptcy. When a debt is discharged, it cannot be legally
collected, although a lien that secures
the debt is not automatically wiped out. A successful
bankruptcy case results in a discharge. §727; §1328 TOP
↑
Dischargeable
Debt A debt that can be
cancelled by filing bankruptcy. TOP ↑
Dismissal
Having your bankruptcy case terminated by the court before a discharge enters or a Chapter 13 Plan is completed.
An unsuccessful case results in a dismissal. A dismissal
may keep you from being able to file
bankruptcy again for a while or from getting all the
protection that a bankruptcy case normally brings. Your
case may be dismissed if, for example, you do not file the
right documents on time, fail to attend required hearings, or
do not make your Chapter 13 Plan
payments. §109(g);
§349; §707; §1307 TOP ↑
Domestic Support
Obligation Alimony or child support
payments that you owe to an ex-spouse, to a parent or guardian
of your child(ren), or to a town or state that has supported
your child(ren), your children's parent or guardian, or
ex-spouse. You cannot cancel your liability for a
domestic support obligation by filing bankruptcy. The
court will not confirm your Chapter 13 Bankruptcy if you are behind in
your payments on a domestic support obligation. (See
support
and alimony on the FAQ page and the Divorce &
Bankruptcy page.) §101(14A); §523(a)(5);
§1325(a)(8); §1328 TOP ↑
Equity
The difference between what your house (or any other asset) is worth and the total of all the mortgages or other liens
against the property. If you house is worth $250,000 and
you owe $200,000 on your first mortgage and $10,000 on a
second mortgage, your equity is $40,000. TOP ↑
Exempt
Property that is protected in bankruptcy from creditors. §522(d) TOP ↑
Exemptions A list
of the property that you have protected
in bankruptcy. §522(d) TOP
↑
Foreclosure A
lawsuit filed in state court by a bank or other holder of a mortgage or lien to
take the real estate that secures the loan. In
Connecticut, there are two types of these lawsuits, Foreclosure by Sale, in which
the property is sold at auction, and Strict Foreclosure, in which
title to the property passes directly to the bank. (See
the Stopping Foreclosure
page.) TOP ↑
Foreclosure by Sale
A lawsuit filed in state court by a bank or other holder of a mortgage or lien to
have the court auction off the property securing the loan so
that the bank can get paid.
(See the Stopping
Foreclosure page.) TOP ↑
Foreclosure
Committee An attorney appointed by a
state court in a foreclosure
lawsuit to auction off mortgaged
property. (See the Stopping
Foreclosure page.) TOP ↑
Fraudulent
Transfer Giving property to someone else
for less than it is worth to try and keep the property safe
from creditors.
TOP ↑
Garnish To
attach wages or other property to pay a debt. TOP
↑
Garnishment
A court order allowing wages or other property to be attached
to pay a debt.
TOP ↑
Insider
Any person to whom the debtor is related
(by blood, marriage, adoption or step relationship) within
three degrees of consanguinity according to the common law (in
Connecticut, this would be a parent, child, brother or sister,
grandparent, aunt or uncle, or grandparent, but it is possible
a court may include other relatives); any general partner of
the debtor, any partnership in which the debtor is a general
partner, and any business (such as a corporation or limited
liability company) in which the debtor is a director, officer,
or person in control. §101(31); §101(45) TOP
↑
Judgment
The final ruling of a court in a lawsuit.
TOP ↑
Judgment
Lien A document placed on the land
records to secure payment of a debt that
a court has determined you owe. The person who places
the judgment lien against you is a secured
creditor. Hospitals often sue for unpaid medical
bills and place judgment liens against property. TOP
↑
Law Days
Deadlines in a strict foreclosure
lawsuit to pay off the entire mortgage
balance
(to "redeem") in order to keep the property.
The court sets the law days when it enters judgment.
The first law day is for the owner of the property. This
day has to be at least 20 days after the date of
judgment. If there are other mortgages or liens against the property, then the holder
of the last mortgage or lien recorded on the land records gets
the second law day, the holder of the next-to-last mortgage or
lien gets the third law day, and so on. When the last
law day passes, the bank or other lender that brought the
foreclosure case gets title to the property. When the
last law day passes, it is then too late to file a bankruptcy
to save the property from foreclosure. (See the Stopping Foreclosure
page.) TOP ↑
Lien
A right to property to secure a debt. A mortgage
recorded on the land records is a lien against a house or
other real estate. A bank that makes a car loan keeps
the title as a lien against the car. §101(37)
TOP ↑
Lien-Stripping
Reducing a lien to the value of the collateral securing a debt.
See cramdown. TOP ↑
Luxury Goods Any item not reasonably acquired for the support or
maintenance of the debtor or a dependent of the debtor. Debt of more than $500
from the purchase of luxury items 90 days before filing
bankruptcy is not
dischargeable. §523(a)(2)(C) TOP ↑
Means Test A calculation
required by the 2005 Bankruptcy Act that will determine if
you can file a Chapter
7 Bankruptcy and cancel your unsecured
debt or whether you must file a Chapter 13
Bankruptcy and pay your part or all of your unsecured debt
over time. The calculation uses your income, your secured debt payments, what your other
expenses should be according to the size of your household,
and the amount of your unsecured debt. (See the Means
Test section of the page about 2005 Act.) §707(b) TOP ↑
Meeting of Creditors
An interview that anyone who files bankruptcy must
attend. The interview is sometimes called the 341
Hearing after the section of the bankruptcy law that
requires it or the Meeting of Creditors because
creditors have the right to appear and ask questions (which
almost never happens except in cases where the debtor operates
a business or has been sued). The interview is conducted
by a trustee, who is a lawyer not a
judge, and takes place in a regular room instead of a
courtroom. (See the Trustee Hearing page.) §341
TOP ↑
Mortgage
A deed to a home or other real estate that is given to a bank
to guarantee a loan. When you buy a home with a loan from a
bank, you give the bank a mortgage, you are the mortgagor, and the bank is the mortgagee. An equity line of
credit is also a mortgage. TOP ↑
Mortgagee The bank
or other lender who makes a loan and gets back a mortgage. TOP ↑
Mortgagor The
borrower who gives a bank or other lender a mortgage on a home or other real estate
to guarantee payment. TOP ↑
No-Asset
Case A Chapter 7 Bankruptcy
case where there are no assets
(property) that can be sold to pay unsecured
debt. Most Chapter 7 cases are no-asset cases
because people who file bankruptcy usually have very little
property and what they do have can be protected through exemptions.
TOP ↑
Non-Dischargeable Debt
A debt, such as child support, that
cannot be cancelled in bankruptcy.
(See the alimony & child support, taxes, and student
loan sections of the FAQ page.)
§523(a);
§1328(a) TOP
↑
Personal Property
Anything you own that is not real estate. TOP ↑
Petition
The document that is filed with the bankruptcy court to start
a bankruptcy case. §101(42);
§301 TOP ↑
Plaintiff The person
or entity who files a lawsuit. In a foreclosure case, the bank that has
sued you is the plaintiff and you are the defendant.
TOP ↑
Plan
See Chapter 13 Plan. TOP ↑
Preference or Preferential Transfer A
payment or transfer of property made so soon before filing
bankruptcy that the law allows it to be avoided
(taken back). The trustee can get
back the payment or property and divide it among all the unsecured creditors unless (1)
it was for a secured debt such as a
mortgage or car loan, (2) it was made
more than 90 days before filing bankruptcy, (3) it was made
more than 1 year before filing bankruptcy and was to a
relative or other insider (such as a
business partner), or (3) it was made in the usual course of
business (for example, rent, utilities or supplies). §547 to §548
TOP ↑
Priority Debt A debt that has to be paid in full through a Chapter 13 Plan. Priority
debts include taxes
that became due during the 3 years before filing bankruptcy
and child
support. §507;
§1322(a)(2) TOP
↑
Proof of Claim A
document that a creditor can file with
the bankruptcy court stating how much the creditor was owed at
the time the bankruptcy was filed, how much was overdue,
whether there is any property held to secure the loan, and the
value of any such property A creditor who fails to
file a Proof of Claim usually will not get paid through the
bankruptcy. §501;
§502 TOP ↑
Reaffirmation Agreement An
agreement in a Chapter
7 Bankruptcy in which you agree to keep paying a debt that you could discharge.
This is usually done to keep collateral,
such as a car or a house, that secures
a debt. If you are represented by an attorney, he or she
can certify to the court that reaffirming a debt would not be
a hardship for you. If your attorney feels he cannot
make that certification, then the bankruptcy judge must
approve the reaffirmation at a hearing. You can cancel
this agreement within 60 days or before discharge,
whichever occurs later. Reaffirmation
is an alternative to redeeming or to
surrendering (giving up) the property.
§524 TOP
↑
Redeem
(Bankruptcy) In a Chapter 7 Bankruptcy,
to pay a creditor that holds a lien on
property the full value of the property at once to keep the
property and cancel the balance due. This may be a good
idea if you owe more that the property is worth. You may
even be able to get a loan to make the payment.
Example: You
have a car worth $7500 but owe $10,000. You can redeem
the car by paying the lender $7500 and thereby cancel the
balance. Redemption is an alternative to reaffirming a debt or surrendering
(giving up) the property. §722 TOP
↑
Redeem
(Foreclosure) To save
your home or other real estate by paying the bank or other creditor that has filed the foreclosure lawsuit the full amount of
its debt. Your chance to redeem is lost once your law day passes. (See the Stopping Foreclosure page.)
TOP ↑
Relief from Stay A
bankruptcy court order allowing a creditor
to ignore the automatic stay and
take some action to collect a debt, such
as starting or continuing a foreclosure
case. (See the Stopping
Foreclosure page.) §362(d)
TOP ↑
Schedules The
documents filed with your bankruptcy petition
that list your assets, debts, income and expenses. TOP ↑
Secured
Creditor A creditor
who has a right to some of your property in order to guarantee
your payment of a loan. Examples of secured creditors
are a bank that holds a mortgage to
your house, a finance company that holds the title to your
car, and a hospital that has filed a judgment lien
on the land records against your home. TOP ↑
Secured Debt
Money
you owe where the payment is
guaranteed by a right to some of your property. Examples
include a mortgage on your house or
other real estate, a car loan where the bank holds the title
to your car, and a judgment lien
filed on the land records by someone who successfully sued you
to collect a debt. §506 TOP ↑
Stay
An order of a court forbidding something to happen until the
court lifts the order or some specified event happens.
When you file bankruptcy, an automatic
stay enters forbidding your creditors,
with certain exceptions, from taking action to collect debts, such as starting or continuing a foreclosure. TOP ↑
Strict
Foreclosure
A lawsuit filed in state court by a bank or other
holder of a mortgage to have the court
transfer to the bank (or other mortgage holder) the title to
the home or other piece of real estate that secures the
mortgage if the owner of the property does not pay off the
mortgage in full (redeem) before a
certain deadline. The deadline, known as the law day, is set by the court when it
enters judgment.
If there are other mortgages or liens
against the property, the holder of these mortgages or liens
also get law days. When the last law day passes, it is
then too late to file a bankruptcy to save the property from
foreclosure. (See the Stopping Foreclosure
page.) TOP ↑
Summary
Judgment A judgment
that a court can enter without holding a trial if the court
believes that is has enough information from affidavits and
other documents to decide the case. To enter summary
judgment, the court must decide that the affidavits and
documents show that there is
no genuine issue of material fact, that is, there are no facts
that would require a trial to prove. TOP ↑
Trustee
See Bankruptcy Trustee. TOP ↑
Unsecured
Creditor A person or company that does
not have any rights to property to guarantee payment of a
debt. TOP
↑
