Bankruptcy Glossary

Glossary of Terms

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Automatic StayThe term automatic stay refers to the hold that is put on all collections activity upon the filing of any bankruptcy petition.
DischargeWhen a bankruptcy case is completed, most of the filing person’s debts are discharged. When a debt is discharged, the debtor is no longer legally obligated to pay that debt.
TrusteeA trustee is an attorney hired by the federal government to oversee the bankruptcy estate. In Chapter 7 cases, the trustee reviews the bankruptcy petition, interviews debtors a the Meeting of Creditors, and would be one of the people who could raise an objection to the bankruptcy. In Chapter 13 cases, the trustee reviews the proposed payment plan, distributes any money that the debtor pays into the court amongst the creditors, and more or less oversees the case.
Automobile DeficienciesWhen an automobile is repossessed, the creditor often will sell that vehicle at auction. When this happens, the creditor usually does not receive full value for the vehicle. What funds the creditor does receive are applied toward the debtor’s loan. If the amount received by the creditor from the sale of the vehicle is less than the amount that the debtor owed on the vehicle, the creditor can still pursue the debtor for the difference. The difference in the amounts is called a deficiency.
PetitionThe petition is the actual paperwork submitted to the court which asks the court for the discharge of the debt and outlines the debtor’s assets, income and debt. The filing of the petition begins the bankruptcy case.
SummonsA summons is a document sent out by the court, which orders a person to appear in court.
GarnishmentsAfter a creditor has receive a judgment, that creditor may then go to the debtor’s employer and ask that a portion (up to 25% for creditors other than the IRS) of the debtor’s wages be given directly to the creditor holding the judgment. Only one creditor can garnish a person’s wages at one time.
JudgmentsA judgment is a court order in which a judge finds in favor of a creditor. The judgment basically states that the creditor holds a valid clam against a debtor.
Bankruptcy EstateUpon filing a bankruptcy case, all of the assets of the debtor pass into the bankruptcy estate. The bankruptcy estate is managed by the trustee. Under either state or federal law, a debtor is allowed to exempt some assets. Exempting an asset is basically removing that asset from the bankruptcy estate and thereby retaining ownership of that asset.
Meeting of CreditorsAbout one month after a bankruptcy petition is filed, a hearing is held where the debtor goes before the trustee assigned to his case. The debtor takes an oath and then the trustee asks the debtor questions regarding his or her financial circumstances. At the hearing, creditors are allowed to ask the debtor questions as well. Usually this hearing lasts an average of five minutes.
Post-PetitionThe time from when the bankruptcy petition was filed, going forward.