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For many borrowers, bankruptcy may offer the best opportunity to get out of debt. However, the complexities of the system and legal terminology can make it difficult to determine whether bankruptcy is appropriate for you or what benefits it offers. Understanding the following terms can help you decide what program is best and what obstacles you might face.

5 Key Bankruptcy Terms Defined

bankruptcy1. Priority Claim

These are debts that will be paid first if funds are available to compensate any of the creditors. Debts eligible for this special treatment include the administrative costs of the bankruptcy, child and spousal support, eligible back taxes, and judgments stemming from DUI accidents.

2. Secured Debts

These are debts that are guaranteed with some form of property over which the creditor can stake a claim if you fail to repay the loan. Some common forms of secured debts include mortgages and auto loans, which typically can’t be discharged in a Chapter 7 bankruptcy.

3. Reaffirmation Agreement

If you wish to continue repaying on a debt after a bankruptcy, you may engage in a reaffirmation agreement. For instance, you may decide to keep paying for your auto loan rather than lose the vehicle through bankruptcy.

4. Trustee

The trustee is a court-appointed official tasked with administering your bankruptcy, with duties including seizing property to pay back creditors or distributing payments in a Chapter 13 bankruptcy.

5. Automatic Stay

Both Chapter 7 and Chapter 13 bankruptcies include an automatic stay, which puts an immediate stop to all collection activities, including judgments, repossessions, and wage garnishments.

 

If you’re facing bankruptcy, the attorneys at Sam Turco Law Offices will guide you through the process. They have built a reputation for providing high-quality legal advice to clients throughout the Lincoln and Omaha, NE, areas. Visit their website to learn more about their wide range of bankruptcy services, follow their Facebook for more legal insight, or call (402) 614-7171 for a consultation today.

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