Hello clients and friends, this will be my location for posting on topics such as surviving bankruptcy, handling finances after bankruptcy, debt collection, mortgage loans and litigation, and other consumer-related topics. If there is an issue you would like to see addressed, e-mail me. Chances are it’s a topic in which others are also interested.
Let’s start with the basics. The following are a short list of terms commonly used when discussing bankruptcy and debt issues:
Bankruptcy. This is a federal law that provides an individual or corporations with financial relief from their debts. This usually involves debt forgiveness (a “discharge”). For consumers, there are two types of bankruptcy cases. Chapter 7 allows a consumer to discharge most unsecured debts and secured debts in which the consumer is willing to allow the creditor to take possession of the collateral securing the debt. Chapter 13 provides consumers with a repayment plan in which they may retain property they might lose in a Chapter 7 case, and may repay other debts such as back taxes, child support, and mortgage arrearages.
Debtor. This is you when you owe money to someone.
Creditor. This is the person or company to whom you owe money.
Collateral. Collateral is property that may be taken by a creditor if you fail to pay the debt to them.
Debt. This is a financial obligation of any kind to another person or company. Common debts include loans for homes, cars, or other purchases; credit cards; medical bills; payday loans; student loans; and even fines and criminal restitution. Most debts fall into the following categories when discussing them in terms of bankruptcy.
Unsecured debt. This is debt that is not secured by any collateral. If a creditor cannot take your property if you fail to pay the debt, it is unsecured. Most unsecured debts include credit cards, student loans, medical bills, payday loans, and other small loans.
Secured debt. Secured debt is debt in which you have pledged collateral. Most secured debts are used the purchase the item that is considered collateral, such as a car, home, or other expensive items. Other secured debts include bank loans large enough to require collateral. In some cases, people will allow a bank to take a security interest in property that was previously free and clear.
Priority debt. A priority debt is a debt that takes priority over lesser types of debts. Priority debts are paid before other types of debts in bankruptcy. Priority debts include child support, many types of taxes, and many debts owed to the government.
Non dischargeable debt. This is debt that cannot be discharged in bankruptcy. Non-dischargeable debts include criminal fines and restitution, most student loans, debts incurred through fraud, and child support and alimony.
Discharge. A discharge is the order from the bankruptcy court issued at the completion of a Chapter 7 or Chapter 13 bankruptcy case. This order states that the debts discharge owed by the debtor are no longer collectable and are no longer legally owed.
Garnishment. A garnishment is a court order allowing a creditor to take money, property, or wages from a debtor who owes money to that creditor. A garnishment is only issued after a lawsuit is filed and a judgment taken by that creditor. In Oklahoma, a creditor may garnish 25 percent of a debtor’s wages, and may garnish bank accounts or other types of property.
Third party debt collector. A third-party debt collector is an entity that collects a debt against a debtor on behalf of a creditor. The debt is not actually owed to that collector, the collector is merely hired by the creditor to undertake collection action.