Bankruptcy Terms (Definitions)
Definitions
Unsecured debt: A debt that is not backed by any collateral. Typically, credit card debts, medical bills, repossessions, and payday loans are unsecured debts and can be eliminated in a bankruptcy.
Means test: A formula that uses predefined income and expense categories to determine whether a debtor whose current monthly income is higher than the median family income for his or her state should be allowed to file for Chapter 7 bankruptcy.
Non-Dischargeable debts: a debt that will survive the bankruptcy proceeding (you will still be responsible for payment of these debts).
- Federal, state and local tax claims (subject to specific time rules)
- Customs duties
- Spousal support
- Child support
- Most student loans
- Secured debts
- Fines and penalties imposed by government agencies
- Debts incurred due to false statements made with the intent to deceive
- Fraud committed in a fiduciary capacity, such as embezzlement or larceny
- Punitive damage claims for “willful and malicious” acts
- Debts not listed on the forms and schedules filed with the Court
- Drunk driving obligations
- Debts for last-minute purchases of luxury goods or services, or taking out cash advances on a credit card just before bankruptcy
There are some exceptions; for example, alimony, student loans and taxes are dischargeable in certain circumstances.
