BANKRUPTCY WORDS YOU NEED TO KNOW
If you are thinking about filing for bankruptcy, it's a good idea to become familiar with some of the common everyday words that are used in bankruptcy law. By learning what these words and phrases mean, you will be a more educated client, and you will have a better understanding of what bankruptcy is all about and how the bankruptcy process can help you get a new lease on life, decrease your stress, and totally wipe out your bills if you do it the right way
So let's get started with some of the most common words and phrases you will hear and read about as you prepare for and go through the bankruptcy process.
ARREARS - this term relates to the amount of money you are behind on your particular bills. For example, if you haven't paid your mortgage payment of $2000 for the last 4 months, your arrears are $8000. This is the amount that you will have to pay to catch up and be fully current on your debt to the mortgage company.
AUTOMATIC STAY - this is a very powerful tool for people who file bankruptcy. Once the case is filed, you are fully protected from bill collectors, lawsuits, foreclosures, wage garnishments, bank levies, etc. The automatic stay fully protects you, and it shifts the balance of power from where the bill collectors previously had power over you, now you have the power over the bill collectors because the automatic stay gives you all this protection. It's sort of like an invisible shield of armor that gives you both power and protection.
BANKRUPTCY PETITION - the document that has to be completely prepared and filed with the court so that your bankruptcy is officially started. Once the petition has been filed, the automatic stay goes into effect and you now are clothed with complete protection from your creditors.
CHAPTER 7 - it's usually over in about 4 months. The goal is to wipe out all of your debts, keep your property, and get a "discharge", meaning that your debts have been forgiven by the bankruptcy court.
CHAPTER 13 - cases usually go on for 3 to 5 years. You can usually wipe out all of your unsecured debts, and pay back any arrears on mortgages or car loans. There's a lot more to it, and I've got several blogs and videos that fully explain the process and power of Chapter 13.
CONFIRMATION - this is one of the goals of Chapter 13 - you want to get your plan approved or "confirmed" by the Court. This means that you now are well on your way to wiping out many of your debts and paying certain debts that have to be paid back.
CREDITOR - when you owe money, the people or companies you owe the money to are your "creditors".
CREDIT REPAIR - if you've got lousy credit, maybe some honest credit repair company can give you advice on how you can increase your creditworthiness. Beware, however, because many of these so called "credit repair" companies are scams, and you just might be throwing your money away.
CREDIT REPORT - you can usually get yours for free by going to www.annualcreditreport.com. It should give you a listing of all the creditors you owe money to, and a report on your credit history.
DEBTOR - if you owe money to somebody, they are your creditor, and you are the debtor. This term is also used to refer to the person or company that files for bankruptcy.
DEFAULT - when you don't make your payments on time, you are behind and therefore you are in "default" on your obligation to make timely payments. This word is also used to describe what happens in the process when you are being sued. For example, in New Jersey, if someone sues you for money, you normally have 35 days to respond to the lawsuit by filing an Answer to the Complaint. If you don't file your Answer on time, you can lose the case by "default". It's sort of like not showing up for a professional football game - you lose the game by default or forfeit. It's like giving up without even trying.
DISCHARGE - this is a very important word to you if you are a bankruptcy "debtor". The discharge is the goal of your case - it's exactly what you want to achieve. It means that your debts have been legally forgiven by the Bankruptcy Court - you are debt free, and you keep your property.
EVICTION - you don't want this to happen to you, and bankruptcy can often protect you from eviction. Eviction is the legal term for the legal process that forces a tenant out of their residence. If you are going to be evicted, the sheriff or some other legal officer is going to lock you out, and they can put your personal belongings in storage. This also applies to people who haven't been able to pay their mortgage and are being locked out after they have lost their ownership of their home as a result of a sheriff's sale. It's not a pleasant experience.
EXEMPTION - this term refers to property or assets that you can keep when you file for bankruptcy. It means that the property is "exempt" or protected from creditors. You can owe all this money to creditors, but when your property is "exempt", they can't take it away from you.
FAIR DEBT COLLECTION PRACTICES ACT - This is an important federal law that protects many debtors. The law is designed to prevent and prohibit unfair and illegal debt collection practices by collection agencies and their employees.
FORECLOSURE - I could write a book on this word. To make it very simple, in New Jersey this term describes the court process that a mortgage company has to follow to take over ownership of the property on which they hold the mortgage. In other words, you are at least 3 or 4 payments behind on your mortgage, and the mortgage company is taking you to court with the intention of having a sheriff's sale to take away your ownership of your home. If you are facing foreclosure, it's a good idea to contact a lawyer right away, because there are lots of things that can probably legally be done to protect you from the foreclosure process and help you save your home. In fact, as of September, 2021, there should be lots of "free money" available to New Jersey homeowners who have fallen behind on their mortgage due to covid related issues.
FROZEN BANK ACCOUNT - if a creditor has sued you and obtained a judgment against you, they have the right to try to collect their money. One way they do that is by directing your bank to "freeze" your bank account. The term "levy" is also used to describe the process by which a bank account is frozen. When this happens, the money is still yours, but you can't access it because the creditor is trying to get it. The money is sort of in limbo. Be careful, because you can ask the court to release the freeze, especially if you have $1000 or less in the account. The creditor has the right to ask the court for a turnover order, and you have a right to object. If that turnover order is entered, you pretty much have lost your rights to that money. If you file bankruptcy before the turnover order is entered, you can usually have that money immediately released back to you.
LIEN - this is often a confusing term, especially because a "lien" is totally invisible. A lien provides a creditor with the legal right to seize and sell the property or asset of a borrower who fails to meet the obligations of a loan or contract. The property that is the subject of a lien cannot be sold by the owner without the consent of the lien holder. If you owe money to a creditor, they sue you, and the court rules against you, the creditor can file a judgment lien against you. and then a lien can be created on any real estate the debtor owns in New Jersey.
PROOF OF CLAIM - this is paperwork filed with the court by a creditor. In this document, the creditor submits a statement claiming exactly what they say the debtor owes to them. The debtor has a full right to dispute the claim by filing an objection to the proof of claim.
STAY RELIEF - the automatic stay protects you from your creditors, but when you file for bankruptcy you have certain important responsibilities. For example, if you are in foreclosure, the automatic stay stops the foreclosure, but you still have to pay your mortgage payment in the future. If you don't pay your mortgage every month, the attorney for the mortgage company can ask for stay relief. In other words, they are saying to the court something like this: "The debtor is protected from foreclosure, but he hasn't been paying his mortgage like he is supposed to. We are not permitted to foreclose because of the bankruptcy, but since the debtor is not paying, he should not be protected any longer and we are therefore asking for "stay relief". If stay relief is granted to the mortgage company, the debtor loses the protection of the automatic stay, and the mortgage company can now continue with their foreclosure. It is important to note that if this happens, if the debtor can catch up with the mortgage arrears at a later date, the debtor can come back to court and ask for the automatic stay to be reimposed and for the stay relief order to be vacated.
SECURED DEBT - secured debts are those for which the borrower puts up some property or other asset as collateral for the loan. Typical examples would be a mortgage on your home or collateral on your car loan.
SHERIFF'S SALE - if you are in foreclosure, as you move towards the end of the process, the county sheriff schedules a sale date for the "sheriff's sale", and your property is put up to be sold to the highest bidder at a public auction. If the sale actually happens, you are losing your home ownership rights. I have blogs and videos that you can watch that describe the entire New Jersey sheriff's sale process, and at what point you finally have to leave your home after a sheriff's sale has been fully completed.
TRUSTEE - the person who is appointed by the bankruptcy court to oversee the debtor's bankruptcy and question the debtor about their property and debts, and other information contained in the bankruptcy petition.
UNSECURED DEBTS - a debt that is not secured with any collateral. For example, credit card debt, medical bills, utility bills, and personal loans are unsecured debts.
WAGE GARNISHMENT - this is a way for a judgment creditor to get their money. They can obtain a court order and get about 10% taken from your gross salary and paid to them. You can object to a wage garnishment, and you can often get it reduced to less than 10%.
Feel free to call us at 856 696 8300 to discuss any questions you might have. We are happy to help - it's our passion and our mission.
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