5 Lesser Known Terms Associated With Bankruptcy

Anybody that needs to file for bankruptcy is more than likely familiar with the basic terms used in the legal process. However, there are a few that go beyond creditors and debtors that you need to be aware of. 

Schedules

Schedules are the documents used to file for bankruptcy at the beginning of a bankruptcy process, and they list all of your assets, debts, cash flow, exemptions, and things of that nature. You will need to review the schedules with your lawyer to ensure that everything is accurate. It's important to remember that if you forget a debt to list on the appropriate schedule, you cannot have it discharged later. Do a thorough review of these documents and make sure that they are accurate.

SOFA

A statement of financial affairs (SOFA) is reported at the start of a bankruptcy filing, and are questions that you must answer in order to start the process. It asks for things such as your recent tax returns, income, lawsuits that you've been involved with, and debts that you paid off prior to the bankruptcy filing. You'll even need to list things like if you gave money to a friend or relative.

Exemptions

Your bankruptcy filing will allow you to have a certain amount of exemptions regarding property, money, or earnings that you can withhold and are not subject to creditors. For example, there are exemptions for individuals to retain vehicles and homes or retirement income that you are allowed to hold onto. These exemptions cannot be taken away from you during a bankruptcy filing.

Means Test

Part of filing for bankruptcy will require taking a means test. This is not a traditional test as the name implies, but a look at your finances to determine if you even qualify for bankruptcy. This will be done by looking at your income levels and expenses, then comparing what those are to the average person in your area. If you are filing for bankruptcy with a lot of disposable income, you will likely not qualify.

Adversary Action

An adversary is a lawsuit that happens within your bankruptcy case. It often happens is a specific creditor has an objection to their debt being discharged and has a valid reason as to why they feel they are still owed their money. Speak with a bankruptcy attorney to find out if they will cover the legal expenses associated with any adverse action against you since it may or may not be covered under the original legal fees.