Below are some definitions I provided from a now unknown source to clients when I was a Financial Health and Bankruptcy Counselor. They are meant to inform you in general and not to be used as legal definitions or the basis of any decisions you may make.
Understanding many of these Forecloure Definitions may help when you talk to your mortgage lender. Feel free to call me if you have any questions.
Arrears:
Money owed and due, but not yet paid; often the total of a series of unpaid amounts. Being overdue in an installment payment
Bankruptcy:
Proceedings under federal law whereby a debtor can discharge (i.e., wipe out) his or her debts or have protection from creditors while trying to repay them. Liquidation bankruptcy (Chapter 7) involves discharging debts by the surrender of assets. Reorganization bankruptcy (Chapter 13) involves providing the court with a plan for repaying the debts. Reorganization bankruptcy for businesses and for consumers with very large debts is called Chapter 11.
Bankruptcy Court:
The specialized federal court that deals with bankruptcy matters as detailed in the Federal Bankruptcy Act. Each state also has a number of such courts, usually covering several counties.
Bankruptcy Trustee:
A court-appointed individual who oversees the case of a person or business that has filed for bankruptcy. In a consumer Chapter 7 case, the trustee gathers the debtor’s nonexempt property, liquidates it, and distributes it proportionally to the creditors. In a Chapter 13 case, the trustee receives the debtor’s monthly payments and distributes them proportionally to the creditors
Chapter 7 Bankruptcy:
Liquidation or straight bankruptcy, the most familiar sort, in which many or all debts are discharged (i.e., wiped out) completely in exchange for an individual’s or business’ nonexempt property. Proceeds are distributed to creditors. Chapter 7 refers to the relevant section of the federal Bankruptcy Code.
Chapter 13 Bankruptcy:
Reorganization bankruptcy for individual consumers may allow the full repayment of debts. Individuals keep their property and use their income to pay their debts (partly or fully) over three to five years, according to a plan presented to the court. The minimum amount to be paid is approximately equal to the value of the individual’s nonexempt property. In addition, the individual’s disposable net income (minus reasonable expenses) must be used to pay debts during the period. At the end of three to five years, the outstanding balance of the debt owed is erased. Chapter 13 refers to the relevant section of the federal Bankruptcy Code.
Deed in Lieu of Foreclosure:
Used by owners to voluntarily convey the title of their property to the beneficiary (lender) to avoid the negative credit consequences of a foreclosure. Lenders are generally reluctant to accept a “deed in lieu” unless the title is free and clear of any other encumbrances junior to theirs and the owners execute an estoppels affidavit acknowledging that they are acting voluntarily, with informed consent.
Deficiency:
The amount for which the borrower is personally liable if the foreclosure sale does not bring enough to cover the debt.
Dischargeable Debts:
Debts that can be erased through bankruptcy. This includes most debts incurred before an individual or business declares bankruptcy. Compare non-dischargeable debts.
Forbearance:
Voluntarily refraining from doing something, especially choosing not to assert a legal right. For example, a creditor may postpone or reduce a borrower’s payments, or one party to a contract may forbear the demanding performance of the other party.
Forbearance Agreement:
The waiting for payment of a debt by a creditor after the debt becomes due.
Foreclosure:
The forced sale of property pledged as security for a debt that went into default.
Grace period:
A time stated in a contract during which a late payment or performance may be made without penalty. If, after the grace period ends, there has still been no payment or performance, the contract is suspended
Guarantor:
One who makes a legally binding secondary promise to pay the debts of another or to perform another person’s duty if that person fails to perform it.
Insolvency:
The state of having more liabilities than the total assets that might be available to pay them, and therefore the inability to pay debts when called upon to do so. If insolvency is chronic, bankruptcy normally follows.
Installment Contract:
An agreement in which payments of money, delivery of goods, or performance of services are to be made in a series, usually on fixed dates or based on certain actions. A failure to pay (or perform) an installment when due is a breach of contract and may relieve the other party from performing further. In many such contracts, the failure to make a payment gives the seller the right to repossess any article that has been sold.
Judgment creditor:
A winning plaintiff in a lawsuit to whom a court decides the defendant owes money. It remains up to the creditor to collect the judgment. If the defendant debtor files for bankruptcy, the judgment creditor has priority—a share of the assets ahead of general unsecured creditors who do not have judgments.
Judgment debtor:
The losing defendant in a lawsuit owes the amount of the judgment to the winner, the judgment creditor.
Lien:
A legal claim by a creditor against property that arises from some obligation of the property owner, usually a debt. Security interests are liens that an individual agrees to (e.g., mortgages, home and car loans, and personal loans for which property is pledged to guarantee repayment). Nonconsensual liens are made without a person’s consent and include judgment liens (from a creditor who has sued and obtained a judgment), tax liens, and mechanic’s liens (from an unpaid contractor, subcontractor or other worker).
Lis Pendens:
A legal notice required to show pending litigation relating to real property. Counting, when expenses are greater than profits, loss is the difference between the amount of money spent and the income.
Mortgage:
A security instrument that is recorded against the property that enables the lender (Mortgagee) to sell the property if the borrower (Mortgagor) is in default on the obligations of the Note.
Non-dischargeable Debts:
Debts that are not erased by filing for bankruptcy. In Chapter 7 bankruptcy, such debts remain when the case is over; in Chapter 13 bankruptcy, such debts have to be paid in full as part of the payment plan or remain as a balance at the end of the case.
Non-dischargeable debts include alimony and child support, most income tax debts, many student loans, and debts for personal injury. Compare dischargeable debts.
Non-Judicial Foreclosure:
In Michigan, a foreclosure that does not require a court action
Note:
The promise to pay (the actual loan itself).
Notice of Default:
A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on payments).
Priority:
In bankruptcy law, the right to collect before other creditors do so. Priority is given to taxing authorities, judgment holders, secured creditors, bankruptcy trustees, and attorneys. Priority is also given to mortgages, deeds of trusts, or liens, in the order they were recorded at the office of the County Recorder or Recorder of Deeds.
Quit Claim Deed:
A deed operating as a release; intended to pass any title, interest or claim which the grantor may have in a property, but not containing any warranty of a valid interest or title in the grantor.
Real Estate:
Land and the structures or fixtures that are permanently attached to it, including buildings, houses, stationary mobile homes, fences and trees. Also known as real property or realty
Redemption:
The process of canceling a defeasible (can be defeated: conditions apply) title to land, such as is created by a mortgage foreclosure or tax sale.
Redemption Right:
A time period during which a mortgage, land contract, deed of trust, etc., can be redeemed. Usually set by statute, and after judicial foreclosure.
Sale:
The act of transferring goods or services from a buyer to a seller in exchange for money or something else of value. The price paid may be an announced or listed cost, or it may result from negotiation between seller and buyer or bidding at auction.
Secured Debt:
A debt on which a creditor has a lien. In the event of a default, the creditor can bring an action allowing foreclosure or repossession to take the property identified by the lien (i.e., the collateral or security).
Short Sale:
A sale of property which includes some forgiveness of debt by the lender under a mortgage or trust deed. The amount of debt forgiven may be considered income to the seller and taxable.
Warranty Deed:
A deed used in most states to convey fee title to real property. Until the widespread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee for defective title.