Bankruptcy Legalese: Translated (Part 2)

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There are so many important legal terms related to bankruptcy that we felt it prudent to devote two entire posts in our Back to Basics series to the topic. Hence, today we present you with Part 2 of what we in the legal profession and our clients lovingly refer to as bankruptcy ‘legalese.’

  • 341 hearing – Also referred to as the Meeting of Creditors, this  event takes place 21 – 40 days from the date your bankruptcy case was filed. Your trustee will head up the 341 hearing, with the purpose of investigating the validity and dischargeability of your debts, as well as any exemptions you may have. This hearing is open to all of your creditors, and you are personally required to attend.
  • Adversary proceeding – Although rare, this is a lawsuit filed by you or one of your creditors (even potentially the trustee) during the course of your bankruptcy case. Technically, an adversary proceeding is part of your bankruptcy, but it is a separate case in its own right. Reasons for filing: suspected fraud, potential preference payments, questions about whether or not a debt is dischargeable and property that is jointly owned (and therefore must be split in order for the trustee to sell it).
  • Bankruptcy code – The group of laws put into place after the Bankruptcy Reform Act (1978) that govern the entire bankruptcy process.
  • Collateral – Property that is subject to a lien. An example is a home that has been mortgaged. The collateral is the home, while the mortgage is the lien. If a creditor has the right to any collateral, they are considered to be a secured creditor*. The Bankruptcy Code gives specific protection for secured creditors and the collateral they have an interest in.
  • Liquidation – While it may sound like something you’d do with a blender, in reference to bankruptcies, liquidation is the act of selling as much of the debtor’s property as possible in order to repay as many of their debts as possible prior to discharge (chapter 7).
  • Means test – Added to the Bankruptcy Code in 2005, the means test is used as a screening tool. This tool allows the bankruptcy court to determine whether or not you “qualify” to file for bankruptcy. The factors used to determine your bankruptcy worthiness include an average of your most recent six months of income in comparison to your state’s median income and the total amount of your unsecured debts. The means test helps prevent abuse of the bankruptcy process.
  • Secured creditor* – When you borrow money from a company without any collateral involved (credit card companies, your electric company, internet service providers, fitness centers, etc) – those creditors are considered to be unsecured. Secured creditors, then, are those that have a claim to some property that you own, like a car or house. As far as creditors are concerned, it is riskier to be unsecured. Secured creditors  can seize the property they have an interest in if you fail to make good on your payments to them.

You can learn more about the terms included in our Back to Basics series as well as additional important bankruptcy verbiage here. For more detailed information about a specific bankruptcy topic, be sure to search our bankruptcy blog or call us directly. Veitengruber Law is always more than happy to help you fully understand the New Jersey bankruptcy process.

 

Image credit: Caleb Roenigk
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One Response to Bankruptcy Legalese: Translated (Part 2)

  1. Pingback: Why did the Trustee Object to My Bankruptcy Discharge? | Veitengruber Law

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