Most people know that bankruptcy offers individuals and business relief from debt stress. What most people don’t know is how the process works. Bankruptcy has complicated rules and procedures that can confuse filers. If you are considering filing for bankruptcy, it is important that you understand the terminology. We offer the following definitions as an introduction to the bankruptcy process.
The automatic stay is a court order that, from the moment you file your bankruptcy petition, automatically stops your creditors from pursuing collection activities against you. Collection activities can include wage garnishment, lawsuits, foreclosure and contacting you by letter or phone to demand payment for a debt. The automatic stay protects you until your bankruptcy case is closed except, if a creditor prevails in a petition to lift the automatic stay. In addition, the automatic stay will not stop any criminal proceedings or the collection of child support.
Your bankruptcy estate consists of all property or assets that you own at the time you file your petition. Both real and personal property is included, even if you give property to another person for holding. You may exclude property from your bankruptcy estate through reaffirmation and redemption.
Redemption is a process that allows you to keep property by making a lump sum payment for its value to the creditor. With court approval, you negotiate to pay a reduced amount.
The reaffirmation process allows you keep making payments on a secured asset outside of the bankruptcy process. It is not necessary that your payments are current. Some creditors will try to force you into reaffirmation therefore, the bankruptcy court requires your attorney (or you, if you are not represented by an attorney) to certify that the reaffirmation is voluntary and that you understand that through reaffirmation the property will move outside of bankruptcy protection allowing the creditor pursue collections if you fall behind on your payments.
At the conclusion of your bankruptcy case, the court issues an order releasing debtors from any personal liability for the qualified debts listed on the bankruptcy petition. A discharge prevents creditors from taking further collection actions against the debtor.
Don’t let the Bankruptcy Code’s terminology intimidate you. Contact an Arkansas bankruptcy law firm with over 40 years of experience to guide you through the bankruptcy process. Call us today to schedule a meeting at one of our conveniently located offices.