We have collected a list of common financial terms that we think everyone should know. Read through the terms and familiarize yourself with them. You never know when they may come in handy!
An asset is something you own, and includes cash, savings accounts, and personal property. In a balance sheet, assets such as the value of your home are offset by liabilities, such as your current mortgage.
A balance sheet is a financial statement that shows your financial assets (such as your savings account and home equity) compared to your financial liabilities (such as your mortgage, credit card debt).
A budget is a document that shows your spending goals for a designated period of time.
Compound interest is interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.
Credit counseling is a prerequisite to filing bankruptcy. During your credit counseling session, you will learn about alternatives to bankruptcy, and following the session, you will receive a certificate of completion.
Discharge may occur during Chapter 7 bankruptcy proceedings and means that you no longer owe any money on the debt that is discharged.
Exempt assets are not included in your bankruptcy filing.
A personal financial planner can advise you on your personal financial situation, including investments and savings goals. Fee-only financial planners are paid for the appointment, and do not receive a commission for your purchases.
Gross income is the total amount of money that you make, before subtracting social security, income taxes and other payroll deductions.
A personal liability is the amount that you owe. For example, many households have their home loan, car loans, credit card bills, and student loans as their liabilities.
Liquidation of your assets is when your assets are sold, and the proceeds used to pay your debts.
The means test uses certain parameters to determine whether a debtor may file Chapter 7 bankruptcy for a full discharge of debt. Individuals with too much income after certain expenses are prohibited from filing Chapter 7 unless they qualify as exception.
Net Income is your income after subtracting out expenses such as social security, income taxes and other payroll deductions.
Your net worth is the difference between your financial assets and your financial liabilities. If you are in debt, your net worth is likely to be negative.
Nonexempt assets are included in your bankruptcy filing, and may be repossessed and liquidated.
Reaffirmation of your loans is when you agree to new terms with your lenders during the bankruptcy process and do not seek to discharge your debt or cease your access to credit.
Secured debt is secured by collateral, such as an automobile or home. Secured creditors have the right to your collateral in the event you default on payments. Typically, secured debt is not fully discharged in bankruptcy and secured creditors are entitled to certain privileges.
A tax adviser is a tax professional who can help you in planning a tax strategy, and can prepare your tax returns for you.
A teaser rate is an introductory interest rate offered by credit card companies. When the introductory period is over, the rate typically increases dramatically.
Unsecured debt, such as credit card debt, is not secured with collateral. During the bankruptcy process, creditors of unsecured debt are not able to repossess your personal property.