Glossary Of Common Bankruptcy Terms
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The legal inability to pay debts or the state of having been legally declared bankrupt. Obtaining bankruptcy protection can be a grueling process. Because bankruptcy laws can be complicated due to the many different types of bankruptcy, it is highly recommended that you hire a bankruptcy lawyer or attorney to help you with your case – especially if you own a business and have assets.
Bankruptcy code is the name given to the statutory body of bankruptcy laws after the Bankruptcy Reform Act of 1978.
Allows the debtor to hold on to certain assets, such as property, a car, home, land, and many other assets. Claiming certain assets is made possible under federal and state exemption laws.
Bankruptcy Reform Act of 1978
The Bankruptcy Reform Act of 1978 was signed into law on October 22, 1994 with most provisions effective immediately. Included in the 1994 Act are provisions to expedite bankruptcy proceedings; provisions to standardize fees; provisions to encourage individual debtors to use Chapter 13 to reschedule their debts rather than use Chapter 7 to liquidate; provisions to aid creditors in recovering claims against bankrupt estates, and creation of a National Bankruptcy Commission to investigate further changes in bankruptcy law.
The federal tribunal where cases under the Bankruptcy Code are litigated. Multiple bankruptcy courts exist in each state.
Chapter 7 bankruptcy refers to a section of the United States Federal Bankruptcy Code that contains the bankruptcy law that allows individuals, couples, and businesses to cancel (discharge) their debts.
Bankruptcies of municipalities, chapter 9 bankruptcies are very rare—only a few of these are filed each year. Over the period 1980 through 1988 there averaged about four Chapter 9 filings per year.
A section of the U.S. Federal Bankruptcy Code that allows an insolvent company to be reorganized, sometimes providing for repayment of debts or the creation of a new corporate entity.
Family farmer bankruptcies; created by Congress in 1986 (Chapter 12 became effective on November 26, 1986 and is now a permanent Chapter of the Bankruptcy Code); only a family owned farm business can qualify for Chapter 12.
Chapter 13 bankruptcy allows the debtor to use their income to pay all or some of what is owed to creditors over a specific period of time. The time allowed is typically from three to five years, depending on several factors, including how much one earns and the amount/size of the debts.
The individual or organization to whom the debtor owes monetary or legal obligation.
The entity seeking protection from creditors under the bankruptcy laws.
Discharge of Indebtedness
The satisfaction or elimination of the debts of the debtor by the bankruptcy court.
Property that is excused from the bankruptcy estate and is not available to pay the claims of creditors. The debtor is able to select the property to be exempt from the bankruptcy according to the exemption laws of that particular state. The debtor retains this property for use in making a fresh financial start after bankruptcy.
When a debtor\'s property is liquidated, it is sold and the money raised goes to creditors. Liquidation can occur for both businesses and individuals. Not all assets are subject to liquidation.
Added to the Bankruptcy Code to create objective standards for deciding which individuals are justified of relief in Chapter 7. It only applies to individuals whose debt is mostly consumer debt.
Proof of claim
Court appointed form which establishes the creditors claim against the debtor.
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