Common terms in a Florida bankruptcy court:

Secured debt: Secured debt is debt that is backed by certain property, such as real estate, a car, or other assets, that you must surrender if you default on the debt.  Usually the debt is secured with the asset that was purchased when the debt is incurred.  The creditor to whom you owe the money is legally entitled to the property if you default on your payments.  The property can be sold and the sale proceeds applied to pay down the balance of the debt.  If the sale proceeds are insufficient to pay the entire debt, the creditor is entitled to recover the balance from you with a court judgment.  The rights of a creditor to the security are defined by the written agreements between the creditor and the debtor and by state and federal law.  Secured creditors generally have higher priority than unsecured creditors to repayment in a bankruptcy proceeding.

Unsecured debt: This is an obligation to pay money that is not backed by any property.  It is usually based on a written agreement to lend money or credit for the purchase of goods.  Credit cards are unsecured debt: the credit card company has paid money on your behalf to the store that sold you the goods.  You owe the debt to the credit card company based on your written credit agreement.  

Discharge: This is an order from the bankruptcy court that states that you no longer owe the debt.  Once you are discharged, a creditor can not collect the debt.  The discharge only applies to debts that you incur before your petition is filed.  It is imperative that all debts, large and small, are listed on the bankruptcy petition.  If you do not list a debt, it may not be discharged.

Reaffirmation agreement: This is a voluntary agreement with a creditor to pay off a debt, even though you may be entitled to a discharge of that debt in your bankruptcy.  Why would you do this? It allows you to negotiate with a secured creditor to keep collateral, such as a car or house, in exchange for an agreement to repay the debt according to better terms.  An affirmation agreement must be approved by the bankruptcy court.

Cram down: This is a procedure whereby the balance for a secured debt is reduced to the value of the colateral. This applies to secured debts only.  The secured portion of the debt will be "crammed down" to the fair market value of the asset that secures the debt.  To take advantage of this procedure, the full amount of the fair market value of the property must be paid to the creditor.  Depending on several factors, the creditor may still be entitled to payment for part or all of the unsecured portion of the debt that remains after the cram-down.  This procedure is useful for keeping an asset, such a car or house, and reducing the amount owed to own that asset. Depnding on the particular case, the procedure may reduce the total amount owed for the asset.

Lien stripping:  This procedure allows a lien that secures debt to be removed.  The secured debt is then converted to an unsecured debt.  This can be done if there is insufficient value in the property to secure the debt.  An example of this when the amount due on a first mortgage is less than the fair market value of the property.  In that case, there is no remaining value to secure the second mortgage and that mortgage is "stripped" off of the property.  The second mortgage lien ceases to exist.  The debt is still due, but is it now unsecured debt, not secured debt.  This procedure is only available in a Chapter 13 proceeding, which may be used to discharge the unsecured portion of the debt that remains after the stripping.  

Automatic stay:  This is the protection that is given to anyone who files bankruptcy.  It occurs automatically upon the filing of a petition for bankruptcy.  It prevents all creditors from taking any action to collect or enforce a debt.  If a creditor, such as a mortgage lender, wants to foreclose on your property, they must obtain special permission from the Florida bankruptcy court.

Exempt assets: These are the assets that a creditor can not seize to satisfy a debt, either in or out of Florida bankruptcy court.  They include:

• Your Florida homestead property(unless you have voluntarily given a creditor a lien, such as a mortgage),
• $1,000 of personal property, (this can be raised to $4,000 if you do not claim the Florida homestead exemption),
• Up to $1,000 of equity in your car.

Trustee: A person who is appointed to take over your property for the benefit of your creditors.   The trustee works  not for you, but for your creditors.  There job is to take all of your non-exempt property and sell it and use the money to pay your creditors.

Florida Homestead exemption: This is your right, protected by the Florida Constitution, to protection from creditors using the property you own and live on to satisfy your debt obligation to them.   A creditor with with a judgment against you can not have your homestead sold to pay the judgment.  However, if the creditor files the judgment, it becomes a lien on your homestead property.  The debt must be paid if you sell the property, or if you refinance it.  The Florida homestead exemption can be voluntarily waived by you.  This happens whenever someone agrees to a mortgage on their Florida home.  The creditor holding the mortgage is entitled to foreclose against the property and have it sold to pay the debt.

Let Us Make It Easy To Get a Fresh Start. Call Today For a Free Consultation! Contact Orlando Bankruptcy Lawyer: Jeff Badgley

As an experienced Orlando bankruptcy attorney, Jeff Badgley has over 20 years experience in helping Orlando and Central Florida residents with their financial matters. If you live in the Orlando, Altamonte Springs, Winter Springs, Winter Haven, Windermere, Ocoee, Winter Garden, Kissimmee, Clermont, Deltona, Oviedo, Winter Park or the Central Florida area and have any questions regarding an Orlando bankruptcy concern contact or call us at (866) 977-1544  for a FREE CONSULTATION.