If you are considering filing for bankruptcy there are some things you can do to make sure the process is as smooth as possible. The first place to start is getting to know some of the common terms involved in the process and what they mean to your case.
Bankruptcy petition– This is a legal document that is used in determining your eligibility for filing; and provides a thorough outline of your debts, assets, income, funds and an overview of your financial history. The petition is also used to initiate your bankruptcy case with the court.
Means Test– When you file for bankruptcy your eligibility to file for Chapter 7 bankruptcy is assessed using the means test. The first part of the test compares your income to the median income of the state. If your income is less than the median income of your state, you pass and are eligible to file for Chapter 7 bankruptcy. If your income is above this amount, the test also evaluates factors such as your total debt burden, and your household size in terms of dependents. If your income is deemed sufficient to warrant repayment, you may not qualify for Chapter 7 bankruptcy protection; but instead file for Chapter 13.
Automatic Stay– Once your case is initiated with the court, a legal order issued that prohibits creditors from collecting on your debt while you are in bankruptcy. Once this order is issued, creditors cannot make any further collection attempts on a debt. If your debts are discharged, this order becomes permanent and removes you from liability over those debts in the future. However, this protection does not extend to debts that are not part of the bankruptcy case.
Secured debt– Debts that are accumulated on accounts with a contractual agreement to have collateral or an asset “secured” against the loan give permission for the creditor to repossess or liquidate the asset if you default on a payment. Common examples of secured debts are mortgage loans, car loans, payday loans and some personal loans.
Unsecured debt– Debts that are accumulated on accounts that do not hold any asset or item as collateral on the loan are unsecured debts. They are termed “unsecured” because the creditor has no right to repossess or liquidate assets if you default on the debt payment. Common examples are credit cards, medical bills, some personal loans, and utility bills.
Bankruptcy attorney – The person of first contact in the bankruptcy process is a bankruptcy attorney. He or she conducts your initial consultation to review your case for eligibility, answers any questions you have about the process, and helps you navigate the remaining steps in the process. Your Dayton bankruptcy attorney is also important for mediating interactions between you and the court or creditors.
Trustee– During your case, the court appoints an impartial representative to oversee your transactions and manage the distribution of funds to your creditors. Their job is to maintain responsibility for paying creditors, collecting and distributing assets when applicable and monitoring repayment plans.