Discharge - A bankruptcy term that refers to when the US Federal Bankruptcy court certifies that the debtor has met all the necessary requirements to complete the bankruptcy. It release debtor from his/her obligation to repay debts that were or might have been proved in the bankruptcy proceeding.
Dismissal - In bankruptcy, a dismissal of the case usually takes place when the Debtor has failed to fulfill or meet the necessary requirements to complete the bankruptcy and be awarded the discharge. Dismissal can be voluntary by the Debtor or involuntary when the Trustee or some other party in the bankruptcy proceeding moves for dismissal of the matter. A debtor's debts are reinstated in full as if the bankruptcy never took place. A dismissed bankruptcy is still reported by the credit bureaus and may be used to prevent debtor from refilling depending on the circumstances surrounding the dismissal. Essentially, the debtor is burdened with all the negatives of the bankruptcy without any of the benefits of relief. Most bankruptcies filed to save a home or property from foreclosure end up in dismissal because of bad advice.
Debtor - A party (individual or corporate entity) that is seeking relief from the bankruptcy court and/or a party that owes money.
Creditor - A party that issues/lends money or is owed money, also known as a Lender. These are usually corporations.
Automatic Stay - Any parties (creditors) seeking to collect from the debtor must immediately cease any and all pursuit of debtor upon reasonable notice of the bankruptcy filing. This automatically goes into effect at the time debtor files bankruptcy in any form (chapter 7, 11, 13, 9, etc). Failure of a creditor to cease pursuit after receiving notice of the bankruptcy is a violation of the bankruptcy stay. Depending on the situation, violations of the automatic stay by the creditor may carry damages and could be raised against creditors to reduce or offset repayments in Chapter 13 cases.
Lift the Automatic Stay - When a creditor that has a lien on property (home, car, boat, etc.) and has not been paid the amount it is owed under Bankruptcy's Chapter 11 or 13 plans, it has the right to ask the court to lift the automatic stay and allow the creditor to pursue the debtor for payment or for the property itself. This tends to occur with mortgaged real estate property or vehicles under a financing agreement or lease. Once the stay is lifted, the creditor/bank will generally file a civil suit in state court or continue with previously filed lawsuits, foreclosures for real estate and replevins for other types of personal property and vehicles.This is one of the primary reasons why EV Has, LLC advocates against the haphazard filing of bankruptcies in the pursuit of saving ones home. Filing bankruptcy to save the house is a futile attempt. Saving the home from foreclosure requires immediate attention and action in the foreclosure court by a competent attorney who focuses on foreclosure defense and will not be distracted by the lure of profitable bankruptcy filings.
Trustee - The United States Trustee Office is a component of the United States Department of Justice and is responsible for overseeing the administration of bankruptcy cases and private trustees under 28 U.S.C. §586 and 11 U.S.C. §101, et seq. The trustee’s mission is to promote integrity and efficiency in the nation’s bankruptcy system by enforcing bankruptcy laws, providing oversight of private trustees and maintaining operational excellence. Trustees also assist the US Attorney’s Office with identifying and investigating bankruptcy fraud and abuse.
Means Test - This is a bankruptcy standard determining whether a debtor qualifies for a Chapter 7 full discharge of all debts or must pursue a Chapter 13 repayment plan over 3 years or 5 years. The Means Test compares the debtor's income against the average household income by state. The Debtor seeking chapter 7 must fall below the Means test in order to qualify for a Chapter 7 bankruptcy full discharge of all debts. Due to intense lobbying efforts of the major credit card companies, Congress passed bankruptcy laws in 2005 that restricted debtors seeking a fresh start from filing Chapter 7 protection, and instead forces debtors into 3 or 5 year Chapter 13 As a result of the new bankruptcy laws, a majority of Chapter 13 bankruptcies fail to continue through to the end of the plan due to underlying financial problems the debtors faced prior to bankruptcy that were not resolved as intended by the bankruptcy filing.There are ways to qualify for Chapter 7 bankruptcy if a debtor does not fall below the means test. A qualified bankruptcy attorney must be able to go through all the possible ways to qualify for a Chapter 7 versus a Chapter 13. If the bankruptcy attorney cannot go through and identify ways to qualify for Chapter 7 with you, then find another attorney.
Security Interest (Secured Debt) - A financing arrangement where a creditor loans money to the debtor and, in exchange, the creditor may require the debtor to give an interest in the property to ensure payment on the debt. A debtor's default on the loan agreement may result in the creditor’s filing suit to take possession of the property. This usually takes the form of a mortgage on real estate or a car loan or car lease.
Unsecured Debt - A financing arrangement where a creditor lends money to a debtor without seeking any interest in property. The creditor is unable to attach or pursue specific property in the event of default.However, a creditor can file a collection lawsuit in state court seeking repayment of the unpaid debt. If the creditor is successful in court in proving their position and proving that the money was actually leant out, or was never paid, then the creditor is granted a judgment. Once judgment is entered against the debtor, the creditor can garnish wages or attach to property. It is critical to hire a competent attorney in these matters as many creditors and collections agencies file false or insufficient claims and pleadings. Unfortunately, because debtors fail to appear or even challenge the lawsuit, judgments are freely entered.
Chapter 7 - This is a full discharge of all of debtor's liabilities, and in some situations may also include a full liquidation of all assets as well (not including exempted assets). Exemptions vary by state and by assets, therefore you should speak to a qualified bankruptcy attorney.
Chapter 11 - This is for bankruptcy filings on behalf of corporations and/or individuals with asset values in excess of $1 Million. Chapter 11 requires a plan of reorganization approved by the creditors and the court. The case is much more involved than a Chapter 13 case and the legal fees tend to range from tens to hundreds of thousands of dollars. Major cases like the Kmart Bankruptcy, the auto industry and airline industry bankruptcies are filed under Chapter 11.
Chapter 13 - This type of bankruptcy requires a debtor to make timely monthly payments to the trustee under a plan authorized and approved by the court and the creditors over the course of 3 to 5 years. The payments will include payments to your attorney for his/her fees, the trustee's fees, court fees, and the creditor's attorneys fees and costs on top of the amount of the debt. For example, car payments and mortgage payments are generally equal to the monthly amounts originally owed prior to the bankruptcy. Loan modifications or reductions in payments on the mortgage or the car loan are not available in bankruptcy. Any reductions must be negotiated separately and usually out of court. See Loan Modifications. After all 36 or 60 payments are made and every technical requirement is met by the debtor, only then is debtor's unsecured debt discharged, along with any unpaid pre bankruptcy mortgage payments. Otherwise, the mortgage stays as it is and so do the payments. There are some benefits of possible lien stripping options depending on home valuations and mortgage liabilities. Speak to a qualified bankruptcy attorney who can explain this process to you in detail and then show you how it is applicable to your case. Remember, bankruptcy is a last resort and, even as such, it will not save your home. Only an effective foreclosure defense strategy implemented by a qualified foreclosure defense attorney can stop a foreclosure.
