Glossary

Debt relief agency

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A definition added to the Bankruptcy Code in 2005, which includes law firms like this one, which helps people file for bankruptcy relief.

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Debtor

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A person filing for relief under the Bankruptcy Code. 

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Delinquent

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Getting behind in payments. 

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It’s important to be aware of the difference between “prepetition” (before the filing) and “postpetition” delinquency.  Chapter 13 can help you catch up many types of prepetition delinquency, such as to a mortgage company, car creditor, or child/spousal support under a Court order.  The prepetition delinquency can be cured as part of your Chapter 13 “reorganization” provided that you do not become delinquent on your postpetition payments, including the plan payments you make to the Chapter 13 Trustee. 

Direct creditor payments

The payments you continue to make directly to a creditor after filing for bankruptcy. 

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In a Chapter 13 case it is important to know which payments are covered by the amount you send each month to the Chapter 13 Trustee, and which payments you are expected to make directly to the creditor.

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Discharge

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The permanent Court injunction against further creditor activity at the end of the Chapter 7 process, or after successfully completing a Chapter 13 plan. 

Disposable income

The monthly amount you have left over to pay your creditors after accounting for your monthly income and reasonable household expenses. 

Your disposable income can be important for several reasons.  In Chapter 7, if your income history suggests you have the means to pay your creditors, you may not qualify.  If you are above the median income for the area where you live, you may be required to pay a certain amount to your unsecured creditors as part of your Chapter 13 plan.

Domestic Support Obligation (DSO)

A term used in the Bankruptcy Code that includes most debt owed to a spouse or former spouse for Court-ordered alimony or child support.

Equity

Any amount that you would have left over after selling property and paying off any debt secured by the property.

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Equity in property belongs to your creditors unless you can claim an exemption in those amounts.

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Exemption

Amounts that you are legally allowed to shield from the claims of creditors. 

Exemptions can be complicated and require a legal analysis.  Long-term residents of Georgia claim exemptions under Georgia law, which sets out certain categories of property and the amounts that can be claimed exempt in each type.  If you have lived elsewhere int he past two years, a different set of state or federal exemptions may apply.  

Filing fee

The fee that needs to be paid to the Clerk of Court at the time a bankruptcy petition is filed.

This fee is completely separate from the fee you pay to an attorney for legal representation, and any monthly plan payment that you need to make to a Trustee under your plan in Chapter 13.

Financial management instructional course

The second, “postpetition” course that is required after filing the case, but before you will be able to receive a bankruptcy discharge.  You must file a certification with the Bankruptcy Court that you have completed the course. 

Judgment lien

A lien against your property that a creditor obtained against you.  These liens are not considered to be voluntary and are different from voluntarily giving collateral to a creditor.  As such, judgment liens are often treated differently in the Bankruptcy Code and can sometimes be avoided.

Liquidation

This term means that if you own any property with equity that you cannot fully exempt, a Chapter 7 Trustee can sell the property and use the proceeds of sale to satisfy the claims of your unsecured creditors.

Loan modification

A voluntary agreement between you and (most usually) a mortgage lender.  The modification can take various forms.  It may reduce the amount owed, the monthly payments, or interest.  It can recapitalize missed payments, effectively adding the missed payments to the end of the loan so that you are no longer in default under the loan for those amounts.  Loan modifications offer various other benefits and can sometimes be the key to saving your home. 

Means test

The test added to the Bankruptcy Code in 2005 to determine whether a debtor has the theoretical ability (or the “means”) to pay back amounts to his or her unsecured creditors.

The form is based on the average income for the six-month period before the filing date.  If your income exceeds the median amount for someone with a similar household size in the area where you live, you are considered to be “above median,” and special rules apply.  Part two of the test then applies a series of deductions from that income based on certain real and standard exemption amounts.  At the end, the form produces a number which is assumed to be the amount of “disposable income” that you can pay to your general unsecured creditors.

The test has obvious flaws, and the United States Supreme Court has ruled that the disposable income rules do not automatically apply when there has been a significant change in circumstances. 

Motion to dismiss

In Chapter 13, a motion by a creditor or Trustee, asking the Court to dismiss your case, most often due to delinquency in Chapter 13 plan payments.

If you are a Chapter 13 debtor and receive a motion to dismiss, this does not mean that your case has already been dismissed.  Instead, it means that you should contact your attorney right away and find out what you need to do to get back on track, if you want your bankruptcy case to continue.

In general, if your bankruptcy case is dismissed, the status of all of your creditors’ claims are reset to whatever they were at the time you filed your case. 

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