“341 meeting” refers to a meeting between creditors and debtors that is required to take place during the course of a Chapter 7 bankruptcy proceeding.

11 U.S.C. 341 -- Meetings of Creditors and Equity Security Holders

The term “341 meeting” refers to a meeting between creditors and debtors that is required to take place during the course of a Chapter 7 bankruptcy proceeding. During the meeting, the lawyers for the debtor and creditor engaged in detailed conversation regarding the debtor’s assets, liabilities, and income sources; and were able to negotiate a general plan for the gradual repayment of the outstanding debt. Although the attorneys of the debtor and creditor are welcome to attend, the only parties whose presence at the 341 meeting is legally required are the debtor in question and the court-appointed trustee. The debtor present declared bankruptcy over a $5,000 debt, and has attended the meeting along with his bankruptcy lawyer. If the creditors are in attendance, they will be able to ask clarifying questions, such as whether the debtor is entitled to any upcoming income sources, ie. tax rebates or inheritances, or whether the debtor owns undisclosed assets, such as shares in a private business or assets held overseas.

341 Meeting

Additional assets put up as collateral by a borrower against debt obligations are called additional collateral.

Additional collateral refers to additional assets put up as collateral by a borrower against debt obligations. Since collateral offers some security to the lender should the borrower fail to pay back the loan, loans that are secured by collateral typically have lower interest rates than unsecured loans. A lender may take additional collateral for a loan after the borrower and lender have already entered into a loan agreement. When a borrower has insufficient collateral for a loan but will be acquiring additional assets such as property in the near term, a lender may choose to issue the loan anyway. 1:44
When creditors require additional assets as collateral against debt obligations is called additional collateral.

Additional Collateral

The American Bankruptcy Institute is a nonpartisan research association that educates its members, Congress and the public on bankruptcy issues. 

S.256—Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Personal bankruptcies soar to all-time high

The American Bankruptcy Institute (ABI) is a nonpartisan research association and organization that educates its members, congress, and the public on bankruptcy issues. The ABI primarily provides education by analyzing proposed legislation, publishing books, maintaining an informational website, providing information to journalists, publishing its ABI Journal 10 times a year and its ABI Law Review twice a year, and holding national and regional conferences that provide continuing education to bankruptcy professionals. The American Bankruptcy Institute (ABI) is a nonpartisan research association that educates its members, Congress, and the public on bankruptcy issues. The American Bankruptcy Institute (ABI) is a nonpartisan research association and organization that educates its members, congress, and the public on bankruptcy issues. The digital ABI platform generates and communicates information on global insolvency and insolvency opinions, and also maintains and upkeeps an insolvency-related blog, online educational sessions, and its published journal.

American Bankruptcy Institute (ABI)

An automatic stay is a legal provision that temporarily prevents creditors from trying to collect money or seize property from debtors in bankruptcy. 

Bankruptcy and the Application of the Automatic Stay to Family Law Cases

An automatic stay is a provision in United States bankruptcy law that temporarily prevents creditors, collection agencies, government entities, and others from pursuing debtors for money that they owe. Automatic-stay provisions protect the debtor against certain actions from their creditors, including starting or continuing court proceedings against the debtor; moving to foreclose on a debtor’s property; creating, perfecting, or enforcing a lien against a debtor’s property; and attempting to repossess collateral. If a debtor has had two cases pending during the previous year, then no automatic stay will go into effect when a third case is filed, unless a motion is filed with the court and unless a judge agrees that filing three cases is reasonable for that debtor’s circumstances. An automatic stay stops creditors from trying to collect debts from a debtor who has filed for bankruptcy until court proceedings are completed. If a debtor has had one case pending during the previous year and then files a second one, the automatic stay will only last for 30 days in the second case unless the court agrees to extend it.

Automatic Stay

Bad debt recovery is a payment received for a debt that was written off and considered uncollectible. The receivable may come in the form of a loan, credit line, or any other accounts receivable.

Bad debt recovery is a payment received for a debt that was written off and considered uncollectible. If a business's bad debt deduction triggered an NOL carryover that has not expired, that constitutes a tax deduction, and the bad debt recovery must thus be reported as income. In accounting, the bad debt recovery credits the allowance for bad debts or bad debt reserve categories and reduces the accounts receivable category in the books. So when a business writes off a bad debt in one tax year and recovers some or all of the debt in the following tax year, the Internal Revenue Service (IRS) requires the business to include the recovered funds in its gross income. However, he only needs to report an amount equal to the bad debt deduction that reduced his tax obligation in the year he claimed the bad debt.

Bad Debt Recovery

Bankruptcy court is a specific kind of federal court that deals with bankruptcy. 

Justice Manual, 69. Appellate Procedures in Bankruptcy

U.S. bankruptcy court refers to specialized federal courtrooms in the United States. Bankruptcy courts make extensive use of video- and audio-conferencing facilities because it is impossible to assemble creditors from different parts of the country into a single room at the same time.
If an individual or creditor disagrees with the bankruptcy judge’s decision and wishes to contest the judge’s ruling, the filer has the option of filing an appeal and beginning the appeal process.
The appeal is generally made by individuals or businesses that have standing in the decision or are directly affected by it. The laws that govern bankruptcy are part of federal law, not state law, so in order to start bankruptcy proceedings, an individual must work within the federal court system. Unlike the federal court, which the U.S. Constitution established in 1781, the bankruptcy court system did not exist until 1978, when Congress established it as part of the Bankruptcy Reform Act.﻿﻿ Proceedings of a bankruptcy court are public unless a judge rules that they remain under seal, and can be accessed at a bankruptcy clerk's office or through the Public Access to Court Electronic Records, also called PACER.

Bankruptcy Court

Bankruptcy is a legal proceeding for people or businesses that are unable to repay their outstanding debts.

Chapter 11 — Reorganization — Historical and Revision Notes

Discharge in Bankruptcy - Bankruptcy Basics

I Filed for Bankruptcy. How Long Will That Appear on Credit Reports?

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What Is Bankruptcy? While Chapter 7, Chapter 11, and Chapter 13 are the most common bankruptcy proceedings, especially as far as individuals are concerned, the law also provides for several other types:
Chapter 9 bankruptcy is available to financially distressed municipalities, including cities, towns, villages, counties, and school districts. Bankruptcy filings in the United States fall under one of several chapters of the Bankruptcy Code, including Chapter 7, which involves the liquidation of assets; Chapter 11, which deals with company or individual reorganizations; and Chapter 13, which arranges for debt repayment with lowered debt covenants or specific payment plans. Declaring bankruptcy can help relieve you of your legal obligation to pay your debts and save your home, business, or ability to function financially, depending on which kind of bankruptcy petition you file. Any decisions in federal bankruptcy cases are made by a bankruptcy judge, including whether a debtor is eligible to file and whether they should be discharged of their debts.

Bankruptcy

Bankruptcy financing is financing arranged by a company while under the chapter 11 bankruptcy process. 

Bankruptcy financing is another term for debtor-in-possession (DIP) financing, or the money a lender provides to a company going through a Chapter 11 bankruptcy reorganization. For large bankruptcy cases, a company will typically arrange bankruptcy financing prior to filing for bankruptcy and making those plans public. Bankruptcy financing is another term for debtor-in-possession (DIP) financing, or the money a lender provides to a company going through a Chapter 11 bankruptcy reorganization. But bankruptcy financing, or debtor-in-possession financing, is a common activity for many financial institutions to engage in, and it's an essential part of the corporate bankruptcy process. Because Congress understood that lenders may be reluctant to lend to a business that just filed for bankruptcy, it has allowed judges to declare that the lender of bankruptcy financing will be repaid before many other creditors, like previous lenders, employees, or suppliers.

Bankruptcy Financing

BAPCPA was passed by Congress and signed into law by President George W. Bush as a move to reform the bankruptcy system.

S.256 - Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Official Form 122A–2 Chapter 7 Means Test Calculation

Bankruptcy Forms for Individuals: Instructions

Revision of Certain Dollar Amounts in the Bankruptcy Code Prescribed Under Section 104(a) of the Code

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 is a piece of legislation that revised the United States Bankruptcy Code for cases filed on or after October 17, 2005. The Act created a bankruptcy means test that determines whether individuals filing for bankruptcy can file for Chapter 7 bankruptcy, which discharges many debts in full—or whether they must opt for Chapter 13 bankruptcy, which requires at least partial repayment of debts. Some of these debts are:
More than $750 in cash advances on a credit card taken out within 90 days of filing
More than $500 charged on a credit card for luxury goods within 90 days of filing
All federal and private student loans
Most studies that have looked into the effectiveness of BAPCPA to reform bankruptcy have concluded that the profile of consumer bankruptcy debtors hasn't changed. To complete a means test, a debtor must submit either Form 122A—1 for Chapter 7 or Form 122C for Chapter 13 to the Bankruptcy Court before the court will hear the case.
BAPCPA also set in place mandatory credit counseling for consumers and businesses looking to file for bankruptcy. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was introduced to make it more difficult for debtors to file for Chapter 7 bankruptcy and, instead, force them to file for Chapter 13.

Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)

The cancellation of debt (COD) occurs when a creditor relieves a debtor from a debt obligation. Debts forgiven by a creditor are taxable as income.

Cancellation of debt (COD) occurs when a creditor relieves a debtor from a debt obligation. 4.  Canceled debt that would be deductible if an individual as a cash basis taxpayer, paid it
5.  A qualified purchase price reduction on a property provided by the seller
6.  Pay-For-Performance Success payments that reduce the principal balance of a mortgage under the Home Affordable Modification Program
7.  Amounts of student loans discharged upon the death or disability of the student
The following exclusions are considered cancellation of debt income but the IRS excludes them from being reported as income.
1.  Canceled debt from a Title 11 bankruptcy case
2.  Canceled debt to the extent insolvent
3.  Cancellation of qualified farm indebtedness
4.  Cancellation of qualified real property business indebtedness
5.  Cancellation of qualified principal residence indebtedness Canceled debt will typically be recorded by the creditor and reported to a debtor as income on a 1099-C.
Cancellation of debt (COD) is the forgiveness of debt obligations by a creditor. Many distressed borrowers may choose to file for bankruptcy or work with a debt relief program which can lower a borrower’s total debt. When obtaining debt relief borrowers should plan ahead for taxes on potential savings expected from the cancellation of debt.

Cancellation of Debt (COD)

Chapter 11, named after the U.S. bankruptcy code 11, is a bankruptcy generally filed by corporations and involves a reorganization of assets and debt.

Chapter 11 - Bankruptcy Basics: Background

In Re: Purdue Pharma, L.P., et. al., Debtors

Chapter 11 - Bankruptcy Basics: Acceptance of the Plan of Reorganization

H.R. 3311 - Small Business Reorganization Act of 2019

U.S. Trustee Program Ready to Implement the Small Business Reorganization Act of 2019

U.S. Bankruptcy Court, Eastern Division of Virginia Richmond, Bankruptcy Petition #: 19-30258-KLP

Gap Inc. Acquires Janie and Jack, Expanding Brand Portfolio into Premium Kids and Baby Apparel

Iconic Gymboree Brand Relaunch Planned for Early 2020

The Gymboree Corporation, Case No. 17-32986

Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets, and for that reason is known as "reorganization" bankruptcy. They are: Chapter 7 (liquidation), Chapter 9 (municipalities) , Chapter 11 (reorganization, usually for businesses), Chapter 12 (family farmers), Chapter 13 (repayments options), and Chapter 15 (international bankruptcies). According to a press release by Gymboree, the company had received a commitment for a debtor in possession in the form of financing ($30 million in new money loans) provided by SSIG and Goldman Sachs Specialty Lending Holdings, Inc. and a “roll-up” of all of Gymboree’s obligations under the “prepetition Term Loan Credit Agreement.”
CEO Shaz Kahng said that the company was “continuing to pursue a going-concern sale of its Janie and Jack business and a sale of the intellectual property and online platform for Gymboree.” Corporations, partnerships, and limited liability companies (LLCs) usually file Chapter 11, but in rare cases, individuals with a lot of debt who do not qualify for Chapter 7 or 13 may be eligible for Chapter 11. The act “imposes shorter deadlines for completing the bankruptcy process, allows for greater flexibility in negotiating restructuring plans with creditors, and provides for a private trustee who will work with the small business debtor and its creditors to facilitate the development of a consensual plan of reorganization.”

Chapter 11

Chapter 12 is a form of bankruptcy filing in the United States that applies specifically to farms and fisheries.

Chapter 12 -- Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income

H.R.5316 -- Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986

H.R. 2336 -- Family Farmer Relief Act of 2019

The Changing Rural Economy: Implications for Rural America

Chapter 12 is a category of bankruptcy in the United States that applies specifically to farms and fisheries. Depending on the state of the economy and commodity prices, there are prescribed debt levels for those seeking to file for Chapter 12 bankruptcy.﻿﻿ The Farmer Family Relief Act of 2019 increased debt limits for this type of bankruptcy for farmers from $3.3 million to $10 million.﻿﻿ The increase was a response to ballooning U.S. farm debt of $400 billion. Structured similarly to Chapter 13 bankruptcy, Chapter 12 was designed to help farms and fisheries through the bankruptcy process. As a result of downward-spiraling commodity prices, industry debt rose to approximately $216 billion by the end of 1983.﻿﻿ Chapter 12 bankruptcy allowed farmers relief to service that debt. Farmers and fisheries filing for bankruptcy must fulfill several requirements in order to be eligible for Chapter 12 bankruptcy.

Chapter 12 Bankruptcy

Chapter 13 is a U.S. bankruptcy proceeding in which debtors reorganize their finances in order to repay creditors within three to five years.

Chapter 13 - Bankruptcy Basics: Chapter 13 Eligibility

Chapter 13 - Bankruptcy Basics: Background

Chapter 13 refers to a U.S. bankruptcy proceeding in which debtors undertake a reorganization of their finances under the supervision and approval of the courts. Chapter 11 bankruptcy is another plan in which debt is restructured and paid back over time.﻿﻿ Although it is available to individuals, couples, and businesses, it's filed most frequently by businesses because it is expensive and complicated.
Chapter 13 gives filers who make too much money to be considered for Chapter 7 an easier alternative to Chapter 11. People are eligible to use Chapter 13 only if their debts are below certain limits: $419,275 for unsecured debt and $1,257,850 for secured debt as of February 2019 (increases come in three-year intervals).﻿﻿ Filers must also have completed credit counseling to be considered eligible for Chapter 13. With a Chapter 13 bankruptcy, debtors must compile a list of all creditors along with the amount of money owed to each, a list of any property owned, information about income amounts and sources, and detailed information about monthly expenses. As part of a Chapter 13 reorganization, which is also known as a wage earner's plan, debtors must submit and follow through with a plan to repay outstanding creditors within three to five years.

Chapter 13 Bankruptcy

A charge-off is a debt that is deemed unlikely to be collected by the creditor but the debt is not necessarily forgiven or written off entirely.

A charge-off is a debt, for example on a credit card, that is deemed unlikely to be collected by the creditor because the borrower has become substantially delinquent after a period of time. The creditor crosses off the consumer’s debt as uncollectible and marks it on the consumer’s credit report as a charge-off. Each state has its own statute of limitations on debt, which, depending on the type of debt, could be as low as three years or as high as 15 years. Either way, charge-offs remain on the credit report for seven years, and the affected party will either have to wait out the seven years or negotiate with the creditor to have it removed after paying off all the debt. It just means that the creditor or debt collector will not be able to get a judgment in court for the payment of the old debt.

Charge-Off

Chattel is tangible personal property that is movable between locations, as opposed to immovable property such as real estate.

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Expand If the company defaults on the loan, the lender is compensated by selling the chattel.
In the financial world, chattel refers to movable personal property such as jewelry or furniture. The primary difference between chattel and real estate is that chattel is movable while real estate is fixed permanently to one specific location. Chattel property and other personal property is tracked separately from land or improvements made to land because it can be depreciated more quickly. Companies use chattel mortgages to buy property, and they authorize equipment, vehicles, and other assets as collateral.

Chattel

The collateral source rule prevents monetary damages from being reduced by the amount that was reimbursed from another source such as insurance.

The collateral source rule is a law in state jurisdictions that prevents the reduction of damages awarded to a plaintiff for injury, illness, or disability by the amount already recovered from a third party such as an insurer. Proponents of the collateral source rule argue that a defendant in a suit for damages should not escape the consequences of negligence or malpractice just because the damages were covered by the plaintiff's insurer or by government benefits. The rule varies by state but generally mandates that damages awarded to a plaintiff in court cannot be reduced by any amount that is paid from other sources, including health insurance and workers' compensation, that cover the damages. The collateral source rule is a law in state jurisdictions that prevents the reduction of damages awarded to a plaintiff for injury, illness, or disability by the amount already recovered from a third party such as an insurer. In many states, the collateral source rule prevents evidence that the plaintiff is receiving compensation for injuries from other sources, such as insurance, from being admitted in court.

Collateral Source Rule

A collection agency is a company used by lenders to recover funds that are past due or from accounts that are in default.

A collection agency is a company used by lenders or creditors to recover funds that are past due, or from accounts that are in default. Collection agencies deploy multiple strategies to try to retrieve funds, such as the following:
Calling the debtor’s personal and office telephones
Mailing numerous late-payment notices to the debtor
Contacting a debtor’s family, friends, and neighbors to confirm the debtor’s contact information
Appearing at the individual’s front door
Third-party collection agencies—but not creditors' in-house collection departments—are bound by the Fair Debt Collection Practices Act (FDCPA), of which some rules are cited below.
A debt collector may not do the following: A lender may outsource the debt-collection activity to a third party (the collection agency), or it may have an internal department or a debt-collection subsidiary that would handle the job. If the borrower pays their debt as a result of the collection agency's efforts, then the creditor pays the collection agency a percentage of the funds, or assets, that it recovers. Collection agencies are regulated by the Fair Debt Collection Practices Act (FDCPA) and bound by rules about what they can and cannot do to collect funds.
When a borrower defaults on their debts or fails to make scheduled loan payments, the creditor will report this delinquency to a credit bureau.

Collection Agency

Credit counseling provides guidance and support for consumer credit, money management, debt management, and budgeting. 

Credit counseling provides consumers with guidance on consumer credit, money management, debt management, and budgeting. It’s important to note that credit counseling and agencies that provide these services are not the same as companies that offer debt settlement or debt consolidation services. Some of the most important things to ask include:
What services do you offer?
How is credit counseling offered at your organization?
How often will we meet or communicate?
Do you offer free educational resources?
What fees, if any, do you charge?
What if I can’t afford to pay?
Do I have to sign a contract to use your services?
What are your certifications and qualifications? Credit counseling companies can help you create a debt management plan (DMP), which allows you to make a single payment toward your debt each month. The goal of most credit counseling is to help a debtor avoid bankruptcy if they find themselves struggling with debt repayment.

Credit Counseling

A debt cancellation contract (DCC) modifies loan terms to cancel all or part of a customer’s obligation to repay an extension of credit from a bank.

What Are Debt Cancellation or Debt Suspension Products Offered with an Auto Loan?

A debt cancellation contract (DCC) is a contractual arrangement modifying loan terms. Consequently, DCCs—as well as debt suspension agreements (DSAs)—often are a more suitable form of debt protection for borrowers than credit insurance. When you’re having difficulty keeping up with auto loans, credit cards, or other types of debt, and debt cancellation is not an option, then it’s important to consider all the solutions available to you. Seeking debt relief, for example, may allow you to take advantage of things like debt settlement or debt consolidation for managing outstanding obligations. Banks and other financial institutions offer debt cancellation contracts in place of credit insurance plans.

Debt Cancellation Contract (DCC)

A debt avalanche is an accelerated system of paying down debt that is based on paying the loan with the highest interest rate first.

A debt avalanche is a type of accelerated debt repayment plan. Your current loans include:
$1,000 on a credit card with a 20% annual percentage rate (APR)
$1,250 monthly car payment at a 6% interest rate
$5,000 line of credit (LOC) with an 8% interest rate
For simplicity’s sake, assume each debt has a minimum monthly payment of $50, except for the car loan, where the minimum payment would be the regular monthly installment. Using the debt avalanche approach, once the debt with the highest interest rate is entirely paid off, then the extra repayment funds go toward the next-highest interest-bearing loan. The advantage of the debt avalanche method of debt repayment is that it minimizes the amount of interest you pay while working toward your debt-free goal, as long as you stick to the plan. With a debt avalanche, you make the minimum payment on each source of debt, then use any remaining available funds to pay extra on toward the debts with the highest interest rates.

Debt Avalanche

If a debt becomes delinquent and the lender sees few options for recovery, the lender might sell the account to a debt buyer.

Debt Collection Agencies Industry in the US - Market Research Report

A debt buyer is a company that purchases debt from creditors at a discount. Debt buyers, such as collection agencies or a private debt collector, buy delinquent or charged-off debt at a fraction of the debt's face value. The debt buyer then collects on the debt either on its own or through the hiring or a collection agency or resells portions of the debt, or any combination of these alternatives. A debt buyer is a type of debt collector who purchases a creditor's debt at a discount in order to collect on it. Rather than continue to wait for the debtor to pay off the delinquent debt in full, the lender could turn to a debt buyer and transfer ownership of that account for a smaller return.

Debt Buyer

A debt collector recovers past-due debts for creditors in return for a fee.

A debt collector is a company or agency that is in the business of recovering money owed on delinquent accounts. Some debt collectors are debt buyers; these companies purchase debt at a fraction of its face value and then attempt to recover the full amount of the debt. Finally, an individual has the right to issue a cease and desist letter to a debt collector who repeatedly contacts them within a short period of time, as the FDCPA regards this behavior as a form of harassment.﻿﻿﻿ If after receiving the cease and desist, the collections agency still continues harassing the individual, they can make a report to the Consumer Financial Protection Bureau (CFPB). Not only will their credit history be hit, but their debt will be turned over to a collections agency or debt collector within three to six months of default. Overdue payments on credit card balances, phone bills, auto loan payments, utility payments, and back taxes are examples of delinquent bills that a debt collector may be tasked with retrieving.

Debt Collector

Debt fatigue refers to the seeming futility of the debt repayment process due to high amounts of incurred debt.

Debt fatigue occurs when a debtor becomes overwhelmed by the amount of debt incurred and the seeming futility of the debt repayment process. By not dragging the debt out for any longer than necessary, the debtor will start seeing more dramatic results of the debt repayments sooner, preventing them from becoming overwhelmed by the overall debt burden.
Let's say Jamie took out a student loan to pursue her MBA. To make debt fatigue less likely to occur, a debtor should make efforts to stop incurring additional debt and make a realistic repayment plan that allows the debt to be fully repaid as soon as possible. Because debt often feels like it will last forever, a debtor should focus on the reasons they want to be out of debt and their goals for life after debt. Debt fatigue occurs when a debtor becomes overwhelmed by the amount of debt incurred and the seeming futility of the debt repayment process.

Debt Fatigue

Debt relief refers to strategies whereby debtors are able to lessen the burden of their obligations to a creditor.

Household Debt and Credit Report (Q4 2020)

Debt relief is the reorganization of debt in any shape or form so as to provide the indebted party with a measure of respite, either fully or partially. Options for mitigating consumer debt include speaking with a creditor about debt-relief measures, such as restructuring loans, loan forgiveness, or declaring personal bankruptcy, which are forms of debt settlement. Creditors may only be willing to consider debt-relief measures when the repercussions of debt default by the indebted party or parties are perceived as being so severe that debt mitigation is a better alternative. Another common form of debt relief involves debt consolidation, or the combining of several higher-interest loans into a single lower-interest loan. Options for debt relief may entail forgiving a portion of the debt’s principal, lowering the interest rate, or consolidating several debts into a single lower-interest loan.

Debt Relief

Debt consolidation is the act of combining several loans or liabilities into one by taking out a new loan to pay off the debts.

Consolidating your federal education loans can simplify your payments, but it also can result in the loss of some benefits

Can Debt Consolidation Affect Your Credit Score?

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What Is Debt Consolidation?
How Debt Consolidation Works If you were to pay off each credit card separately, you would spend $750 each month for 28 months and you would end up paying a total of around $5,441.73 in interest.
Consolidating three credit cards into one low-interest loan
**Loan Details**
**Credit Cards (3)**
**Consolidation Loan**
**Interest %**
**Payments**
**Bills Paid/Month**
**Principal**
$15,000 ($5,000 \3)
**Interest**
$5,441.73($1,813.91\*3)
$1,820.22($606.74\*3)
However, if you transfer the balances of those three cards into one consolidated loan at a more reasonable 12% interest rate and you continue to repay the loan with the same $750 a month, you'll pay roughly one-third of the interest—$1,820.22—and you can retire your loan five months earlier. Benefits of debt consolidation include a single monthly payment in lieu of multiple payments and a lower interest rate.
Debt consolidation is the process of using different forms of financing to pay off other debts and liabilities. If you consider consolidation loans, speak to your credit card issuer(s) to find out how long it will take to pay off debts at their current interest rate and compare that to the potential new loan. Consumers can apply for debt consolidation loans, lower-interest credit cards, HELOCs, and special programs for student loans.

Debt Consolidation

A debtor in possession (DIP) is a person or corporation under bankruptcy protection that still holds property to which a creditor has a right.

A debtor in possession (DIP) is a person or corporation that has filed for Chapter 11 bankruptcy protection but still holds property to which creditors have a legal claim under a lien or other security interest. The DIP also needs to maintain adequate insurance on estate assets—and to be able to document that coverage—and must provide periodic reporting on the financial health of the business.
Should the debtor not meet these obligations, or fail to follow court orders, the DIP designation can be terminated, after which the court will appoint a trustee to manage the business. A debtor in possession (DIP) is a person or corporation that has filed for Chapter 11 bankruptcy protection but still holds property to which creditors have a legal claim under a lien or other security interest. A debtor in possession (DIP) is a person or corporation that has filed for Chapter 11 bankruptcy protection but still holds property to which creditors have a legal claim under a lien or other security interest. A DIP may also be able to secure debtor-in-possession financing (DIP financing) that can help to keep the business solvent until it can be sold.

Debtor in Possession (DIP)

A bankruptcy discharge is an order that releases a debtor from personal liability for certain types of debts.

Discharge in Bankruptcy—Bankruptcy Basics

Table of Contents
What Is a Bankruptcy Discharge?
How a Bankruptcy Discharge Works
Which Debts Get Discharged
Limitations of Bankruptcy Discharge
Can Bankruptcy Discharge Be Denied? A court can deny a discharge in Chapter 7 for a number of reasons, including, among others, the debtor's failure to provide tax documents that have been requested, destruction or concealment of books or records, violation of a court order, or an earlier discharge in an earlier case that began within eight years before the date the second petition was filed, and failure to complete a course on personal financial management. A bankruptcy discharge, also known as a discharge in bankruptcy, refers to a permanent court order that releases a debtor from personal liability for certain types of debts. Chapter 7 bankruptcies generally receive a discharge after about four months from the time the bankruptcy petition is filed, while a Chapter 13 bankruptcy discharge is issued after the debtor completes all payments under the plan. As mentioned above, creditors listed on the discharge are not permitted to contact the debtor or pursue collection activity, and a debtor may file a report with the court if a creditor violates the discharge order.

Bankruptcy Discharge

An earnings withholding order is a court order allowing an organization to garnish wages from one of their members or employees.

An earnings withholding order is a court order issued by a judge that instructs an employer to garnish wages from one of their employees. These include:
The name, address, and jurisdiction of the court issuing the order
The name and address of the levying officer
The name and address of the employee in question, and that of their attorney, if applicable
The name of the creditor
The court case number
The date on which the order was issued If they are successful in their case, the court can send an earnings withholding order to the borrower’s employer, informing them that they are legally obligated to deduct a specified sum from the borrower’s paycheck and forward it on to a specified levying officer. An earnings withholding order is a court order issued by a judge that instructs an employer to garnish wages from one of their employees. An earnings withholding order is a court order requiring that an employer garnish wages from one of their employees.

Earnings Withholding Order

A frozen account is an account to which no withdrawals or purchases can be made.

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What Is a Frozen Account? If illegal activity is detected, or if the account holder is found to be complicit in any fraud through the account, the account may be permanently closed, and any remaining funds may be seized. When a bank receives the judgment, it is legally bound to place the freeze on the account immediately and is not required to inform the account holder. If they did not receive a notice after the account was frozen, they can call the bank and ask for the lawyer's name and phone number so they can attempt to settle the account. A frozen account is a bank or investment account through which no debit transaction can be made.

Frozen Account

Full-recourse debt grants lenders the right to tap a borrower's assets in excess of the specified secured collateral if a borrower defaults on its loan obligation.

Full-recourse debt is a type of secured debt that gives the lender rights to assets—beyond just the secured collateral specified in the loan contract—to cover the full repayment of the borrower’s loan obligations if they default on the loan. Full-recourse debt is a type of secured debt that gives the lender rights to assets—beyond just the secured collateral specified in the loan contract—to cover the full repayment of the borrower’s loan obligations if they default on the loan. In other words, loans with full-recourse provisions offer lenders additional remedies to pursue 100% of the outstanding loan amount, including legal action.
Full- and non-recourse debt are examples of secured loans.
Full-recourse debt is common in the mortgage loan sector. In contrast to full-recourse debt, non-recourse debt does not give a lender any rights to additional assets if a borrower defaults on a secured loan. The essential difference between a recourse and non-recourse loan has to do with the types of assets a lender can claim if a borrower fails to repay a loan.

Full-Recourse Debt

Insolvency is a situation in which an individual or company cannot pay off bills and debts.

Insolvency is a term for when an individual or company can no longer meet their financial obligations to lenders as debts become due. If a business owner plans on restructuring the company’s debt, they assemble a realistic plan showing how they can reduce company overhead and continue carrying out business operations. Before an insolvent company or person gets involved in insolvency proceedings, they will likely be involved in informal arrangements with creditors, such as setting up alternative payment arrangements. A bankruptcy, on the other hand, is an actual court order that depicts how an insolvent person or business will pay off their creditors, or how they will sell their assets in order to make the payments. Insolvency is a state of financial distress in which a person or business is unable to pay their debts.

Insolvency

A judgment lien is a court ruling giving a creditor the right to take possession of a debtor's property if the debtor doesn't fulfill his or her obligations.

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What Is a Judgment Lien? A judgment lien is a court ruling that gives a creditor the right to take possession of a debtor's real or personal property if the debtor fails to fulfill his or her contractual obligations. A judgment lien is a court ruling that gives a creditor the right to take possession of a debtor's property if the debtor fails to fulfill his or her contractual obligations. This lien may be made against an individual or business and allows the creditor to access assets such as the debtor's business, personal property, and real estate to satisfy the judgment. These liens can be attached to real or personal property, or—if the debtor has none at the time of judgment—to future acquisitions.
If you owe money to a creditor and don't pay, that party may sue you for the balance.

Judgment Lien

Judgment proof is a description of a person who does not have enough assets for a creditor to seize when a court order requires debt repayment.

Judgment proof is a description of a person who does not have enough assets for a creditor to seize when a court order requires debt repayment. Judgments can be valid for many years, and creditors can continue to try to collect what the judgment allows long after they win a lawsuit against a delinquent borrower.
If a person is deemed judgment proof, it likely means that they have no assets and no job. The credit card company fails in its debt collection efforts, then sells Mike’s unpaid debt to a collection agency. As a last resort, the collection agency sues Mike and obtains a judgment against him for the unpaid debt. However, because Mike barely earns more than the minimum wage, his wages can’t be garnished, and because he lives in a state that protects his primary residence from creditors, the collection agency can’t place a lien on his house.

Judgment Proof

Keep and pay is a bankruptcy exemption. It lets a person keep an asset provided the individual continues to make payments.

Table of Contents
What Is Keep and Pay? Keep and pay is a strategy to keep an asset while continuing to make payments on it, even after having declared bankruptcy.
Keep-and-pay requires that the debtor or person filing for bankruptcy is able to keep up with payments for the asset. Understanding Keep and Pay
How Keep and Pay Works
Keep and Pay Rules
Example of Keep and Pay
Keep and pay refers to a type of bankruptcy exemption. Keep and pay prevents people from having a particular asset repossessed and possibly liquidated, but it sometimes requires them to file an official statement with the bankruptcy court that shows they have a plan to pay for the asset going forward. Keep and pay is a bankruptcy strategy in which an individual who wants to keep an asset following a bankruptcy resolution agrees to follow a payment schedule and sets forth their intentions in court documents.

Keep and Pay

If the owner of property fails to meet their related debt obligations, their property may be put for a lien sale to satisfy those debts.

A lien sale is the sale of the claim—or a hold—placed on an asset to satisfy an unpaid debt. When the lien debt is sold, usually by a local government agency, the buyer can employ a lien servicing company that may add more fees and interest to the lien. Owners of property that is subject to a lien sale can have their property removed from such sale by making payment arrangements to bring their outstanding debt up to date. Typically, lien sales are conducted as public auctions, and the lien is on real estate, automobiles, and other personal property. A lien sale is the sale of the claim—or a hold—placed on an asset to satisfy an unpaid debt.

Lien Sale

Lifetime cost is the sum of all the costs, including the purchase price, of owning a particular item, such as a car, over the lifetime of that item.

Lifetime cost is the total of all other expenses relating to a good, like a car or a home, over the expected life of the product. The lifetime cost of a good or service refers to the total cost of owning it over its lifetime, in addition to the initial cost of purchase—in business, you may hear this referred to as TCO (total cost of ownership).
Lifetime costs can include maintenance, upgrades, annual membership fees, as well as products like gas for a car or toner for a computer. Besides the base purchase price, lifetime costs include:
The cost of maintaining the article in a good or functioning fashion
Cost of insurance to protect the item
Renovations or upgrades required by the product As an example, if a person bought a fur coat, lifetime cost would include the purchase price as well as the price to clean, store, insure, and otherwise maintain the coat. The average amount it costs to own and operate a car per year, according to the American Automobile Association's latest survey; the number includes the cost of gasoline, maintenance, insurance, license and registration, loan finance charges, and depreciation costs.

Lifetime Cost

A limited recourse debt is a debt in which the creditor has limited claims on the loan in the event of default.

Limited recourse debt is a debt in which the creditor has limited claims on the loan if the borrower defaults. Often, a limited recourse debt contract is structured so that the debt transitions to unsecured, or non-recourse debt pending the completion of a specific event. Limited recourse debt sits in between secured debt and unsecured debt in terms of the backing behind the loan. Limited recourse debt sits between secured debt and unsecured debt in regards to the payout hierarchy. Limited recourse debt falls between an unsecured and secured loan, where claims on the debt sit below secured lenders and above both shareholders and unsecured lenders in terms of payout hierarchy.

Limited Recourse Debt

Mini-Miranda rights are a set of statements a debt collector must use when contacting an individual to collect a debt.

Mini-Miranda rights are a set of statements that a debt collector must use when contacting an individual to collect a debt. The actual Miranda Warning states that the suspect has the right to remain silent, that anything said by the suspect can and will be used against them in a court of law, and that the suspect has the right to an attorney.
Just as the Miranda Warning came about to protect suspects from intimidation efforts by law-enforcement officers, the Mini-Miranda was introduced to safeguard consumers from abusive debt collection practices. If the collection agency phones the debtor, the Mini-Miranda rights require the collector to inform the debtor that the call is from a debt collector, that they are calling to collect a debt, and that any information obtained during the phone call will be used to achieve this goal. These rights and related information are set out by law in the U.S. in the Fair Debt Collection Practices Act (FDCPA) of 1977
Mini-Miranda prevents a debt collector from using false pretenses in furtherance of collecting a debt. Like traditional Miranda rights that inform arrestees of their rights and provide information about why they are being arrested, Mini-Miranda rights provide information about the debt being collected and who is seeking it.

Mini-Miranda Rights

Nondischargeable debt is a type of debt that cannot be eliminated through a bankruptcy proceeding. Examples of such debt include student loans as well as most federal, state, and local taxes.

Nondischargeable debt is a type of debt that cannot be eliminated through a bankruptcy proceeding. These include debts arising from a martial settlement or divorce decree; debts incurred based on fraudulent acts; debts from willful and malicious acts to another person or another person's property; and debts from embezzlement, larceny, or a breach of fiduciary responsibility. This includes instances when the debtor destroys records of their finances, transfers property in an effort to hide it from creditors, if the debtor does not fulfill the completion of a course in personal finance management, or if the debtor cannot account for certain missing assets. This could be grounds under their latest bankruptcy for their debts to be declared nondischargeable, dependent on the type of bankruptcy that was filed and the time frame. Under Chapter 7 of the Bankruptcy Code, other types of nondischargeable debt include payments owed for personal injury caused by the debtor while intoxicated and operating a motor vehicle.

Nondischargeable Debt

Peak debt is the point at which a debtor's monthly interest payments overwhelm overall income, forcing a drastic change in spending.

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Table of Contents
What Is Peak Debt?
Understanding Peak Debt
Good Debt and Bad Debt
About Household Debt
Household Peak Debt
Tackling Peak Debt Once the principal and interest payments on your debt make it difficult or impossible to meet your fixed expenses, you will need a plan to potentially restructure and pay down your debt over time. Table of Contents
What Is Peak Debt?
Understanding Peak Debt
Good Debt and Bad Debt
About Household Debt
Household Peak Debt
Tackling Peak Debt If your household has reached peak debt, it may be time to consider debt counseling. Household debt, otherwise known as consumer debt, in the U.S. rose to $14.56 trillion as of the third quarter of 2020.

Peak Debt

Preferred debt refers to debt obligations that must be repaid before other financial liabilities are met.

Preferred debt is a financial obligation that is considered more important than–or make take priority over–other types of debt. This makes ownership of preferred debt more lucrative than owning subordinate, secondary debt. Preferred debt is a financial obligation that is considered more important than–or make take priority over–other types of debt. Even preferred securities are placed after preferred and senior debt in terms of repayment order. For a business, the amount of preferred debt that it carries on its books, along with other liabilities, could affect its overall valuation and ability to secure additional financing.

Preferred Debt

Reaffirmation is an agreement made by a debtor to repay some or all of a debt while going through bankruptcy. 

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Reaffirmation is a type of agreement a debtor makes with a lender to repay some or all of a debt despite going through bankruptcy proceedings. By entering into a reaffirmation agreement, a borrower often maintains possession of an asset held as collateral such as a home or a car, as long as they can fully repay the debt owed on that particular loan. When a borrower reaffirms a debt, this is noted by credit reporting agencies, which then register that the person is making regular on-time payments. When a borrower reaffirms a debt, this is noted by credit reporting agencies, which then register that the person will make regular on-time payments. Reaffirmation does make a borrower liable for a debt and is arranged through a formal agreement with the courts and is therefore a legal process for the borrower to protect themselves and their assets.

Reaffirmation

The forced resumption of legal obligations on old debt is called re-aging debt. Discover more about it here.

Re-aging debt occurs when there is a restart on the clock on an old debt’s statute of limitations. Often, unpaid debt can resurface if a creditor contacts a borrower about repaying an old debt, or if unpaid debt gets bought and sold by debt collectors in a secondary market. Re-aging debt can happen if a borrower talks to a creditor about an old debt or makes a payment on an old debt. 1:39
Re-aging debt could also happen because old, unpaid debt gets bought and sold by debt collectors in a secondary market. If this happens, a borrower can report the debt to the credit bureau as inaccurate, which should result in the debt collector having to prove the validity of the debt.

Re-Aging Debt

Refinancing risk is the possibility that a borrower will not be able to replace existing debt with new debt.

Refinancing risk refers to the possibility that an individual or company would not be able to replace a debt obligation with new debt at a critical time for the borrower. Refinancing risk refers to the possibility that an individual or company would not be able to replace a debt obligation with new debt at a critical time for the borrower. Typically—whether you're a professional investor, a consumer with credit card debt, or a homeowner trying to refinance—we incur a particular debt because its risk-reward profile is attractive and within our tolerance for risk. Refinancing risk refers to the possibility that a borrower will not be able to replace existing debt with new debt. It is risky to assume that you will be able to pay down your existing debt with lower-interest debt because such a loan might not be available when you need it.

Refinancing Risk

A strategy for becoming debt-free, the debt snowball starts with paying off the smallest debt first and working up from there. 

When paying off debt, there are different strategies that you may use to erase credit cards, loans, and other obligations. While it would cost debtors less in interest in the long run to stick with a method called the debt avalanche—repaying debts starting with the highest-interest debt and ending with the lowest-interest debt—the debt snowball method can be more effective in reality because of the psychological benefits of generating a win each time a debt is paid in full, its proponents say. The debt snowball is a method of debt repayment in which a person lists all of their debts from smallest to largest (not including the mortgage), then devotes extra money each month to paying off the smallest debt first, while making only minimum monthly payments on the other debts. Let’s say you can afford to put $1,000 every month toward retiring your three sources of debt: $2,000 worth of credit card debt (with a minimum monthly payment of $50), $5,000 worth of auto loan debt (with a minimum monthly payment of $300), and a $30,000 student loan (with a minimum monthly payment of $400). After the smallest debt is paid off, the debtor starts putting extra money each month toward the second-smallest debt, while continuing to make only minimum monthly payments on all the other debts.

Debt Snowball

A Stipulated Judgment is a court decision ordering a debtor to pay back a debt according to an agreed schedule. 

A stipulated judgment is a court order requiring one party to pay another party a specific amount of money, usually on a payment plan. A stipulated judgment, also known as a consent judgment, is arranged in the courts by a debtor who has limited means of repaying debt, often established as a means for a debtor to prevent wage garnishment. While laws vary from case to case and state to state, stipulated judgments may sometimes be dischargeable in bankruptcy.
Many kinds of debt cannot be forgiven in bankruptcy, including student loans, tax debt, child support, and alimony.﻿﻿ Other types of debt may be forgiven in bankruptcy at the discretion of the court. In most cases, when a debtor fails to adhere to the payment plan agreed upon in a stipulated judgment, the debtor will then be liable for the entirety of the original debt including interest and fees, minus monies already paid back. Debtors who face a court judgment regarding delinquent debt may petition the court for a stipulated judgment in order to halt garnishment and other collection proceedings.

Stipulated Judgment

A subordination agreement establishes one debt as ranking behind another in priority for collecting repayment should a debtor default.

A subordination agreement is a legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor. The lender of the first mortgage refinancing will now require that a subordination agreement be signed by the second mortgage lender to reposition it in top priority for debt repayment. When an individual takes out a second mortgage, that second mortgage has a lower priority than the first mortgage, but these priorities can be upset by refinancing the original loan. A subordination agreement acknowledges that one party’s claim or interest is superior to that of another party in the event that the borrower's assets must be liquidated to repay the debts. Subordinated debts are riskier than higher priority loans, so lenders typically require a higher interest rate as compensation for taking on this risk.

Subordination Agreement

Technical bankruptcy occurs when a borrower can't pay debts but hasn't officially declared bankruptcy. It also refers to obsolete software systems.

Technical bankruptcy occurs when a borrower is unable to make payment on a debt obligation but has yet to officially declare bankruptcy before a legal authority. Technical bankruptcy often refers to a state in which a debtor—an individual or a company—has defaulted on a debt and would likely qualify for bankruptcy protection but has yet to formally file for protection in a bankruptcy court. In technical bankruptcy, the debtor would likely qualify for protections but neither the debtor nor their creditors have taken up formal legal action in a bankruptcy court. Technical bankruptcy occurs when a borrower is unable to make payment on a debt obligation but has yet to officially declare bankruptcy before a legal authority. When collection agencies come calling, they discover that he is in technical bankruptcy, meaning he does not own assets or funds that could help him make payments and he has not filed for a bankruptcy before the courts.

Technical Bankruptcy

Time-barred debt is money a consumer borrowed and didn’t repay but which is no longer legally collectable because a certain number of years have passed. 

Time-barred debt is money a consumer borrowed and didn’t repay but which is no longer legally collectable because a certain number of years have passed. The borrower can then decide whether they want to dispute the debt because the statute of limitations has expired, repay the debt because they feel obligated or want to improve their credit score, or compromise with the collector by settling the debt for less than they owe. Many credit card debt collectors may not have aggressive debt collection policies, allowing unpaid debt to pass without repayment beyond a state’s statute of limitations. If a debt collector contacts a borrower about a debt that they think might be time-barred, the borrower should request written verification of the debt to do further due diligence. Creditors and debt collectors may attempt to sue consumers to collect time-barred
debt, but they should not be able to win in court since the statute of limitations has run out.

Time-Barred Debt

Wage assignment is the act of taking money directly from an employee's paycheck in order to pay back a debt obligation.

Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III (CCPA)

(740 ILCS 170/) Illinois Wage Assignment Act

Wage assignment is the act of taking money directly from an employee's paycheck in order to pay back a debt obligation. The wage assignment cannot continue for more than three years, and the worker can stop the wage assignment at any time. A wage assignment, when involuntary, may also be referred to as wage garnishment and requires a court order. A wage assignment, when involuntary, may also be referred to as wage garnishment and requires a court order. In a voluntary wage assignment, a worker asks their employer to withhold a portion of their paycheck and send it to a creditor to pay off a debt.

Wage Assignment

A waiver of exemption, which is no longer allowed, let creditors seize property on a consumer loan default, which was contrary to state law. 

Staff Guidelines on the Credit Practices Rule

A waiver of exemption was a provision in a consumer credit contract or loan agreement which allowed creditors to seize, or threaten the seizure, of specific personal possessions or property. A waiver of exemption was a provision in a consumer credit contract or loan agreement which allowed creditors to seize, or threaten the seizure, of specific personal possessions or property. State personal property laws do not apply to mortgage loans where a creditor always retains the right to foreclose on the property in the event of a default. Generally, property considered necessities of life—such as an individual's primary home, car, and necessary household goods like a refrigerator or clothing—are exempt from seizure. Further, the Credit Practices Rule of 1985 separately prohibited creditors from attaching liens to household goods considered necessary, including appliances, clothing and linens, and items deemed of more personal than a monetary value such as family photos and wedding rings.

Waiver Of Exemption

A walk-away lease is an auto lease which allows the lessee to return the car at the end of the lease period without any further financial obligations.

A walk-away lease is an auto lease that allows the lessee to return the car at the end of the lease period without any financial obligations based on the car’s residual value. A walk-away lease is a common type of car lease which releases the lessee from any financial obligations at the end of the lease, assuming they have satisfied the maintenance and mileage requirements of the lease agreement. A walk-away lease is an auto lease that allows the lessee to return the car at the end of the lease period without any financial obligations based on the car’s residual value. Since the lender remains the owner of the car and will recover residual value at the lease’s end, the monthly lease payments tend to be lower than loan payments on a comparable vehicle. The advantages of a walk-away lease, when compared to the purchase of a new car via a loan, lie in the convenience and short-term cost savings of a lease.

Debt Management

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