Facing financial turmoil can be daunting enough without the confusion of administrative complexities and jargon that comes with filing bankruptcy. It may help you to get to know some of the terms related to bankruptcy so you have a better idea of what to expect as you move forward with your filing. This post will cover a list of terms you may see across more than one bankruptcy type (that is primarily chapters 7, 11 and 13).
Automatic stay
When you officially file for bankruptcy, an automatic stay follows suit. The automatic stay prevents collectors or creditors from seeking owned money from you. Your automatic stay will last throughout your bankruptcy case timeline.
Liquidation
When in reference to chapter 7 bankruptcy, you may hear the term “liquidation.” Liquidation is in reference to the way that chapter 7 bankruptcy resolves. In other words, certain assets of yours are sold and that money will then go to pay off debts with your creditors.
Adjustment of debts
When it comes to chapter 13 bankruptcy, you may come across the phrase “adjustment of debts.” What this refers to is the way in which chapter 13 resolves. Your debts are adjusted according to a repayment plan and you may still hold onto your assets and properties.
Means test
The means test is the bankruptcy court’s way of determining whether you qualify for chapter 7 bankruptcy—that is, if you do not have the means of paying back your debt—or if you should seek another way to resolving your financial challenges. Typically, if you do not qualify for chapter 7, you will want to file for chapter 13 bankruptcy.