Bankruptcy trustees and lawyers are specially trained in order to be good at what they do, which means they’ll probably use terms and phrases you might not be familiar with. If you need to file for bankruptcy, your trustee or lawyer will probably use a few of these terms when they speak to you. Here’s what some of their jargon means:
- Automatic stay –
This legally stops any lawsuits, foreclosures, garnishments, and collections from your creditors as soon as the bankruptcy is filed. An automatic stay can be lifted with a motion from your creditors, but that doesn’t usually happen.
- Bankruptcy estate –
The“estate”refers to all of your legal or equitable interests in property. Even if you don’t own the property, if you have legal or financial interest in it, it becomes part of your estate. In bankruptcy, your trustee liquidates your estate to pay back parts of your debt.
- CCAA filing –
This is for corporations with large amounts of debt. With a CCAA filing, the corporation can settle part of its debt, while receiving protection from creditors while regaining financial stability.
- Consumer proposal –
This is an arrangement made with creditors to reduce the amount a debtor owes and to consolidate debt. The debtor can follow a repayment plan of up to five years.
- Creditor –
This is the person or organization that a debtor owes money to.
- Debtor –
This is usually you, or the person who owes debts to other people or organizations.
- Discharge –
Certain debts can be discharged, which means that creditors can’t take action against them anymore. They can’t contact you about the debts in any way after you have a discharge. However, you can’t discharge all of your debts. Ask your lawyer or trustee to learn more.
- Division 1 proposal –
This is a version of a CCAA filing meant for individuals and smaller companies.
- Equity –
Equity is what interest you have left after your trustee has settled liens and creditors’ interests.
- Exemptions –
This means you can keep some of your property away from your unsecured creditors when the trustee liquidates your assets or settles creditors’ interests. The exemptions depend on where you live, so be sure to ask your lawyer or trustee to learn more.
- Lien –
Your creditors have rights too, and one of those rights is a lien: the right to take and hold or sell the property of debtors. You may see a few petitions for liens when you file for bankruptcy.
- Liquidation –
When your trustee or lawyer talks about liquidation, he or she is talking about the sale of your non-exempt property. Liquidation happens when one of your creditors requests a liquidated claim to settle your debt.
- Priority –
Some debts have more priority than others, and the priority determines the order in which creditors are paid. The trustee will pay them with your liquidated assets.
- Trustee –
A bankruptcy trustee is the representative of the bankruptcy estate. The trustee reviews your petitions and schedules and then facilitates every action that helps you settle with your creditor.
If you would like to know more about bankruptcy jargon or the bankruptcy process, contact McLay Bankruptcy Trustees. We’d be happy to help you in this confusing process.