Glossary of Bankruptcy Terms
Adversary proceeding:
A lawsuit arising in or related to a bankruptcy case.
Assets:
Every form of property that the debtor owns. May include intangibles such as stock options.
Assume:
An agreement to continue performing duties under a contract.
Automatic stay:
A legal injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
Bankruptcy:
A legal procedure for dealing with debt problems of individuals and businesses.
Bankruptcy administrator:
Term for officer of the judiciary serving in Alabama and North Carolina, compare to U.S. trustee. Supervises the administration of bankruptcy cases, estates, and trustees, monitors plans and disclosure statements, creditors’ committees, fee applications, and performs other statutory duties.
Bankruptcy Code:
Title 11 of the United States Code governs bankruptcy proceedings.
Bankruptcy court:
A unit of the district court, the bankruptcy judges in each district.
Bankruptcy estate:
Encompasses all legal or equitable interests in property of the debtor at the time of bankruptcy filing. Includes all property in which debtor has an interest, even if it is own by another person.
Bankruptcy judge:
Judicial officer of the United States district court. The official with decision-making power over federal bankruptcy cases.
Bankruptcy petition:
Official document filed by debtor (when voluntary) or by creditors (when involuntary) which opens the bankruptcy case.
Chapter 7:
Chapter of Bankruptcy Code providing for the sale of the debtor’s (nonexempt) property with proceeds distributed to creditors.
Chapter 9:
Chapter of Bankruptcy Code providing for reorganization of municipalities.
Chapter 11:
Chapter of Bankruptcy Code providing for for reorganization of a corporation or partnership. Usually including a plan to keep business alive and pay creditors over time.
Chapter 13:
Chapter of Bankruptcy Code providing for reorganization and adjustment of debts of an individual with regular income. Debtor keeps property and pays debt over time, typically in three to five years.
Chapter 15:
Chapter of Bankruptcy Code dealing with cases of cross-border insolvency.
Claim:
A creditor’s assertion of right to payment from the debtor.
Collateral:
Property which is subject to a lien. A creditor with rights in collateral is a secured creditor.
Confirmation:
Bankruptcy judge’s approval of the plan of reorganization or payment plan.
Contested matter:
Matters outside of objections to claims that are disputed but not within definition of adversary proceeding.
Contingent claim:
A claim that may be owed by the debtor only under certain circumstances, such as cosigning on another person’s loan and that person fails to pay.
Creditor:
One who claims to be owed money by the debtor.
Credit counseling:
a) The “individual or group briefing” that individual debtors must attend before filing under any chapter of the Bankruptcy Code.
b) An “instructional course in personal financial management” that an individual debtor must complete before discharge from a Chapter 7 or a Chapter 13 bankruptcy.
Creditors’ meeting:
See 341 meeting.
Debtor:
A person who has filed a petition for relief under the Bankruptcy Code.
Denial of discharge:
Penalty for debtor misconduct. When the debtor’s discharge is denied, the debts that could have been discharged cannot be discharged in any subsequent bankrtupcy.
Discharge:
A release of a debtor from the dischargeable debts set forth in the Bankruptcy Code. Prevents the creditors from taking any action against the debtor to collect the debts.
Dischargeable debt:
A debt eliminated by the Bankruptcy Code from the debtor’s personal liability.
Dismissal:
The termination of a bankruptcy case without either the entry of a discharge or a denial of discharge. After a case is dismissed, the debtor and the creditors have the same rights as before the bankruptcy commenced.
Equity:
The value of a debtor’s interest in property after creditors’ interests are considered.
Exempt property:
Property owned by an individual debtor that the Bankruptcy Code or state law permits the debtor to keep from creditors, varies by state. Can include primary residence under the homestead exemption, “tools of the trade” debtor needs to make a living.
Joint administration:
Two cases administered together– separate individuals with no conflicts of interest may pool their resources, hire same professionals, etc., as approved by the court.
Joint petition:
Single bankruptcy petition filed by a husband and wife together.
Lien:
The right to take and hold or sell the property of a debtor as payment for a debt.
Liquidation:
Sale of debtor’s property with proceeds to go to creditors.
Liquidated claim:
Fixed amount of money claimed by creditor.
Means test:
Determination of whether an individual debtor’s chapter 7 filing is an abuse of the Bankruptcy Code that would require dismissal or a conversion to chapter 13.
Motion to lift the automatic stay:
Request by creditor that would allow the creditor to take action against the debtor.
Non-dischargeable debt:
Debt that cannot be eliminated in bankruptcy. Examples include home mortgage, debt for alimony or child support, some taxes, most government funded or guaranteed educational loans, debts arising from death or injury caused by driving under the influence, and debts for criminal fines included in a sentence on the debtor’s conviction of a crime.
Objection to dischargeability:
An objection by a trustee or creditor to the debtor being released from personal liability for certain dischargeable debts.
Objection to exemptions:
An objection by a trustee or creditor to the debtor’s claim of certain property as exempt from liquidation.
Party in interest:
One who can be heard by the court in a matter decided in a bankruptcy case. Generally the debtor, U.S. trustee or bankruptcy administrator, the case trustee, and creditors.
Petition preparer:
A business that prepares bankruptcy petitions that is not authorized to practice law.
Plan:
Detailed description of how the debtor will pay creditors’ over period of time.
Postpetition transfer:
Transfer of the debtor’s property after commencement of bankruptcy case.
Prebankruptcy planning:
Rearrangement of debtor’s property to allow the debtor to take maximum advantage of exemptions.
Preferential debt payment:
Payment made to a creditor within the 90 days before a debtor files for bankruptcy.
Priority:
Statutory ranking of unsecured claims determining the order in which claims will be paid if there is not enough money to pay all claims in full. Ranked by the bankruptcy Code.
Priority claim:
An unsecured claim that is entitled to be paid ahead of other claims.
Proof of claim:
Official form detailing a statement and verifying documentation describing reason debtor owes a creditor money.
Property of the estate:
All legal or equitable interests of the debtor as of the commencement of the case.
Schedules:
Official form filed by the debtor along with the petition. Lists assets, liabilities, and other financial information.
Secured creditor:
A creditor with a claim against the debtor who is entitled to take and hold or sell certain property of the debtor to satisfy some of all of the claim.
Secured debt:
Debt for which creditor has right to pursue pledged collateral upon default. Examples are home mortgages, auto loans, and tax liens.
Statement of financial affairs:
An official form a debtor must use to answer questions about sources of income, transfers of property, and other financial information.
341 meeting:
The meeting required by section 341 of the Bankruptcy Code. The creditors, a trustee, examiner or the U.S. trustee questions the debtor under oath about his or her financial affairs. See also, creditors’ meeting.
Transfer:
Any mode or means that a debtor uses to part with her or her property.
Trustee:
The trustee is a private individual (or corporation) appointed in all Chapter 7, 12, and 13 cases, and some Chapter 11 cases. The trustee is under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee liquidates property of the estate and distributes to creditors. In Chapter 13 bankruptcy, the trustee also oversees the debtor’s plan, receives the payments from the debtor, and disburses the payments to the creditors.
U.S. trustee:
Responsible for supervising the administration of bankruptcy cases, estates, and trustees. The U.S. trustee also monitors the bankruptcy plans and disclosure statements and performs other statutory duties as an officer of the Justice Department.
Undersecured claim:
A debt secured by property that is worth less than the full amount of the debt.
Unliquidated claim:
A claim where the specific value has not been determined.
Unscheduled debt:
A debt that should have been listed by the debtor in the schedules but was not. An unscheduled debt may or may not be discharged.
Unsecured claim:
A claim or debt for which a creditor holds no special assurance of payment.
Voluntary transfer:
A transfer of a debtor’s property with the debtor’s consent.