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Bankruptcy Definitions

Bankruptcy Definitions

Arrears - Past due amounts on payments owed to a creditor, usually payments due on a secured debt such as a vehicle or house.

Assets - Any property, including real estate, personal property, and any contingent property (money that may be received from a lawsuit or inheritance) that a debtor owns or has a right to.

Creditor - Someone (a person or company) who is owed money by a debtor.

Debtor - Someone (a person or a company) who owes money to a creditor.

Discharge - An order from a bankruptcy court that releases a debtor from any obligation to pay a debt. There are certain debts that are not dischargeable in bankruptcy. See here for a list of common debts that are not dischargeable.

Exempt Property - Property of the debtor that cannot be seized by a creditor or trustee in a bankruptcy case.

Fair Market Value - The amount someone is willing to pay at a particular point in time for an asset. For personal property, the amount someone would give you for it at a garage sale. For vehicles, the Western District of Texas requires the NADA Guide clean retail value. For real property it is sometimes useful to use the tax appraisal district amounts, but sometimes an actual appraisal is much more accurate.

Median Income - The income level for a particular household size at which half of households make less and half of households make more.

Plan - A plan of reorganization filed in a Chapter 13 bankruptcy case. Once approved by the Court it is binding on all creditors listed in the bankruptcy.

Reaffirm - To agree with a creditor to continue to repay a debt (usually secured, but not always), either on the same or different terms, that would otherwise be discharged.

Redeem - To agree with a creditor to purchase property outright for fair-market value.

Secured Debt - A debt protected by collateral (most often a vehicle or home). In the event the debtor fails to pay the debt, the creditor can take the property and sell it to pay down the debt.

Surrender - To agree to give collateral back to a creditor in a bankruptcy, typically resulting in the underlying debt being discharged.

Trustee - A third party (usually an experienced bankruptcy attorney) who is responsible for protecting the interests of the unsecured creditors in your case.

Unsecured Debt - A debt that has no collateral associated with it.