TERMS AND OTHER ODDS AND ENDS
GLOSSARY OF TERMS and OTHER ODDS AND ENDS
SECURED DEBT: Debt that is secured by collateral such as a car note or a house note. Failing to pay the debt may result in repossession or foreclosure of the collateral to help offset the debt. Surrendering the collateral does not automatically extinguish a debt.
UNSECURED DEBT: Debt that is not attached to collateral. Common examples
PRIORITY DEBT: A type of debt that is paid first if any creditors are paid in a Chapter 7 bankruptcy case and must be paid in full in a Chapter 13 bankruptcy case. Priority debts include alimony and child support, wages owed to employees, and fees owed to the trustee and the debtor's bankruptcy attorney.
CHAPTER 7 BANKRUPTCY: A liquidation. Generally speaking, gives you a complete discharge of credit cards, medical bills, and personal loans. You are over and done in about 6 months.
MEANS TEST: A calculation of your adjusted income to see if you qualify to fila a Chapter 7 Bankruptcy. Gross income can be offset by a number of factors such as mortgage payments and insurance premiums.
CHAPTER 13 BANKRUPTCY: A reorganization. If you are behind on a secured debt such as a car note or a mortgage you can pay back the arrearage over time within a court structured plan.
TRADELINE: an entry on a credit report.
CHAPTER 13 plan: A plan to repay the creditors, court costs, and attorney’s fees over time which is supervised by the Court Appointed Trustee. The plan is based on the numbers you provide the Court so it’s intended to be within your means.
NEGATIVE EQUITY: When you owe more than the collateral is worth. This frequently becomes a problem when trading in vehicles that are not paid off. Commonly known as being upside down or under water.
EXEMPTION: a law or set of laws design to protect, or exempt, certain assets. Examples of this are homesteads, vehicles, and most retirement programs. Funds in a 401K or other qualified plan are not subject to creditor garnishment. Most funds received from government benefits are exempt from collection.
GARNISHMENT: a post judgment remedy for creditors to seize various assets. This is after judgment on the original lawsuit is granted and usually involves a separate Court proceeding. In the case of garnishing a bank account the creditor in effect sues the bank. The account is frozen pending the resolution of the matter and you could lose several paychecks before your employer can move funds. Also, as the debtor, you get the pay the bank’s attorneys who have done little to no work. The act of attempting to garnish assets.