If you or your business is in debt that you’re sure will be hard to clear at the right time, you’re right to opt for bankruptcy. What you should, however, be careful of is rushing into it. There are lots of getting-to-know to do and only with a professional bankruptcy attorney can you find out. Speaking of which I have decided to share with you 5 essential bankruptcy terms you should know for your enlightenment. But before we drill in, see here if you’re filing bankruptcy in Tennessee in 2021.
Seen? Great! Now, let the learning begin.
- Creditor versus Debtor; if you find the term debtor or creditor or both in the file you’re to sign with your bankruptcy attorney and don’t know what they mean, here’s the knowledge of it. A creditor is the bank, institution, or individual that is owed. On the flip side, the debtor is the entity that is owing a creditor. In other words, you are the debtor and whoever you’re filing bankruptcy against is the creditor.
- Unsecured versus secured debts; pay attention to this. PLEASE. There are two types of debts, namely secured and unsecured debts. The secured debts are the ones your creditor has lien rights and interest against properties. Creditors with lien rights can exert it to recoup some of your properties. On the other hand, unsecured debts are the likes of personal loans, bills debts, and, credit card loans which your creditors have no legal right to claim.
- Involuntary versus voluntary bankruptcy; okay, so there are two possible bankruptcy scenarios. In most cases, a debtor is forcefully made to file bankruptcy by the creditor. This is called an involuntary bankruptcy. But in a case where the debtor decides to file bankruptcy on their own, it is called voluntary bankruptcy. Knowing the difference will save you costs and stress in the long run.
- Non-consumer versus consumer debts; knowing the difference is important. Consumer debts can be otherwise called personal debts. These are the debts incurred for your personal funding. Examples of consumer debts are home mortgages, personal credit cards, and even medical bills debts. Likewise, non-consumer debts can also be called business debts. While it is right to say they are the debts incurred for business funding, non-consumer debts are even more encompassing as even tax debts can also be considered as non-consumer debts.
- Discharge versus dismissal; always know this- discharge is the best way to go and dismissal is the best way to die. Okay, I made that up. But the difference is clear. When you file a Discharge bankruptcy, you are agreeing to clear your debt at a convenient pace after which you will be able to bounce back for a fresh start. This will also keep your credit record clean. Unfortunately, if you file for dismissal bankruptcy, it means you’re defaulting on the debt payment and want the court to dismiss the debt. Though it sounds like a smart way to avoid clearing your debt, your credit record will remain stained forever and, in most cases, you will still have to deal with your creditors.