Plain-English explanations of common bankruptcy terms—so you can follow the process with more clarity and less stress.
Legal language can feel intimidating, especially when something urgent is happening. This glossary explains the bankruptcy terms clients ask about most often, without legal jargon or pressure. If you’re reading an article, FAQ, or court notice and see a word you don’t recognize, this page is here to help.
A court-ordered pause on most collection activity that begins when a bankruptcy case is filed. It usually stops wage garnishments, lawsuits, foreclosure actions, and collection calls right away, with some exceptions.
A legal action that allows funds in a bank account to be frozen or seized to satisfy a judgment. Bankruptcy can often stop further levies.
A legal process that helps individuals or businesses eliminate or reorganize certain debts under federal law. The goal is to provide financial relief and a structured path forward.
A type of bankruptcy that eliminates qualifying unsecured debts, such as credit cards or medical bills. Most Chapter 7 cases are completed within a few months.
A type of bankruptcy that creates a court-approved repayment plan, typically lasting three to five years. It is often used by people with steady income who need time to catch up on payments.
A person or company to whom money is owed. Creditors may include banks, credit card companies, medical providers, or collection agencies.
The legal elimination of qualifying debts at the end of a bankruptcy case. Once a debt is discharged, you are no longer personally responsible for paying it.
A debt that can be eliminated through bankruptcy. Common examples include credit cards, medical bills, and unsecured personal loans.
Legal protections that allow you to keep certain property during bankruptcy, such as a home, vehicle, retirement accounts, or household goods. Exemptions vary by situation and location.
A legal process where a lender takes possession of a home after missed mortgage payments. Bankruptcy can temporarily stop foreclosure and may provide options to address past-due amounts.
A court-ordered process that allows money to be taken from wages or bank accounts to pay a debt. Bankruptcy often stops garnishment for most consumer debts.
A court ruling that confirms a creditor is legally owed a debt. Judgments can lead to wage garnishment, bank levies, or liens if not addressed.
A legal claim placed on property to secure payment of a debt. Common examples include mortgage liens or judgment liens.
A financial calculation used to determine eligibility for Chapter 7 bankruptcy. It compares household income and expenses to established guidelines.
A debt that generally cannot be eliminated through bankruptcy, such as child support, alimony, and most student loans.
The formal paperwork filed with the bankruptcy court to start a case. Filing the petition triggers the automatic stay in most situations.
Certain debts that receive special treatment in bankruptcy, such as child support, alimony, and some taxes. These debts are often not dischargeable.
A court-approved schedule for paying debts over time in Chapter 13 bankruptcy. Payments are based on income and reasonable expenses.
A voluntary agreement to continue paying a specific debt after bankruptcy, usually for a vehicle or other secured property. These agreements require court approval.
A debt backed by property, such as a mortgage or auto loan. The property serves as collateral if payments are not made.
A required bankruptcy document that lists financial history, income sources, transfers, and other disclosures. Accuracy is important.
A court-appointed individual who oversees the bankruptcy case. The trustee reviews paperwork, administers assets if necessary, and ensures the process follows the law.
A debt that is not tied to specific property, such as credit cards, medical bills, or personal loans. These debts are often discharged in bankruptcy.
A bankruptcy case initiated by the individual or business seeking relief, rather than by creditors.
A form of garnishment where money is withheld directly from a paycheck. Filing bankruptcy usually stops wage garnishment for most consumer debts.
A form of garnishment where money is withheld directly from a paycheck. Filing bankruptcy usually stops wage garnishment for most consumer debts.
Understanding the language is often the first step toward feeling more in control.
If a term here connects to something you’re experiencing, you don’t have to figure it out alone—clear answers are available when you’re ready.
