If you have contemplated filing for Bankruptcy it is important to have an understanding of the process and terminology.
The Bankruptcy Code is set forth in Title 11 of the United States Code. The two most common consumer bankruptcy Chapters are Chapter 7 (Liquidation) and Chapter 13 (Adjustment of Debts of Individuals). The client is labeled the debtor or consumer. The debtor files for Bankruptcy by filing a petition. That petition includes which Chapter you are filing along with what a list of all your debt, what you own, your regular income and your monthly expenses (liabilities). Those that are owed money are called creditors. A creditor has either a secured or unsecured debt. An example of a secured debt would be your home mortgage company or your auto financer. An example of an unsecured debt would be credit cards. After the petition has been filed, the debtor has to appear for a meeting before the trustee and creditors. This meeting is commonly known as a §341(a) hearing. The trustee will verify that the debtor disclosed everything and if any changes need to be made. The trustee could possibly inquire as to locations of assets and sources of income. The creditors may also ask questions but they rarely appear. Before the meeting you will be required to submit additional paperwork to the trustee to verify financial responsibility and valuation of assets. The paperwork is typically valuations of real and personal property, 2-3 months of bank statements, most recent tax returns, DMV registration of vehicles, auto and homeowners insurance and payoff balances. Whether the debt is eliminated also known as discharged depends on the type of debt and which Chapter you choose.
Click here learn more about Chapter 7, also known as Consumer Debt Liquidation
Click here to learn about Chapter 13 which deals with adjustment of Debts of an Individual With Regular Income.