Understanding Bankruptcy and Debt Collection
We have compiled an extensive list of commonly used terms in debt collection. Some of the terms are very basic while others warrant a longer explanation. Underlined terms offer more details by clicking on them.
ADR (Alternative Dispute Resolution aka Appropriate Dispute Resolution) – Describes methods used to resolve disputes out of court like negotiation, conciliation, and mediation. ADR is usually less expensive, faster, and less formal than a court trial.
Agent– Someone authorized by another to act in their place, or entrusted with another’s business.
Arbitration – A non-court procedure for resolving disputes using a neutral third party (arbitrator.)
Bankruptcy – A legal proceeding that a debtor from responsibility of paying debts, or provides protection while attempting to repay debts. There are two types of bankruptcies: Chapter 7 liquidation (debts are discharged), and reorganization (a plan is submitted to the court on how debts will be repaid.) For consumers, reorganization bankruptcy is called Chapter 13. Reorganization bankruptcy for consumers with an extraordinary amount of debt and for businesses is called Chapter 11.
Bankruptcy Trustee – A person appointed by the court to oversee the case of a person or business that has filed for bankruptcy. In a consumer Chapter 7 case, the trustee’s role is to gather the debtor’s nonexempt property, liquidate it and distribute it proportionally to her creditors. In a Chapter 13 case, the trustee’s role is to receive the debtor’s monthly payments and distribute them proportionally to her creditors.
CHAPTER 7 Bankruptcy – The most common type of bankruptcy, in which many or all of the debt is wiped out completely in exchange for giving up your nonexempt property. Chapter 7 bankruptcies takes from three to six months, costs about $200, and commonly requires only one trip to the courthouse.
CHAPTER 13 Bankruptcy – The reorganization bankruptcy for consumers, in which debt is partially or fully repaid. In Chapter 13 bankruptcy, you keep your property and use your income to pay all or a portion of the debts over three to five years.
Conformed Copy – An exact copy of a document filed with a court onto which a court clerk stamps the filing date, and adds any handwritten notations to the document that existed on the original, including dates and the judge’s signature. A conformed copy may or may not be certified.
Default – A failure to perform a legal duty including mortgage or other loan payments.
Disbursement – The process of paying out and/or the money paid out to associations, management, other agents.
Discharge – A bankruptcy court’s erasure of the debts of a person or business that has filed for bankruptcy
Fair Credit Reporting Act (FCRA) – The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, is designed to promote accuracy and ensure the privacy of the information used in consumer reports.
Fair Debt Collections & Practices Act (FDCPA) – A federal law that outlaws unfair debt collection practices, including lying, harassing, misleading and otherwise abusing debtors, by debt collectors working for collection agencies.
Forebearance – Voluntarily refraining from doing something, such as asserting a legal right. For example, a creditor may forbear on its right to collect a debt by temporarily postponing or reducing the borrower’s payments.
Foreclosure – The forced sale of real estate to pay off a loan on which the owner of the property has defaulted.
Health Insurance Portability and Accountability Act (HIPAA) – National standards to protect the privacy of personal health information.
Interest – A commission you pay a bank or other creditor for lending you money or extending you credit. An interest rate represents the annual percentage that is added to your balance.
Judgement – A final court ruling resolving the key questions in a lawsuit and determining the rights and obligations of the opposing parties.
Lender – Banks, financial institutions that holds mortgage on property
Lender Collection – When Lender has foreclosed, collection activities are initiated against the Lender for their portion of debt.
Lien – A recorded claim against a property, giving a creditor the right to grab a specific item of property if you don’t pay a debt.
Mediation – A dispute resolution method designed to help warring parties resolve their own dispute without going to court. In mediation, a neutral third party (the mediator) meets with the opposing sides to help them find a mutually satisfactory solution.
NOD (Notice of Default) – A notification given to a borrower stating that he or she has not made their payments by the predetermined deadline. It dictates that if the money owed (plus an additional legal fee) is not paid in a given time, the lender may choose to foreclose the borrower’s property.
NOS (Notice of Sale) – The notice which a lender is required to give before foreclosure sale of property. Sale date is published once per week for three consecutive weeks prior to sale]
Pay-off Demand – Statement of account provided to escrow in order to receive payment when the property goes through escrow for a sale or refinance.
Pre-Collection Service – This service helps to separate accounts that require minimal collection efforts from those that require extensive efforts.
Primary Collections – Delinquent accounts that have never been placed with a professional collection agency
RLN (Release of Lien) – Recorded within 21 days of making Payment In Full
Secondary Collections– Delinquent accounts that another collection agency or collection attorney has previously attempted to collect on your behalf.
Secured Debt – A debt on which a creditor has a lien. The creditor can institute a foreclosure or repossession to take the property identified by the lien, called the collateral, to satisfy the debt if you default.
Small Claims Court – A state court that resolves disputes involving relatively small amounts of money — usually between $2,000 and $10,000, depending on the state. Claimants usually appear without lawyers and recount their side of the dispute in layman’s terms. A small claims judgment has the same force as does the judgment of any other state court.
Title – Evidence of ownership of real estate.
Trustee – The person who manages assets owned by a trust under the terms of the trust document. A trustee’s purpose is to safeguard the trust and distribute trust income or principal as directed in the trust document.
Unsecured Debt – A debt that is not tied to any item of property.