Bankruptcy is designed to provide honest individuals with a fresh financial start by eliminating many of their debts through the process of liquidation or debt repayment. However, filing for bankruptcy can be difficult when you’re unfamiliar with the terminology. This article will discuss some of the terms commonly associated with bankruptcy law.
Bankruptcy itself refers to a federal court process which allows both consumers and businesses to eliminate or repay their debts. However, there are many different chapters of bankruptcy. For example, individuals or consumers may file for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, while businesses may take advantage of Chapter 11 or Chapter 15 Bankruptcy.
Dischargeable debts are those that can be wiped out after filing for liquidation bankruptcy or completing the Chapter 13 repayment plan. While there are certain exceptions, common dischargeable debts include credit cards, unsecured loans, car repossessions, mortgage bills, medical bills, unpaid utility bills, and foreclosure balances.
Exempt property may be kept even after filing for Chapter 7 Bankruptcy. Exempt assets include motor vehicles up to a certain value, necessary clothing and household goods, jewelry up to a certain value, pension plans, a portion of home equity, and a portion of unpaid but earned wages. With Chapter 7, the debtor is also not at risk for losing their public benefits such as public assistance, social security, or unemployment.
Non-exempt assets are those that are usually liquidated in Chapter 7 Bankruptcy, such as bank accounts, stocks, bonds, second vehicles or homes, expensive collectables, and family heirlooms.
Repossession occurs when a creditor or lender takes back the collateral on a secured debt, such as a vehicle when the car loan has not been paid.
Foreclosure is a legal process in which the lender has the right to sell your home in order to gain compensation for unpaid mortgage debts.