New Jersey Bankruptcy Law Practice
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Bankruptcy Terms

Here are some common bankruptcy terms to answer some of your basic bankruptcy questions.  We encourage you to reference them before, during and after your bankruptcy.  For more specific questions, please contact one of our experienced New Jersey bankruptcy lawyers at 856.429.2449 or lmpesquire@comcast.net.

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ARREARS: The amount of money that is unpaid and overdue when a bankruptcy is filed.  Arrears is a term commonly used when referring to child support and past due mortgage payments.

AUTOMATIC STAY: A powerful bankruptcy tool that stops lawsuits, foreclosures and garnishments as well as all collection against the debtor.  The automatic stay goes into effect the moment a bankruptcy petition is filed.

CHAPTER 7 BANKRUPTCY: Chapter 7 bankruptcy is a federal court procedure in which debtors are able to eliminate most types of unsecured debt.  Chapter 7 bankruptcy is often called the liquidation bankruptcy and aims to give individuals a fresh start.     

CHAPTER 13 BANKRUPTCY: Chapter 13 bankruptcy is a federal court process in which debtors are able to repay all or some of their debts through an interest-free payment plan over a 3 or 5 year period.  Chapter 13 bankruptcy is often called the reorganization or repayment bankruptcy.

CHAPTER 11 BANKRUPTCY: Chapter 11 bankruptcy is a federal court procedure for businesses to reorganize their affairs.  The Chapter 11 plan will outline how the business will repay its creditors either partially or in full.

CONFIRMATION: The approval of a repayment plan in a Chapter 13 bankruptcy by a bankruptcy trustee and judge.

CREDITOR: Any person or business to which a debtor owes money.

CREDIT REPAIR: Actively working to make sure that an individual’s credit report is accurate and up-to-date.  After filing for bankruptcy, this is especially important so that debtors can rebuild their credit and get a fresh start.  

CREDIT REPORT: A detailed report outlining the credit history, public records and credit worthiness of an individual.

DEBTOR: Any person or business that owes money to another.

DEFAULT: The failure to make payments in the specific period of time stated in the original contract.

DISCHARGE: The order that eliminates a debt through a bankruptcy case.  When a debt is discharged, it is no longer legally enforceable against the debtor.  However, if a lien exists that secures the debt, it may survive the bankruptcy. 

EVICTION: The legal process where a tenant is forced out of his/her residence.

EXEMPTIONS: The various kinds and values of property that is legally beyond the reach of the creditors or bankruptcy trustee.  Exemptions are determined by state and federal statutes and can vary from state to state.

FAIR CREDIT REPORTING ACT (FCRA): A federal law that is designed to prevent inaccurate or outdated information from entering or remaining in a credit report. 

FAIR DEBT COLLECTIONS & PRACRTICES ACT (FDCPA): A federal law that prohibits unfair debt collection practices, such as lying, harassing, misleading and otherwise abusing debtors, by debt collectors working for collection agencies. The law, however, does not apply to creditors collecting their own debts. 

FORECLOSURE: The legal process by which the buyer or homeowner is in default under a mortgage note and is deprived of his/her interest in the mortgaged property.

FROZEN ACCOUNT: An account that cannot be accessed due to a judgment that has been executed through a court order.  A creditor can ask the court to freeze a debtor’s account if the debtor has fallen significantly behind on his/her payments. 

GARNISHMENT: A type of debt collection ordered by a court in which a portion of a person’s salary is seized and paid to a creditor.  State law governs how much money can be withheld. 

LEVY: The confiscation or seizure of property or money in accordance with a legal judgment.

LIEN: The charge placed upon real or personal property for the satisfaction of the debt or discharge of the obligation.

PETITION: The document that begins a bankruptcy.  When the petition is filed, it constitutes an order of relief and the automatic stay goes into effect.

PRE-PETITION: Anything that arises before the bankruptcy begins.  Typically, only pre-petition debts can be discharged in a bankruptcy proceeding.

PROOF OF CLAIM: The document in which the creditor files to show how much money is owed to them by the debtor.  The proof of claim will also contain all of the supporting evidence regarding the amount owed.

RELIEF FROM STAY: Through a court appearance, the creditor asks the bankruptcy judge to lift the automatic stay so the creditor can act against the debtor or the property of the bankruptcy estate.  Relief from stay can be absolute or limited.

REPOSSESSION: When a creditor takes property that has been pledged as collateral for a loan. For example, creditors most often repossess vehicles when the owner has missed loan payments and has not attempted to resolve the problem.  The repossessing agent cannot use force under state law to obtain possession of a vehicle, but can legally hot-wire it, tow it and even drive it out of your unlocked garage.

SECURED DEBT: A debts is secured when the creditor takes real or personal property as collateral.  An example of secured debt is a mortgage.

SHERIFF’S SALE: The forced sale of a property at public auction with the proceeds of the sale being applied to the mortgage debt.

TRUSTEE: A private individual or corporation who represents the interests of the creditors in the bankruptcy proceeding.

UNSECURED DEBT: A debt is unsecured if it is not backed by any real or personal property as collateral or if it has not been recorded as a lien.  Common examples of unsecured debts are credit cards and medical bills.