What does it all mean?
If you've been doing some internet research about bankruptcy you've probably discovered a lot of confusing terms. Here are some helpful definitions.
A creditor is somebody to whom you owe a debt.
A debtor is a person who owes a debt. "Debtor" is the term used to describe someone who has filed bankruptcy.
In legal terms, a discharge of a debt is an elimination of the legal obligation to pay it. In bankruptcy, at the end of your case, a federal bankruptcy judge signs a "discharge" order which is just a type of court order stating you no longer owe the debts.
In 2005, congress changed the bankruptcy laws to require that everyone seeking to file bankruptcy must complete a form called a means test
. In short, the means test is a way of looking at your income to see if you earn too much money to qualify for a chapter 7
bankruptcy. If you do, you must instead file a chapter 13
and pay back at least a (usually small) portion of your debts.
Meeting of Creditors
Whether you file a chapter 7 or a chapter 13 bankruptcy, you will have to attend a meeting of creditors. This might sound intimidating but the truth is these meetings are usually very short (just a few minutes) and ordinarily none of your creditors even bother to show up. Instead, it's just a chance for the trustee assigned to your case to ask you any questions he or she might have about your financial circumstances. In Utah, the meeting of creditors usually happens around 30-45 days after your case is filed.
This is the type of debt that will survive your bankruptcy and you will still owe it after your case is closed. The law dictates that most taxes, child support, alimony, fees or fines owed to governmental agencies, and student loans are all non-dischargeable. Just about everything else is "dischargeable" and will be eliminated in your bankruptcy.
This is the category of debt that most commonly includes taxes and child support. The reason taxes and child support are called priority is that if your bankruptcy trustee takes some of your property to satisfy your debts (or if you are voluntarily paying debts in a chapter 13), taxes and child support get paid first before unsecured debt.
If you have property that you are purchasing over time, such as with a car loan, home loan, or other installment payment agreement, the creditor
might ask you to sign a re-affirmation agreement. By signing the agreement, you are re-committing yourself to make the payments as set forth in the agreement in return for keeping the collateral. Not all secured creditors require these agreements. In some cases, as an inducement to get you to sign the agreement, the creditors will give you better terms, lower your interest rate, or forgive a few months of late payments in the re-affirmation agreement.
This is debt you owe when you are purchasing something such as a car or home. We say that the loan is "secured by" the collateral you are buying. In almost all secured loans the creditor has the right to repossess the property if you don't stay current on your payments. Here locally in Utah, loans with RC Willey, Les Schwab Tires, and Morgan Jewelers are common examples of secured debts.
A trustee is assigned to each bankruptcy case. The trustee is not a bankruptcy judge but is instead an attorney appointed by the court to examine each case and:
- ensure the papers have been properly completed and filed
- in a chapter 7, look for assets that might be taken from the debtor
- in a chapter 13, receive your monthly bankruptcy payment and distribute it to your creditors
This is debt you owe but for which you have not pledged any collateral. Credit cards, medical bills, payday loans, repo deficiency balances and broken lease agreements are good examples of unsecured debts. All of this kind of debt is discharged (eliminated) in a chapter 7 bankruptcy.
Utah Bankruptcy Clinic
1140 36th St., Suite 205
Ogden, UT 84403