Bankruptcy Legal Terms Defined
Filing for bankruptcy can be an overwhelming experience, especially if you’re unfamiliar with the legal terminology involved. At Kostopoulos Bankruptcy Law, we are committed to providing clear and reliable guidance so you can make informed decisions about your financial future. Below is a comprehensive glossary of essential bankruptcy legal terms relevant under Michigan law.
Administrative Claim: A claim for expenses incurred in the administration of a bankruptcy estate, such as trustee fees and legal costs.
Adversary Proceeding: A lawsuit filed within a bankruptcy case to resolve issues like fraud allegations or disputes over the dischargeability of debts.
Automatic Stay: A court order that immediately stops creditors from collecting debts once a bankruptcy petition is filed.
Assets: Property or possessions owned by an individual or business that may be used to pay debts in a bankruptcy case.
Assumption of Debt: An agreement where one party takes on the responsibility of another party’s financial obligations.
Bankruptcy Code: The set of federal laws governing bankruptcy proceedings in the United States.
Bankruptcy Discharge: A court order that releases a debtor from personal liability for certain debts, preventing creditors from further collection efforts.
Bankruptcy Estate: All legal or equitable interests of the debtor in property at the time of filing.
Bankruptcy Trustee: A court-appointed individual who oversees a bankruptcy case, ensuring assets are distributed fairly to creditors.
Chapter 7 Bankruptcy: A form of bankruptcy that liquidates non-exempt assets to pay creditors and discharges most unsecured debts.
Chapter 9 Bankruptcy: A form of bankruptcy available to municipalities, allowing them to reorganize debt while continuing operations.
Chapter 11 Bankruptcy: A type of bankruptcy typically used by businesses to restructure debts while continuing operations.
Chapter 12 Bankruptcy: A specialized bankruptcy for family farmers and fishermen to restructure debt.
Chapter 13 Bankruptcy: A bankruptcy option that allows individuals with regular income to create a repayment plan over three to five years.
Claim: A creditor’s assertion of a right to payment from the debtor’s bankruptcy estate.
Creditor: Any person or entity to whom the debtor owes money.
Credit Counseling: A mandatory course that debtors must complete before filing for bankruptcy to explore alternatives and financial management strategies.
Cramdown: A bankruptcy provision allowing a debtor to reduce the principal balance of certain secured debts to the fair market value of the collateral.
Debtor: A person or entity that owes money and files for bankruptcy protection.
Debt Reaffirmation: An agreement where the debtor chooses to continue paying a specific debt despite the bankruptcy discharge.
Dischargeable Debt: Debt that can be eliminated through bankruptcy, meaning the debtor is no longer legally obligated to repay it.
Disposable Income: The amount of income left after paying essential expenses, often used in determining eligibility for Chapter 13 repayment plans.
Equity: The value of an asset after subtracting outstanding debts secured by the asset.
Exempt Property: Assets that a debtor is allowed to keep under state or federal bankruptcy exemption laws.
Executory Contract: A contract in which both parties still have obligations to perform, which the debtor must assume or reject in bankruptcy.
Foreclosure: A legal process where a lender takes possession of a property due to unpaid mortgage debt.
Fraudulent Transfer: A transfer of assets intended to hinder, delay, or defraud creditors, which may be reversed by the bankruptcy court.
Garnishment: A legal process where a portion of a debtor’s wages or bank account is withheld to satisfy outstanding debts.
Homestead Exemption: A legal provision that allows a debtor to protect a certain amount of home equity from creditors in bankruptcy.
Income-Based Repayment Plan: A debt repayment plan based on a debtor’s disposable income, typically used in Chapter 13 cases.
Involuntary Bankruptcy: A situation where creditors force a debtor into bankruptcy by filing a petition with the court.
Judgment Lien: A court order that gives a creditor the right to seize a debtor’s property to satisfy a debt.
Lien: A legal claim against an asset to secure a debt.
Liquidation: The process of selling assets to pay off creditors in Chapter 7 bankruptcy.
Means Test: A financial evaluation to determine whether a debtor qualifies for Chapter 7 bankruptcy based on their income and expenses.
Motion to Lift Stay: A request from a creditor to remove the automatic stay and proceed with collection efforts.
Non-Dischargeable Debt: Debt that cannot be eliminated through bankruptcy, such as student loans, certain taxes, and child support obligations.
Objection to Discharge: A creditor’s or trustee’s challenge to prevent a specific debt from being discharged in bankruptcy.
Priority Debt: Debt that must be paid before other claims, such as child support, taxes, and certain wages owed to employees.
Proof of Claim: A formal statement filed by a creditor indicating the amount of money owed by the debtor.
Repossession: The act of a creditor taking back property, such as a car, due to non-payment of a secured loan.
Redemption: A process allowing a debtor to retain secured property by paying its fair market value instead of the full loan amount.
Reorganization: A bankruptcy process, typically under Chapter 11 or Chapter 13, where debts are restructured rather than liquidated.
Secured Debt: A debt backed by collateral, such as a mortgage or auto loan.
Statement of Financial Affairs: A bankruptcy document outlining the debtor’s financial history, transactions, and liabilities.
Trustee’s Sale: A foreclosure sale where a trustee sells a property to recover unpaid debts.
Unsecured Debt: A debt not backed by collateral, such as credit card balances or medical bills.
Undersecured Debt: A secured debt where the collateral’s value is less than the debt owed.
Voluntary Bankruptcy: A bankruptcy case initiated by the debtor filing a petition.
Wage Garnishment: A legal process where a creditor deducts a portion of the debtor’s wages to satisfy a debt.
Contact Kostopoulos Bankruptcy Law for Trusted Legal Guidance
Drowning in debt? You don’t have to face it alone. At Kostopoulos Bankruptcy Law, we have a proven track record of helping individuals and families regain control of their financial future. Our dedicated bankruptcy attorneys will fight to protect your assets, stop creditor harassment, and secure the fresh start you deserve. Time is critical—contact us now at 877-969-7482 for a free consultation and take the first step toward lasting financial relief.