Common Bankruptcy Terms

Common Bankruptcy Terms

Automatic Stay 

Individuals who file for bankruptcy are granted automatic stay at the time of their filing. This is a protection which keeps all creditors from calling the filer during the bankruptcy procedure. Individuals who have been harassed by creditors or threatened with lawsuits will be protected from these calls and threats during the automatic stay period.

Bankruptcy Trustee 

A bankruptcy trustee is the person appointed to oversee and administer a bankruptcy case. A bankruptcy trustee has a variety of roles, which change depending on whether you filed a Chapter 7 or a Chapter 13 bankruptcy. The trustee is responsible for reviewing your bankruptcy petition, looking for fraud or any red flags and maximizing the amount of money your unsecured creditors will get through bankruptcy.

Bankruptcy Discharge 

A bankruptcy discharge occurs when the court approves the elimination of a debt. Normally, discharges are reserved for Chapter 7 bankruptcy filings. Unsecured debts like credit card debt can be discharged under specific situations. This allows a bankruptcy filer to start fresh without having to worry about the frustrations of these debts. IN a discharge the debt is completely eliminated, allowing the individual to move on without having to worry about repayment. Normally, parts of the debts in a Chapter 7 bankruptcy are paid off through liquidation.


In a Chapter 7 bankruptcy, liquidation is the sale of non-exempt items in a bankruptcy procedure. Individuals are required to sell some of their valuables in order to use those profits for the repayment of outstanding debts. Secured debts are always handled first and any leftover money will be used to pay what is possible of the unsecured debts. All remaining unsecured debt after the liquidation process will be discharged. In a Chapter 13 bankruptcy, filers can avoid liquidation by organizing all of their debts into a comprehensive repayment plan.

Means Test 

The 2005 Bankruptcy Act Means Test requires that your income and expenses be analyzed to determine if you qualify to file for a Chapter 7 bankruptcy or if you need to file for a Chapter 13. The court looks at your average income for the six months prior to filing and will compare this to the median income in the state of Michigan. If your income is below the median, you have the right to file for a Chapter 7. If your income exceeds the median, then the means test will determine that you can only file for a Chapter 13.

Meeting of Creditors 

The meeting of creditors is a court-appointed meeting which takes place during a bankruptcy. At this meeting, creditors affected by a bankruptcy filing are free to attend and oppose the bankruptcy if they see the necessity to do so. Many creditors won't attend these meetings, but they are an opportunity for all parties involved to discuss any concerns that they may have.

Are you ready to learn more about bankruptcy? You can go back to the Bankruptcy FAQs, or you can ask for your free consultation with our Detroit bankruptcy lawyer today!


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