Glossary of Bankruptcy Terms & Definitions Related to Financial Law

Chapter 7 Bankruptcy is the process of liquidation under the bankruptcy code. This is the most common bankruptcy in the United States.  Please do not be alarmed by the term “liquidation”.  In most instances, your personal property in Chapter 7 filings is protected from the bankruptcy estate through the various “exemptions” the Bankruptcy Code provides.

A formal request for the protection of the federal bankruptcy laws. (There is an official form for bankruptcy petitions).

This is a formula the court uses to determine if your income is low enough to qualify for chapter 7 bankruptcy.  This formula was designed to keep “high-income” people from taking advantage of the bankruptcy system. If your income is above the median, you may want to consider filing for Chapter 13 bankruptcy. This can be a very tricky test at times and you will want to consult with a professional bankruptcy attorney before your case is filed.

The “debtor” is the person who files for relief under the Bankruptcy Code.  In order for couples to file jointly, they must be legally married.

The people or institutions that are owed money by the debtor.

In short, the bankruptcy estate is all legal and or equitable property the debtor has an interest in at the time of filing (that is not exempt).

This is all types of real estate the debtor owns or has an equitable interest in.

The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $60,000 is subject to a $40,000 mortgage, there is $20,000 of equity).