Louisville Kentucky Bankruptcy: Common Terms Explained

Navigating the bankruptcy process in Louisville, Kentucky can be difficult and somewhat confusing as you will encounter terms that are hard to understand. If you are considering filing Louisville Kentucky bankruptcy, it may help to know what the most common bankruptcy terms are and what they mean to you.

Adversary Proceeding: An adversary proceeding is typically a suit filed by a creditor seeking to have their debt found non-dischargeable in bankruptcy.  This proceeding is filed in the Bankruptcy Court and is heard by the Bankruptcy Judge.

Automatic Stay: As soon as your attorney files your bankruptcy petition, you receive an automatic stay. This means that garnishments, lawsuits, foreclosures and any other collection activity being brought against you must stop immediately while the bankruptcy is processed.

Bankruptcy Judge: The judge who presides over bankruptcies in federal court.

Bankruptcy Petition: The documentation filed in bankruptcy court that requests financial relief through bankruptcy and protection from creditors.

Bankruptcy Exemption: This is the term used for any assets that you are allowed to keep after your bankruptcy. Possible exemptions include:  a vehicle, a home or property. An attorney experienced in bankruptcy can advise you about which of these and other assets are allowable exemptions in your specific case.

Bankruptcy Court: Bankruptcy Court is the federal court in which bankruptcies are litigated. Each state has multiple Bankruptcy Courts.

Chapter 7: A Chapter 7 Bankruptcy is a type of bankruptcy that if completed, allows the person, couple or business to discharge (cancel) all dischargeable debts. What this means to you is that after the bankruptcy you will no longer owe the balance on those debts.

Chapter 11: In a Chapter 11 Bankruptcy, your company is provided time to reorganize. This might include creating a new entity for the corporation or using the time to repay debts, or both.  Individuals can also file for Chapter 11 under certain circumstances.

Chapter 12: The bankruptcy chapter used specifically for family-owned farms or family fishermen.

Chapter 13: This Chapter gives you time to pay some or all of your debts over an arranged time period. The typical Chapter 13 time frame is three to five years. The exact time frame and amount to be paid depends on your income, expenses, and the nature and amount of your debts.

Contingent Claim:  If you co-signed on a loan for someone and they did not pay the debt, it can fall under the term contingent claim.

Creditor: Any entity that you owe money to is a creditor. This can be a person, business or organization.

Debtor: That would be you. Any entity seeking bankruptcy and protection from creditors is a debtor.

Discharge: This term applies to the completion of debts, whether by monetary satisfaction or elimination. For example, your assets are sold and some of the debts paid in full, while others are eliminated without payment. They will all fall under the term discharged.

Liquidation: The liquidation of your property and assets means those items are sold and the money is going to be disbursed among your creditors. Remember, you will likely get to keep some or all of your assets for the purpose of a fresh start.

Means Test: This is a process that uses objective standard methods in determining which individuals are appropriately requesting relief under Chapter 7. You must pass the means test to file a Chapter 7 Bankruptcy.

Non-Dischargeable Debt: This would be any debt that cannot be discharged in a bankruptcy. Examples include – child support or alimony, government funded student loans, some types of tax obligations, fines or costs of criminal convictions or any debt that occurred due to a DUI.

Objection to Dischargeability:  Means that a creditor objects to you being released from owing the debt. This is commonly used if the creditor believes you incurred the debt by fraud and may require that the creditor file an adversary proceeding.

Objection to Exemptions: Happens when a creditor does not want certain property excused from the liquidation process.

Priority: When assets are liquidated the order in which your debts are paid are prioritized by the bankruptcy trustee. For example, any child support owed before filing must be paid before the money can begin paying general debts such as credit card bills.

Reaffirmation Agreement: In a Chapter 7 bankruptcy, sometimes a creditor will agree to let you keep the collateral that secured the debt if you agree to keep paying the debt that would normally be discharged. This is typically seen in the case of a car but can apply to other items.

These and other Louisville Kentucky bankruptcy terms are frequently used during the bankruptcy process. An attorney well-versed in Jefferson bankruptcy law can advise you as to your specific circumstances.