Bankruptcy Terms to Know
Jan. 3, 2024
We understand that facing bankruptcy can be an overwhelming and stressful experience. The legal jargon, the paperwork, and the uncertainty about your financial future can all make you feel like you're in over your head. But we're here to help. At the Atchley Law Firm, PLC, we believe that knowledge is power. We're here to help you understand the complex terms and processes involved in filing for bankruptcy. With a clear understanding of these terms, you'll be better equipped to make informed decisions about your financial future.
Chapter 7 Bankruptcy: What You Need to Know
Let's start with Chapter 7 bankruptcy. This type of bankruptcy is often referred to as "liquidation bankruptcy" because it involves selling off your nonexempt assets to repay your creditors. If you're struggling with a low income and unable to commit to a repayment plan, Chapter 7 could be the right choice for you. It's a more efficient process compared to other types of bankruptcy, allowing you to move forward quickly.
However, it's important to remember that Chapter 7 requires you to give up your nonexempt property. The proceeds from the liquidation process will be used to pay off your debts. While this may seem like a daunting prospect, it can be an effective way to wipe the slate clean and start fresh. We are here to guide you through every step of the process, ensuring that you're aware of all your options and their implications.
Chapter 13 Bankruptcy: An Overview
On the other hand, if you have a stable income and wish to protect your assets from liquidation, Chapter 13 bankruptcy might be more suitable. Unlike Chapter 7, Chapter 13 involves creating a repayment plan that lasts three to five years. It's crucial to understand that Chapter 13 isn't a quick fix. It requires commitment and discipline as you stick to a long-term repayment plan. This type of bankruptcy is more time-consuming but allows you to retain your assets while gradually paying off your debts.
Additional Terms
It's our mission at Atchley Law Firm, PLC, to equip you with the knowledge you need to navigate this process confidently. Here is a comprehensive list of key bankruptcy terms for your reference:
Asset Protection: Techniques employed to shield one's wealth from creditor claims.
Automatic Stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and collection activities against you, your property, and your estate once a bankruptcy petition is filed.
Bankruptcy: The legal proceeding initiated by individuals or corporations unable to pay their debts, seeking relief from part or all their obligations.
Bankruptcy Trustee: A person appointed by the court to oversee your bankruptcy case. They are responsible for selling your nonexempt property to repay your debts and distributing the proceeds to your creditors.
Chapter 7: A bankruptcy type characterized by the liquidation of nonexempt assets to repay creditors. It's typically suited for low-income individuals unable to repay their debts.
Chapter 13: A distinct bankruptcy type that involves the creation of a repayment plan for debt settlement over a specific period without the need for asset liquidation. It's often suitable for individuals with a steady income capable of making consistent monthly debt repayments.
Creditor: A person or institution to whom money is owed.
Debtor: A person or institution that owes money.
Discharge: The release of a debtor from most, if not all, of their debts. After a discharge, creditors cannot take any further action against the debtor to collect the debts.
Estate Planning: The preparation process for the allocation of an individual's wealth and assets post-death.
Exempt Property: Assets that are protected under the bankruptcy law and cannot be sold off to repay creditors. These may include a certain amount of equity in your home, car, or other personal property.
Means Test: A financial assessment used to determine eligibility for Chapter 7 bankruptcy. It compares your income against the median income for equivalent households in your state.
Nonexempt Property: Assets that the bankruptcy trustee can sell to repay your creditors.
Secured Debt: Debt backed or secured by collateral to reduce the risk associated with lending. Examples include car loans and home mortgages.
Unsecured Debt: Debt for which credit was extended based solely on the creditor's assessment of the debtor's future ability to pay. Examples include credit card debt, medical bills, and utility bills.
Wage Garnishment: A court-ordered process where a portion of your earnings is set aside to offset your debts.
Navigate Through Bankruptcy With Knowledge
Navigating through bankruptcy can be complex, but understanding these terms is a good first step toward regaining control of your financial future. It's crucial to remember that you're not alone in this journey. At Atchley Law Firm, PLC, our lawyer is committed to standing by your side every step of the way, serving those in Mesa, Arizona, and the neighboring areas, including Gilbert, Tempe, Chandler, the Phoenix Metro Area, and more. Reach out to our skilled bankruptcy attorneys today for support.