Bankruptcy Terms

341 meeting of creditors: A meeting in which the debtor is questioned under oath about his or her financial affairs by creditors, a trustee, examiner, or U.S. trustee.

Adversary proceeding: A lawsuit arising in or related to a bankruptcy case. This suit is filed in the bankruptcy court and is in the context of the bankruptcy case.

Assets: Property owned by the debtor, including real estate, vehicles, and personal property.

Assume: An agreement to continue performing duties under a contract or lease.

Automatic stay: The moment a bankruptcy petition is filed, this injunction puts a stop to lawsuits, foreclosures, garnishments, and collection activity against the debtor.

Bankruptcy: The legal procedure for dealing with debt problems, whether for individuals or businesses. Refers to cases filed under one of the chapters of the United States Bankruptcy Code.

Bankruptcy code: Informal name for title 11 of the U.S. code which deals with federal bankruptcy — 11 U.S.C. § 101-1330.

Bankruptcy court: Refers to the bankruptcy judges in active service in each district.

Bankruptcy estate: All legal and equitable interests of the debtor at the start of bankruptcy proceedings. This include real and personal property, as well as interests in property.

Bankruptcy petition: A formal document submitted by the debtor to seek the protection of the federal bankruptcy laws.

Bankruptcy trustee: An appointed individual or corporation who represents the interests of the bankruptcy estate and the debtor’s creditors in Chapter 7 and 13 cases.

Chapter 7: A liquidation form of bankruptcy in which the debtor’s property is sold and the proceeds used to pay off creditors.

Chapter 11: A reorganization form of bankruptcy, usually reserved for businesses, in which the debtor proposes a plan to reorganize the business and establish a repayment schedule for creditors.

Chapter 13: A form of bankruptcy in which the debtor has enough steady income to pay down debts through a repayment plan over time, usually 3-5 years.

Claim: A creditor’s statement that they have a right to payment from the debtor or out of the debtor’s property.

Confirmation: Approval of a plan for reorganization, liquidation, or repayment plan by a bankruptcy judge.

Consumer debt: Debts incurred for personal reasons, rather than for business purposes, such as credit cards, mortgages, and auto loans.

Conversion: When a case filed under one form of bankruptcy, such as Chapter 7, is converted to another form, such as Chapter 13.

Contingent claim: A special claim in which the debtor may owe payment under specific circumstances. For instance, if the debtor co-signed a loan and the other signer failed to pay, leaving the debtor responsible.

Creditor: Any individual or business to whom the debtor owes money or who claims the debtor owes money.

Credit counseling: Individual or group course a debtor is required to take from a nonprofit credit counseling agency prior to filing for bankruptcy. This helps establish better spending habits to prevent repeated debt problems.

Debtor: The person or entity that filed for bankruptcy.

Defendant: The person or entity against whom a lawsuit is filed; they must defend their case.

Discharge: Elimination of debt through the bankruptcy process. A discharge releases the debtor from liability for discharged debts and creditors can no longer take action against or communicate with the debtor to collect the debts.

Dischargeable: Debts that can be discharged through bankruptcy according to the Bankruptcy Code.

Disclosure: A written statement in which a debtor filing Chapter 11 provides enough information for creditors to evaluate the proposed reorganization plan.

Equity: Value of a debtor’s interest in property after liens and creditor interests are considered.

Exempt property, exemptions: Property or value in a property that creditors cannot touch. A debtor is allowed to retain exempt property without fear of creditors seizing it to pay off a debt.

Insider (of corporate debtor): A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

Insider (of individual debtor): Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or corporation of which the debtor is a director, officer, or person in control.

Joint administration: A mechanism allowing two or more cases to be administered together after receiving court approval.

Joint petition: A bankruptcy petition filed together by a married couple.

Lien: A claim made on a property to secure payment of a debt. For instance, a mortgage is a kind of lien.

Liquidated claim: A creditor’s claim for a specific amount of money.

Liquidation: When a debtor’s property is sold to pay off creditors.

Means test: A test to determine if a debtor’s income qualifies him or her for Chapter 7 or if it requires conversion to Chapter 13 bankruptcy.

No-asset case: In Chapter 7 cases, if the debtor has no assets to satisfy any portion of the creditor’s unsecured claims. See unsecured claim below.

Non-dischargeable: Debts that cannot be discharged through bankruptcy. These include student loans, taxes, and child and spousal support.

Objection to discharge: When a creditor or trustee objects to certain debts being discharged, often because the debt arose as a result of the debtor’s fraud.

Objection to exemptions: When a creditor or trustee objects to certain property being considered exempt and therefore untouchable to pay off debt.

Party in interest: A party who has standing to be heard in court regarding the bankruptcy case. This includes the debtor, trustees, and creditors.

Petition: The document that is filed to start the bankruptcy process, which includes debtor information, bankruptcy chapter, and estimates of assets and liabilities.

Plaintiff: A person or entity who files a complaint with a court against a defendant.

Plan: A description, in detail, of the process by which a debtor will repay creditors over a fixed period of time. See Chapter 13 bankruptcy.

Postpetition transfer: A transfer of the debtor’s property after the bankruptcy petition has already been made.

Preference: Payment to a creditor in the 90 days prior to the debtor filing for bankruptcy. The creditor receives more with preferential debt payment than they would under Chapter 7 bankruptcy.

Priority: The order in which unsecured claims are paid from the bankruptcy estate, as established by the Bankruptcy Code. For instance, priority claims are paid first, followed by general unsecured claims.

Priority claim: Debts that must be paid first before the bankruptcy estate pays other unsecured claims. Priority claims include alimony or child support, unpaid wages, and taxes.

Proof of claim: A formal statement written by a creditor and filed along with supporting documents that demonstrates why a debtor owes the creditor money.

Property of the estate: All non-exempt, legal, and equitable property or interests owned by the debtor at the commencement of the bankruptcy case.

Reaffirmation agreement: An agreement by the debtor to continue paying dischargeable debt after the conclusion of Chapter 7 bankruptcy proceedings. This is typically to avoid repossession of collateral or mortgaged property.

Schedules: An official list of assets, liabilities, and financial information submitted by the debtor either with or shortly following the initial bankruptcy petition.

Secured creditor: An entity that holds a claim against the debtor secured by a lien on a property. This property is collateral, and the creditor can take, hold, or sell the property to satisfy the debt.

Secured debt: Debt backed by a mortgage, collateral, or lien; any property or goods to which the creditor has the right to repossess.

Statement of financial affairs: An official set of questions answered by the debtor in writing demonstrating sources of income, property transfers, lawsuits, etc.

Statement of intention: An official declaration by the debtor in Chapter 7 bankruptcy that outlines how the debtor will deal with consumer debt secured by the property of the estate.

Trustee: An individual or entity who manages the property in the bankruptcy trust to pay creditors, whether by liquidation, reorganization, or repayment plan.

Unliquidated claim: A claim by a creditor with no specific monetary value attached.

Unscheduled debt: A debt the debtor neglected to include in the schedules filed with the court.

Unsecured claim: A debt for which a creditor holds no assurance of payment through a mortgage or lien; essentially, any debt not tied to an asset. Examples include credit cards, personal loans, and medical debt.

Bankruptcy News

  • What is Bankruptcy

What Is Bankruptcy?

February 26th, 2021|Comments Off on What Is Bankruptcy?

Bankruptcy is a legal process that provides a person or business the right to eliminate or reorganize their debts to get a financial “fresh start.” Filing bankruptcy allows a person to: • Stop collection activities ...