Glossary of Bankruptcy Terms

3/1/2018

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

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

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

Exempt assets are not included in your bankruptcy filing.

Liquidation

Liquidation of your assets is when your assets are sold, and the proceeds used to pay your debts.

Means test

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

Nonexempt assets are included in your bankruptcy filing, and may be repossessed and liquidated.

Reaffirmations

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

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

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.

Tagged in Bankruptcy, Helpful resources

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

Better Business Bureau

MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
Candid

MMI has achieved a Gold Seal of Transparency by Candid (formerly GuideStar), a leading source for insights on thousands of nonprofit organizations. For decades, Candid has provided data that powers hundreds of websites, programs, and applications related to philanthropic giving in order to help grantors make informed decisions.
Trustpilot

MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
Department of Housing and Urban Development

MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
Council On Accreditation

MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
National Foundation for Credit Counseling

MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.