A bankruptcy attorney should be able to explain the filings and proceedings to you in detail, but it will be beneficial for you to understand legal terminology as the case progresses.
Here are some important terms to know:
Attachment: A creditor's seizure or repossession of a debtor's property. It is authorized by a judge following the declaration of bankruptcy. Assets and bank accounts could be subject to attachment. The seized products are applied to the debt owed by the bankrupt individual. This is distinct from liquidation.
Inability to pay one's debts necessitates a person to go through the legal procedure of bankruptcy. A court-appointed trustee liquidates and distributes the person's assets to creditors.
Community debt is the debt incurred by one spouse for the benefit of the other. Each party may be responsible for community debt. Typically, it is repaid with proceeds from the sale of community property.
When the debt can no longer be enforced against the debtor. A creditor may use legal means, such as wage garnishment, prior to granting bankruptcy discharge. Once a debt has been discharged, the creditor may no longer attempt to collect it.
Exempt property: Items that can be retained by the debtor and are not subject to liquidation. Examples of exempt property include clothing, automobiles, and home furnishings.
Fair market value is an educated estimate of the selling price of an asset. Typically utilized for residential property. The fair market value differs from the original purchase price, which is not necessarily what an item is currently worth due to appreciation or depreciation.
The garnishment of a debtor's wages to satisfy an outstanding debt. When a person files for bankruptcy, however, wage garnishment ceases.
Indemnify: When one party promises to pay another's debt. In cases of bankruptcy, one spouse would assume responsibility for debts, while the other would remain unscathed.
Joint bankruptcy petition: A petition submitted jointly by a husband and wife.
The process of selling a debtor's assets. The sale proceeds are divided among creditors to settle debts.
Means test: Formula used to determine who is eligible to file for bankruptcy under chapter 7 and who must file under chapter 13 (requirement for those with excessive income to file under chapter 13).
Non-exempt assets: Assets that can be liquidated and used to pay creditors by a bankruptcy trustee. Non-exempt items vary by state, but typically include stocks and investments, a second vehicle or second vacation property, bank accounts, and non-work-related musical instruments.
Objection to exemptions: A trustee's or creditor's justification for certain items' exclusion from the liquidation procedure. Exemptions are intended to provide the individual filing for bankruptcy with the opportunity for a prosperous start after bankruptcy.
A document lodged in bankruptcy court by a creditor to support a claim and determine whether an unsecured creditor, such as a credit card company, will be paid.
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