Serving Vallejo, Solano, Napa, Alameda and Contra Costa Counties.
These are some of the terms you may hear during a bankruptcy process. The terms are explained below.
Secured debt – debts that have some type of collateral behind them. Car loans, home loans, furniture and electronic purchases are the most common type of secured debt. With these types of debts, if you don’t pay, the creditor can get the collateral back.
Unsecured debts - debts that do not have specific property (like your house or car) serving as collateral. If you fail to make payment on an unsecured debt, the creditor cannot take any of your property without first suing you and getting a court judgment. Examples are credit cards, medical bills, utility bills and personal loans. However if a judgment has been entered the creditor can then take additional steps to obtain a judgment lien against your real and personal property.
Consumer bankruptcy – when you have debts arising from personal and household expenses.
Nonconsumer bankruptcy – when you have debts arising from other than personal or household expenses such as your own business or investments in rental properties, stocks or other matters
Judgments - If you have unpaid debts, the creditor or debt collector may sue you. When the court finds in favor of the creditor and if you have income or assets the creditor can seize them once the creditor obtains a judgment. The judgment may result in a wage garnishment, placing a lien on your property, or attaching funds in your bank account.
Foreclosure - when you fall behind on your house payments and your lender has the legal right to sell your house. Foreclosure works differently in different states. In some states, the lender has to file a lawsuit to foreclose, (judicial foreclosure) or it can foreclose without going to court (nonjudicial foreclosure). In California it is most common to have a Deed of Trust containing a power of sale clause and be subject to a nonjudicial foreclosure
Notice of Default - If the borrower is not making payments and the lender decides to foreclose, the first step is a Notice of Default. It states the amount in default. Ninety (90) days is given to cure the default by catching up on all late payments, penalties, and costs.
Notice of trustee sale - After the 90 days expires, the lender files a 21 day Notice of Trustee's Sale, at which time an auction is held, with limited publicity resulting in a greatly depressed price. After it is over, the former owner must be evicted if he refuses to leave. The Borrower can still catch up on all late payments until 5 business days prior to the sale. Within the last 5 days, the only way to stop a sale is by payment in full of the entire balance.
Trustee’s Sale - The Non-Judicial Foreclosure also known as a TRUSTEE'S SALE. Itis the easy and preferred method of foreclosure in California. It's fast and inexpensive. In a Deed of Trust the borrower (Trustor) gives the Trustee (typically a title company) the right to sell the property if the Borrower defaults. The steps can and do differ state to state. ALWAYS check with local bankruptcy counsel to determine the laws in your state.
Petition – a document filed in bankruptcy court to start proceedings to provide a means by which a debtor who is unwilling or financially unable to pay personal debts to satisfy the claims of his or her creditors as they come due. A petition in bankruptcy lists the debtor’s assets, liabilities, and debts.
Trustee- An individual appointed the United States Trustee to administer your case. The bankruptcy trustee's role varies depending on whether yours is a Chapter 7 or Chapter 13 case. In both types of bankruptcy, the trustee will review your bankruptcy petition, look for fraud or red flags, and try to maximize the amount of money your unsecured creditors will get through your bankruptcy. The trustee presides over the Meeting of Creditors
Meeting of creditors - In both Chapter 7 and Chapter 13 bankruptcy, the debtor is required to attend a meeting of creditors, also called the 341 hearing. The meeting of creditors is not a court hearing and is run by your bankruptcy trustee. It is usually held in a meeting room. The primary purpose of this hearing is to give the bankruptcy trustee the opportunity to ask questions and have you confirm under oath the information you provided in your petition, schedules, and other documents. Generally, the only people attending the meeting are the trustee, your attorney,and you. Although creditors can attend the meeting and ask questions, it is very unusual for creditors to show up at all. It is simply a waste of their time. On the rare occasion when a creditor does turn up, your attorney can make sure they do nothing inappropriate.
Means test – Test designed by Congress to determine whether or not you qualify financially for a Chapter 7 bankruptcy, and if not how much you need to pay monthly to your unsecured creditors in a Chapter 13. The means test was designed to limit the use of Chapter 7 bankruptcy to those who truly can't pay their debts. It does this by deducting specific monthly expenses from your "current monthly income" (your average income over the six calendar months before you file for bankruptcy) to arrive at your monthly "disposable income." The higher your disposable income, the more likely you won't be allowed to use Chapter 7 bankruptcy.) To take the means test, you must first determine whether your income is more or less than the median income in your state. If you earn more than the median, you must figure out whether you would have enough left over, after subtracting certain expenses, to repay some of your debt. If you retain this attorney’s office a Means Test will need to be done for you.
Discharge - is a court order that prohibits a creditor from collecting on most of the debts listed in your bankruptcy case. When the court enters the discharge, you no longer responsible for the debt. The creditor cannot call, send demand letters, report nonpayment of the debt to credit reporting agencies, file a lawsuit against you, or take any other action against you personally in an attempt to collect the debt.
Non-dischargeable debts - Some debts cannot be removed even if you file bankruptcy. Check with local counsel if you have concerns.
Dismiss - If you commit fraud or fail to comply with any applicable laws or local rules, the bankruptcy court or trustee can dismiss your bankruptcy case. You will no longer be under bankruptcy protection and the debt collectors will again attempt to collect your debts.
Automatic stay - the automatic stay immediately stops any lawsuit filed against you and most actions against your property by a creditor, collection agency, or government entity. If you are at risk of being evicted, facing foreclosure, being found in contempt for failure to pay child support, or losing such basic resources as utility services, welfare, unemployment benefits, or your job (because of several wage garnishments), the automatic stay can provide a strong reason to file for bankruptcy.
Reaffirm – Applicable to a Chapter 7 case. If you reaffirm a debt, you agree that you will still owe the debt after your bankruptcy case is over. Both the creditor’s lien on the collateral and your personal liability for the debt under the original promissory note survive bankruptcy intact—often, just as if you never filed for bankruptcy. Reaffirmation may be the only practical way to keep some types of property, such as automobiles or your home. Also, reaffirmation can be a sensible way to keep property that is worth significantly more than what you owe on it. There are advantages and disadvantages to reaffirmation. Mr. McConnell will be happy to explain more fully.
Reaffirmation agreement - When you reaffirm, you sign an agreement with the lender that you will continue to pay for the collateral as if you had not filed bankruptcy, in exchange for keeping the collateral. (Typically a car.)