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The process of filing for bankruptcy can be stressful and frustrating, and the terminology used may sound foreign and unfamiliar. Understanding these terms, however, is important as bankruptcy can be a life-changing event. We've defined some of the most commonly used terms for you.
Credit counseling is a prerequisite to filing bankruptcy. During your credit counseling session, you will learn about alternatives to bankruptcy, and following the session, you will receive a certificate of completion.
Discharge may occur during Chapter 7 bankruptcy proceedings and means that you no longer owe any money on the debt that is discharged.
Exempt assets are not included in your bankruptcy filing.
Liquidation of your assets is when your assets are sold, and the proceeds used to pay your debts.
The means test uses certain parameters to determine whether a debtor may file Chapter 7 bankruptcy for a full discharge of debt. Individuals with too much income after certain expenses are prohibited from filing Chapter 7 unless they qualify as exception.
Nonexempt assets are included in your bankruptcy filing, and may be repossessed and liquidated.
Reaffirmation of your loans is when you agree to new terms with your lenders during the bankruptcy process and do not seek to discharge your debt or cease your access to credit.
Secured debt is secured by collateral, such as an automobile or home. Secured creditors have the right to your collateral in the event you default on payments. Typically, secured debt is not fully discharged in bankruptcy and secured creditors are entitled to certain privileges.
Unsecured debt, such as credit card debt, is not secured with collateral. During the bankruptcy process, creditors of unsecured debt are not able to repossess your personal property.
The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.
Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.
The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.
The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.
The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.