Glossary
Deficiency Judgment — The difference between an agreed upon contract price owed to a creditor and the amount of money the creditor is able to obtain from a security interest after the debtor has relinquished the security interest for whatever reason. (i.e. Debtor owes 10,000 on a car loan. For whatever reason, debtor decides to voluntarily relinquish the vehicle back to the vehicle lien holder. Lien Holder is able to sell the car for $2,000. The $8,000 difference between what the debtor owes on the car and what money the lien holder obtained for the car is a deficiency, for which the lien holder can obtain a deficiency judgment, demanding the monies.)
Discharge — The taking away of a debtors obligation to pay back a particular debt (secured or unsecured). Discharges occur at the end of a bankruptcy process.
Disposable Income — The income a debtor has remaining after the debtors’ necessary expenses have been subtracted from the debtors income. Having or not having disposable income helps to determine which chapter of bankruptcy a particular debtor can file under.
Means Test — refers to an investigative process undertaken to determine whether or not an individual or family is eligible to qualify for help from the government. Generally, the test examines the eligibility for relief for debtors who have sufficient financial means to pay back a portion of their debts. The means test is largely used to determine the chapter of bankruptcy a particular debtor can file under.
Secured Debt — A loan in which the borrower pledges some asset (a car, for example) as collateral for the loan, which then becomes a secured debt owed to the creditor who gave the loan. The debt is secured against the collateral; in the event the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to satisfy the debt by regaining the amount originally lent to the borrower. (i.e. If you finance a car with a car company, using the car as collateral, the debt owed to the car company is a secured debt. Simply meaning that if you fail to pay the payment, the car company would repossess the collateral and may look to sell it so as to regain the amount of money originally lent to the borrower. If they cannot recoup the entire amount of money, you are then in the realm of the deficiency judgment, mentioned above.)
Unsecured Debt –A debt or obligation that is not collateralized (collateral is not pledged for the loan) by a lien on specific assets of the borrower.
