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Photo of attorneys Shelley Slafkes and Bruce Levitt
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​Helping You Understand Common Bankruptcy Terms

For the attorneys at Levitt & Slafkes, P.C., in Maplewood, New Jersey, bankruptcy law is second nature. But our clients need clear and easy to understand explanations when they seek answers about their situation. We can help and have assembled a list of common bankruptcy terms for our clients in Essex County and throughout New Jersey.

Adversary proceeding
A lawsuit filed in the bankruptcy court that is related to the debtor’s bankruptcy case. Examples are complaints to determine dischargeability and complaints to determine the extent and validity of liens.

Things that you own or have a legal interest in that have value. Houses, cars, bank accounts, cash, household goods and furnishings are all considered assets, even if you are making payments on them.

An agreement to continue performing duties or actions under a specific contract or lease.

Automatic stay
An injunction granted by the courts or a judge that automatically stops lawsuits, foreclosures, wage garnishment and most collection activities against the debtor immediately following the filing a bankruptcy petition.

A legal procedure that seeks to resolve the debt problems of individuals and businesses. It specifically refers to a case filed under of the Chapters of the United States Bankruptcy Code.

Bankruptcy Code
The Bankruptcy Code is found in Title 11 of the United States Code. This is the source of the bankruptcy law.

Bankruptcy estate
All legal or equitable interests in property, that the person filing bankruptcy (known as the debtor) has at the time they file bankruptcy.

Bankruptcy judge
A judicial officer of the U.S. District Court who has decision-making powers in federal bankruptcy matters.

Bankruptcy petition
Legal papers filed with the bankruptcy court that start a bankruptcy case. There is an official form for bankruptcy petitions.

Bankruptcy trustee
A private individual or corporate entity appointed to represent the bankruptcy estate and the debtor’s creditors’ interests in Chapter 7 and Chapter 13 cases.

Business bankruptcy
A bankruptcy case where the debtor is a business, an individual with stake in a business and/or an individual involved in a business and those debts were accumulated for business purposes.

Chapter 7
In a Chapter 7 bankruptcy case, a debtor’s unsecured debts (usually credit cards, doctor’s bills and personal loans) are wiped out. Most people can keep their home, car and all of their belongings, but if you can’t bring your mortgage or car payments current quickly, you may lose the house or car.

Chapter 11
A type of bankruptcy usually involving a corporation or partnership where the party seeks to reorganize their debts in order to pay them back. A Chapter 11 debtor will propose a reorganization plan that seeks to repay creditors over time all while maintaining business operations. Individuals or people in business are eligible to seek Chapter 11 relief.

Chapter 13
This chapter of the bankruptcy code allows individuals with a regular income to adjust their debts in accordance with a repayment plan. Often referred to as a “wage earner” plan, Chapter 13 allows a debtor to keep their property and use their disposable income to pay debts over time, usually over the course of three to five years.

Chapter 13 plan
When a person files for Chapter 13, he or she proposes a plan to the court to repay creditors some or all of the money they are owed. The Chapter 13 plan must be approved by the court at the Chapter 13 confirmation hearing.

Chapter 13 trustee
A person appointed to administer a Chapter 13 case.

In bankruptcy cases, a creditor, or someone to whom you owe money, files a proof of claim to tell the court how much you owe.

Approval of a Chapter 13 reorganization plan by a bankruptcy judge.

Confirmation hearing
In a Chapter 13 case, this is a court hearing for the judge to approve your Chapter 13 plan. In many cases, it is not necessary for you to appear for this meeting as your attorney works things out in advance with the Chapter 13 trustee.

Consumer bankruptcy
A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.

Consumer debts
Debts accrued due to personal needs as opposed to business needs.

A person or business that claims it is owed money by the debtor.

Credit counseling
Generally refers to two events in individual bankruptcy cases:

  1. The counseling that can occur online from a nonprofit budget and credit counseling agency that individual debtors must complete before filing under any chapter of the bankruptcy code.
  2. The “instructional course in personal financial management” debtors must complete as part of Chapters 7 and 13 bankruptcies before their discharged debt may be entered with the court.

A person who has filed a petition for relief under the Bankruptcy Code.

Money that is owed.

An individual or business against who a lawsuit has been filed.

The legal term for wiping out debts through bankruptcy. When a debt is discharged, it cannot be legally collected, although a lien that secures the debt is not automatically wiped out.

Dischargeable debt
A debt in which the debtor’s personal liability is allowed, under the Bankruptcy Code, to be eliminated.

Disclosure statement
A document written by the Chapter 11 debtor or other Chapter 11 plan proponent that is designed to provide “adequate information” to creditors, so they can better evaluate the Chapter 11 reorganization plan.

Disposable income
Income that is not reasonably necessary for the maintenance or support of the debtor or dependents. If the debtor operates a business, disposable income is defined as those amounts over and above what is necessary for the payment of ordinary operating expenses.

Exempt assets
Property and assets that do not have liens against them that a debtor is allowed to keep during bankruptcy proceedings. The assets are free from the claims of creditors during bankruptcy proceedings.

Fraudulent transfer
Transferring a debtor’s property with the intent to defraud a creditor or with the intent to receive less than the property’s value.

Fresh start
The of being of a debtor after bankruptcy, since the debtor is free of most, if not all, debts.

Joint petition
One bankruptcy petition that is filed together by a married couple.

The sale of a debtor’s property where the proceeds are used to pay off creditors.

Means test
Section 707(b)(2) of the bankruptcy code applies a “means test” that determines whether or not an individual debtor’s Chapter 7 filing is an abuse of the bankruptcy code. Depending on the findings after the means test, a bankruptcy case may be dismissed or a conversion of the case (generally to Chapter 13) may be had.

A request by a litigant to a judge for a decision on an issue relating to the case.

Motion to lift the automatic stay
A request submitted by a creditor that allows them to take action against the debtor or their property that would otherwise be prohibited by an automatic stay.

No-asset case
A Chapter 7 bankruptcy in which there are no assets from which to satisfy any portion of a creditors’ unsecured claims.

Nondischargeable debt
A debt that is not eligible to be eliminated in bankruptcy. Examples include debts for alimony or child support, certain taxes, debts for most government-funded or guaranteed educational loans or benefit overpayments, and debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs.

Nonexempt assets
Property of a debtor that can be liquidated to satisfy claims of creditors.

Objection to discharge
A trustee’s or creditor’s objection to the debtor being released from his or her debts.

The document that when filed with the bankruptcy court, starts the bankruptcy case. Events that happen before the petition is filed are called “pre-petition” and events that happen after the petition is filed are called “post-petition.”

Post-petition transfer
A transfer of the debtor’s property made after the commencement of a bankruptcy case.

Preferential debt payment
“A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor’s Chapter 7 case.” *

“The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full.” *

Priority claim
“An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.” *

Proof of claim
The document that creditors file with the bankruptcy court stating how much the creditor is owed and the reason the debtor owes this money.

Property of the estate
All of the debtor’s legal or equitable interests in property as of the time the bankruptcy petition is filed.

To assume personal liability after bankruptcy for a debt that would otherwise be discharged in the bankruptcy case.

Reaffirmation agreement
An agreement by a “debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral, such as a vehicle that would otherwise be subject to repossession.” *

A procedure in a Chapter 7 case whereby a debtor removes a secured creditor’s lien on collateral by paying the creditor the value of the property. The debtor may then retain the property.

Lists submitted by the debtor “along with the petition (or shortly thereafter) showing the debtor’s assets, liabilities, and other financial information. There are official forms a debtor must use.” *

Secured creditor
A creditor whose loan is secured by collateral. If you don’t pay, the creditor can take the collateral. Most mortgages and car loans are secured and if you do not make the payments, they can foreclose on the house or repossess the car.

Secured debt
“Debt backed by a mortgage, pledge of collateral or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.” *

Statement of financial affairs
“A series of questions the debtor must answer in writing concerning sources of income, transfers of property and lawsuits by creditors. There is an official form a debtor must use.” *

Statement of intention
“A declaration made by a Chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.” *

341 meeting
A meeting of creditors at which the debtor is questioned under oath by a bankruptcy trustee about their financial affairs, and the bankruptcy petition they filed. Although allowed to attend, creditors rarely attend. The debtor’s lawyer attends the meeting.

Unsecured claim
A claim or debt, such as a lien or mortgage, that does not assure payment to a creditor in the event the borrower defaults on the claim or debt.

Wage garnishment
A nonbankruptcy legal proceeding whereby a plaintiff or creditor seeks to have part of the debtor’s future wages paid to the creditor for a debt owed to the creditor.

We Understand the Bankruptcy Laws and Can Help You, So Call Now

Levitt & Slafkes, P.C., in Maplewood, New Jersey, is a group of skilled attorneys who understand bankruptcy law and know how to successfully guide clients through the legal process. We are attentive, provide thorough explanations and are prepared to help. Contact our law firm online or call us at 973-323-2953.

* Definition of terms provided by the U.S. Bankruptcy Courts’ bankruptcy basics glossary page

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.