Terms in Bankruptcy that You Should be Aware of

While you are undergoing the process of filing a bankruptcy, it is essential to know the different terms. So that when you encounter them, you’ll not be clueless about their respective meaning. It is a good advantage on your part that’s why we will jot those terms down below.
• Discharged bankruptcy: After a successful bankruptcy process, your filing is considered as discharged. This is when creditors got their pay already after you liquidate your assets which is what happens on Chapter 7 bankruptcy. While its counterpart considers a filing discharged when there is a completion of the repayment plan.
• Secured debt: When a debt is backed by property that can be reclaimable it is known as a secured debt. For an instance, you have a loan and you put your home as collateral. This is an assurance on the part of the creditors in case you do not pay the loan.
• Unsecured debt: On the other hand, when creditors do not have any tangible collateral, unsecured debt comes into the scene. This is very risky on the part of the creditors.
• Property exemption: Some properties are exempted from liquidation despite that both bankruptcy types push you to liquidate assets for creditors’ repayment. Every state differs in guidelines as there are different factors to consider for a property to be exempted. Properties that tend to be too personal or can be considered as a source of livelihood may be exempted.
• Liens: When a creditor has the privilege to get, hoard, and liquidate a debtor’s real estate to gain financial freedom again.
• Liquidation: Properties that are considered not exempted are the ones sold. Once a sufficient amount of cash was already acquired then it will be sent out to the creditors.
• Means test: You must prove that you do not have the capability to repay your debts. This will prevent people from abusing the bankruptcy code. To know everything, there will be tests to be conducted such as the following:
– Income
– Assets
– Expenses
– Unsecured debt
Those are the determinants if the bankruptcy that you will file will be rejected or turned into a Chapter 13 type.
• Account reaffirmation: You might concur to proceed with the payment of your debt. However, you also have the knowledge that the debt might be waived off. The creation of this phase is all about securing your prized possessions as they can also be taken from you as collateral and this prevents it from happening.
• Trustee: The bankruptcy court will have to choose a person or corporation to represent the creditors. Their primary job is to review the petition of the debtor and sell properties with a Chapter 7 clause and relay the money to the creditors. They also have the responsibility to provide a concrete plan for the repayment process.
• Credit counseling: Before the grant of a bankruptcy filing, there is a need to meet a budget and credit counseling agency to get approved. After that, you will undergo a course that you must complete in time. It is all about personal financial management. However, there are times that you do not need to undergo such things but it rarely happens.

Conclusion
There you have it, those are the most common terms that you can encounter when filing a bankruptcy. This will ensure that you do not look clueless on the process and will have an idea of what’s going on with the process. No one wants to get bankrupt, so do I that is why responsible financial management is a must.