Bankruptcy Terms in Plain English

341 Meeting11 U.S.C. 341

Also called the "meeting of creditors." A short meeting — usually 5 to 15 minutes — where a bankruptcy trustee asks you questions about your petition under oath. Creditors are allowed to attend and ask questions too, but they rarely do in straightforward cases. You MUST attend.

Automatic Stay11 U.S.C. 362

The moment you file, federal law puts a legal pause on almost all collection actions against you — lawsuits, wage garnishments, foreclosure proceedings, creditor calls. It is not permanent, but it gives you breathing room while your case is processed.

Asset

Everything you own: your car, home, bank accounts, furniture, retirement accounts, jewelry, tax refunds owed to you, and even the right to sue someone for money. All assets must be listed on Schedule A/B.

Chapter 711 U.S.C. Chapter 7

A type of bankruptcy where a trustee can sell (liquidate) your non-exempt assets to pay creditors, and then most of your remaining eligible debts are wiped out (discharged). Often called a "fresh start" bankruptcy. Typically completed in 3-6 months. Income limits apply.

Chapter 1311 U.S.C. Chapter 13

A type of bankruptcy where you propose a 3-to-5-year repayment plan to pay back some or all of your debts, while keeping assets you could not protect in Chapter 7. Requires regular income. Often used by homeowners trying to catch up on mortgage arrears.

Creditor

Anyone or any company you owe money to. This includes credit card companies, medical providers, banks, landlords owed back rent, and the IRS.

Credit Counseling11 U.S.C. 109(h)

A required course you must complete BEFORE filing bankruptcy. It covers budgeting and debt options. Must be from an agency approved by the U.S. Trustee Program. You receive a certificate you must file with your petition.

Current Monthly Income (CMI)11 U.S.C. 101(10A)

Your average monthly income calculated from the six full calendar months before you file. Used in the means test. Includes income from almost all sources — not just your job.

Debtor

The person (or business) who owes money and files for bankruptcy. You.

Debtor Education11 U.S.C. 1141(d)(3), 1328(g)

A second required course — different from credit counseling — that you must complete AFTER filing but BEFORE your discharge is entered. Also called a financial management course. Must be from an approved agency.

Discharge11 U.S.C. 524

The court order that legally eliminates your personal liability for eligible debts. After discharge, creditors whose debts were discharged cannot legally try to collect from you. The goal of most Chapter 7 cases.

Dischargeable Debt

Debt that can be wiped out in bankruptcy. Most credit card debt, medical bills, personal loans, and utility arrears are dischargeable. Some debts are NOT — see Non-Dischargeable Debt.

Equity

The value you actually own in an asset after subtracting what you owe on it. Example: car worth $10,000 with a $7,000 loan outstanding = $3,000 in equity. Equity matters because it affects whether a trustee could sell an asset.

Exempt / Exemption11 U.S.C. 522

Property you are legally allowed to keep even in bankruptcy. Exemptions are set by state law (and some by federal law). Common exemptions include a homestead exemption (protects home equity up to a limit), a vehicle exemption, and household goods. VERIFY your state's specific exemption amounts.

Homestead Exemption

The amount of equity in your primary home that is protected from creditors in bankruptcy. The limit varies dramatically by state — from very low to unlimited in some states. VERIFY your state's current amount.

Lien

A legal claim a creditor has on your property as security for a debt. A mortgage is a lien on your home. A car loan is a lien on your car. Discharge eliminates your personal obligation to pay, but liens on property may survive bankruptcy.

Means Test11 U.S.C. 707(b)

A mathematical calculation that compares your income to the median income for your state and household size. It is used to determine whether you are eligible to file Chapter 7 or whether you might need to file Chapter 13 instead. If your income is below the state median, you generally pass the first step. If above, more math follows.

Non-Dischargeable Debt11 U.S.C. 523

Debt that CANNOT be wiped out in bankruptcy, no matter what. Includes: most student loans, most taxes less than 3 years old, child support, alimony, fines and restitution owed to government, debts from fraud.

Non-Exempt Asset

Property you own that is NOT protected by any exemption. In Chapter 7, the trustee can sell non-exempt assets to pay your creditors. Examples might include a second car above the exemption limit, vacation property, or valuable collections.

Priority Debt11 U.S.C. 507

Certain debts that get paid first in a bankruptcy case, before general unsecured creditors. Priority debts include: most taxes, child support and alimony, certain wages owed to employees, and administrative fees. They typically cannot be discharged.

Pro Se

Filing without an attorney. Pro se is a Latin term meaning "for oneself." Bankruptcy courts allow it, and many straightforward cases are filed pro se. This app is designed for people considering filing pro se.

Reaffirmation Agreement11 U.S.C. 524(c)

A contract where you voluntarily agree to remain personally liable for a specific debt (like a car loan) even after discharge, usually in exchange for keeping the collateral. Requires court approval. Understand what you are giving up before signing one.

Redemption11 U.S.C. 722

A process in Chapter 7 where you pay a secured creditor the current market value of collateral in one lump sum and keep the property, even if you owe more than it is worth. Requires available cash.

Schedule

The official forms you file with your bankruptcy petition that list your assets, debts, income, expenses, and other financial information. There are multiple schedules (A through J) — each covers a different category.

Secured Debt

A debt tied to a specific piece of property (the collateral). If you don't pay, the creditor can take the property. Examples: mortgage (home is collateral), car loan (car is collateral). Goes on Schedule D.

Statement of Financial Affairs (SOFA)

An official form where you disclose financial history: recent income, recent payments to creditors, lawsuits, business ownership, prior addresses, and more. Everything on this form is under penalty of perjury.

Trustee

A court-appointed official who oversees your bankruptcy case. In Chapter 7, the trustee reviews your petition, runs the 341 meeting, and can sell non-exempt assets. In Chapter 13, the trustee administers your repayment plan.

Unsecured Debt

A debt not tied to any specific property. If you don't pay, the creditor cannot automatically take something from you — they would have to sue first. Credit cards, medical bills, personal loans, and most utility arrears are unsecured. Goes on Schedule E/F.

Wildcard Exemption

Some states allow a wildcard exemption — a set dollar amount you can apply to any property you choose, adding to other exemptions or protecting something not covered by a specific exemption. VERIFY your state's rules.