Setting My Finances Straight

If you're getting ready to file for bankruptcy, be aware that it is a complicated process that will require the help of a lawyer to navigate. Part of that is due to all the terminology used in bankruptcy proceedings, much of which you'll be hearing for the first time. Here are some terms that you need to be aware of before proceeding with your case.

Automatic Stay

Once you start the process of filing for bankruptcy, the court will grant you an automatic stay. This means that creditors are not allowed to contact you about paying back your debts. If you are receiving many phone calls from debt collectors, you can feel some relief from phone calls and letters in the mail about how much you owe.

Discharge

If your bankruptcy results in not having to pay back one of your debts, it is known as a discharge. Having a debt discharged also means that the creditor can no longer contact you as well, since the debt will have been legally released from being your responsibility to pay.

Petition

The process of formally requesting to file for bankruptcy is known as a petition. Many of the aspects of a bankruptcy filing, such as the automatic stay, will not start until the petition has been filed with the courts.

Means Test

Chapter 7 bankruptcy requires that you pass a means test, which means proving that you are unable to pay back your debts by taking a look over your finances. If you make under the income thresholds to qualify for bankruptcy, it is considered passing the means test. If it is determined that you make too much money, you won't be able to use Chapter 7 bankruptcy to get rid of your debts.

Secured Debts

Any debt that has some form of collateral is considered a secured debt, and harder to discharge than others without giving up the asset. For example, a home is considered a secured debt because the house can be taken back. The same goes for a vehicle loan since there is a car that can be repossessed. Hospital bills would be considered unsecured because there is nothing that can be reclaimed.

These are just a few potentially confusing terms regarding bankruptcy. For more information, be sure to work with a bankruptcy lawyer, such as at Phoenix Law. They'll be able to answer questions about any confusing terms that you run across during the process.