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Bankruptcy Terms Defined



Automatic Stay:

An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

Bankruptcy Code or Code:


The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.

Bankruptcy Estate:

All property or holdings of the Debtor at the time of the bankruptcy filing. This includes real estate and personal property like checking accounts and furniture, and property that the debtor has in interest in which is titled in someone else’s name.

Bankruptcy Petition:


The documents that make up the bankruptcy filing. Or, the papers filed with the Bankruptcy Court.

Confirmation Hearing

The hearing at bankruptcy court where a judge approves the repayment plan of the Debtor.

Current Monthly Income or “CMI”:

The court calculates a debtor’s average monthly income using the six calendar months prior to the filing. Current monthly income includes income from all sources such as work and regular help from friends or family. It does not include social security income. This number is used to determine eligibility for Chapter 7 cases and repayment amounts in Chapter 13 cases. 

Discharge:

A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.)

Exempt Property:

Property owned by the Debtor(s) which is protected from the creditors in a bankruptcy. For example, in Colorado you can have $75,0000 or $1050,0000 exemption for equity in a home where you live.

Executory Contract:

A contract which has not been fully performed, or is not yet “over.” An example would be a lease where you are still living.

Means Test:

Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13).

Non- Exempt Assets:

This is property above the exempt amounts, which could be sold by the court to pay creditors. In Chapter 13 cases the debtor(s) must pay at least this amount to the court in order to keep the property.
   
Order for Relief:

An order from the court stating that the property and debts of the debtor are under the control of the bankruptcy court.

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:

A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)

Preference:

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
 
Reaffirmation:

An agreement by the debtor in a Chapter 7  to be liable for a contract or debt even though the debt is cancelled by the bankruptcy court. By their nature these are signed after the bankruptcy filing.

341 Meeting:

The meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called creditors’ meeting.