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BANKRUPTCY Glossary
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Bankruptcy
Glossary of Terms
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A
B C
D E F
G H I J K
L M
N O
P Q R
S T
U V W X
Y Z
A
adversary proceeding - A lawsuit
arising in or related to a bankruptcy case that is commenced
by filing a complaint with the court. A nonexclusive list of
adversary proceedings is set forth in Fed. R. Bankr. P. 7001.
assume
- An agreement to continue performing duties under a contract
or lease.
automatic stay -
An injunction that automatically stops lawsuits,
foreclosures, garnishments, and all collection activity against
the debtor the moment a bankruptcy petition is filed.
B
bankruptcy
- A legal procedure for dealing with debt problems of individuals
and businesses; specifically, a case filed under one of the
chapters of title 11 of the United States Code (the Bankruptcy
Code).
bankruptcy administrator - An officer
of the judiciary serving in the judicial districts of Alabama
and North Carolina who, like the U.S. trustee, is responsible
for supervising the administration of bankruptcy cases, estates,
and trustees; monitoring plans and disclosure statements; monitoring
creditors' committees; monitoring fee applications; and performing
other statutory duties. Compare U.S. trustee.
Bankruptcy Code
- The informal name for title 11 of the United States Code (11
U.S.C. §§ 101-1330), the federal bankruptcy law.
bankruptcy court
- The bankruptcy judges in regular active service in each district;
a unit of the district court.
bankruptcy estate
- All legal or equitable interests of the debtor in property
at the time of the bankruptcy filing. (The estate includes all
property in which the debtor has an interest, even if it is
owned or held by another person.)
bankruptcy judge
- A judicial officer of the United States district court who
is the court official with decision-making power over federal
bankruptcy cases.
bankruptcy petition
- The document filed by the debtor (in a voluntary case) or
by creditors (in an involuntary case) by which opens the bankruptcy
case. (There are official forms for bankruptcy petitions.)
C
chapter 7
- The chapter of the Bankruptcy Code providing for "liquidation,"(i.e.,
the sale of a debtor's nonexempt property and the distribution
of the proceeds to creditors.)
chapter 9
- The chapter of the Bankruptcy Code providing for reorganization
of municipalities (which includes cities and towns, as well
as villages, counties, taxing districts, municipal utilities,
and school districts).
chapter 11
- The chapter of the Bankruptcy Code providing (generally) for
reorganization, usually involving a corporation or partnership.
(A chapter 11 debtor usually proposes a plan of reorganization
to keep its business alive and pay creditors over time. People
in business or individuals can also seek relief in chapter 11.)
chapter 12
- The chapter of the Bankruptcy Code providing for adjustment
of debts of a "family farmer," or a "family fisherman" as those
terms are defined in the Bankruptcy Code.
chapter 13
- The chapter of the Bankruptcy Code providing for adjustment
of debts of an individual with regular income. (Chapter 13 allows
a debtor to keep property and pay debts over time, usually three
to five years.)
chapter 15
- The chapter of the Bankruptcy Code dealing with cases of cross-border
insolvency.
claim
- A creditor's assertion of a right to payment from the debtor
or the debtor's property.
confirmation
- Bankruptcy judges's approval of a plan of reorganization or
liquidation in chapter 11, or payment plan in chapter 12 or
13.
consumer debtor
- A debtor whose debts are primarily consumer debts.
consumer debts
- Debts incurred for personal, as opposed to business, needs.
contested matter
- Those matters, other than objections to claims, that are disputed
but are not within the definition of adversary proceeding contained
in Rule 7001.
contingent claim
- A claim that may be owed by the debtor under certain circumstances,
e.g., where the debtor is a cosigner on another person's loan
and that person fails to pay.
creditor
- One to whom the debtor owes money or who claims to be owed
money by the debtor.
credit
counseling - Generally refers to two events
in individual bankruptcy cases: (1) the "individual or group
briefing" from a nonprofit budget and credit counseling agency
that individual debtors must attend prior to filing under any
chapter of the Bankruptcy Code; and (2) the "instructional course
in personal financial management" in chapters 7 and 13 that
an individual debtor must complete before a discharge is entered.
There are exceptions to both requirements for certain categories
of debtors, exigent circumstances, or if the U.S. trustee or
bankruptcy administrator have determined that there are insufficient
approved credit counseling agencies available to provide the
necessary counseling.
creditors' meeting - see
341 meeting
current monthly income
- The average monthly income received by the debtor over the
six calendar months before commencement of the bankruptcy case,
including regular contributions to household expenses from nondebtors
and income from the debtor's spouse if the petition is a joint
petition, but not including social security income and certain
other payments made because the debtor is the victim of certain
crimes. 11 U.S.C. § 101(10A).
D
debtor
- A person who has filed a petition for relief under the Bankruptcy
Code.
debtor education
- see credit counseling
defendant -
An individual (or business) against whom a lawsuit
is filed.
discharge
- A release of a debtor from personal liability for certain
dischargeable debts set forth in the Bankruptcy Code. (A discharge
releases a debtor from personal liability for certain debts
known as dischargeable debts and prevents the creditors owed
those debts from taking any action against the debtor to collect
the debts. The discharge also prohibits creditors from communicating
with the debtor regarding the debt, including telephone calls,
letters, and personal contact.)
dischargeable debt
- A debt for which the Bankruptcy Code allows the debtor's personal
liability to be eliminated.
disclosure statement
- A written document prepared by the chapter 11 debtor or other
plan proponent that is designed to provide "adequate information"
to creditors to enable them to evaluate the chapter 11 plan
of reorganization.
E
equity
- The value of a debtor's interest in property that remains
after liens and other creditors' interests are considered. (Example:
If a house valued at $100,000 is subject to a $80,000 mortgage,
there is $20,000 of equity.)
executory contract or lease
- Generally includes contracts or leases under which both parties
to the agreement have duties remaining to be performed. (If
a contract or lease is executory, a debtor may assume it or
reject it.)
exemptions, exempt property
- Certain property owned by an individual debtor that the Bankruptcy
Code or applicable state law permits the debtor to keep from
unsecured creditors. For example, in some states the debtor
may be able to exempt all or a portion of the equity in the
debtor's primary residence (homestead exemption), or some or
all "tools of the trade" used by the debtor to make a living
(i.e., auto tools for an auto mechanic or dental tools for a
dentist). The availability and amount of property the debtor
may exempt depends on the state the debtor lives in.
F
family farmer or family
fisherman - An individual, individual and
spouse, corporation, or partnership engaged in a farming or
fishing operation that meets certain debt limits and other statutory
criteria for filing a petition under chapter 12.
fraudulent transfer
- A transfer of a debtor's property made with intent to defraud
or for which the debtor receives less than the transferred property's
value.
fresh start
- The characterization of a debtor's status after bankruptcy,
i.e., free of most debts. (Giving debtors a fresh start is one
purpose of the Bankruptcy Code.)
I
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 a corporation of which the debtor is a director, officer,
or person in control.
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.
J
joint
administration - A court-approved mechanism
under which two or more cases can be administered together.
(Assuming no conflicts of interest, these separate businesses
or individuals can pool their resources, hire the same professionals,
etc.)
joint petition
- One bankruptcy petition filed by a husband and wife together.
L
lien
- The right to take and hold or sell the property of a debtor
as security or payment for a debt or duty.
liquidation
- A sale of a debtor's property with the proceeds to be used
for the benefit of creditors.
liquidated claim
- A creditor's claim for a fixed amount of money.
M
means test - Section 707(b)(2) of the
Bankruptcy Code applies a "means test" to determine whether
an individual debtor's chapter 7 filing is presumed to be an
abuse of the Bankruptcy Code requiring dismissal or conversion
of the case (generally to chapter 13). Abuse is presumed if
the debtor's aggregate current monthly income (see definition
above) over 5 years, net of certain statutorily allowed expenses
is more than (i) $10,000, or (ii) 25% of the debtor's nonpriority
unsecured debt, as long as that amount is at least $6,000. The
debtor may rebut a presumption of abuse only by a showing of
special circumstances that justify additional expenses or adjustments
of current monthly income.
motion to lift the automatic
stay - A request by a creditor to allow
the creditor to take action against the debtor or the debtor's
property that would otherwise be prohibited by the automatic
stay.
N
no-asset case
- A chapter 7 case where there are no assets available to satisfy
any portion of the creditors' unsecured claims.
nondischargeable debt
- A debt that cannot be eliminated in bankruptcy. Examples include
a home mortgage, debts for alimony or child support, certain
taxes, debts for most government funded or guaranteed educational
loans or benefit overpayments, debts arising from death or personal
injury caused by driving while intoxicated or under the influence
of drugs, and debts for restitution or a criminal fine included
in a sentence on the debtor's conviction of a crime. Some debts,
such as debts for money or property obtained by false pretenses
and debts for fraud or defalcation while acting in a fiduciary
capacity may be declared nondischargeable only if a creditor
timely files and prevails in a nondischargeability action.
O
objection to dischargeability
- A trustee's or creditor's objection to the debtor being released
from personal liability for certain dischargeable debts. Common
reasons include allegations that the debt to be discharged was
incurred by false pretenses or that debt arose because of the
debtor's fraud while acting as a fiduciary.
objection to exemptions
- A trustee's or creditor's objection to the debtor's attempt
to claim certain property as exempt from liquidation by the
trustee to creditors.
P
party in interest -
A party who has standing to be heard by
the court in a matter to be decided in the bankruptcy case.
The debtor, the U.S. trustee or bankruptcy administrator, the
case trustee and creditors are parties in interest for most
matters.
petition preparer -
A business not authorized to practice law
that prepares bankruptcy petitions.
plan
- A debtor's detailed description of how the debtor proposes
to pay creditors' claims over a fixed period of time.
plaintiff
- A person or business that files a formal complaint with the
court.
postpetition transfer
- A transfer of the debtor's property made after the commencement
of the case.
prebankruptcy planning
- The arrangement (or rearrangement) of a debtor's property
to allow the debtor to take maximum advantage of exemptions.
(Prebankruptcy planning typically includes converting nonexempt
assets into exempt assets.)
preference or preferential
debt payment - A debt payment made to a
creditor in the 90-day period before a debtor files bankruptcy
(or within one year if the creditor was an insider) that gives
the creditor more than the creditor would receive in the debtor's
chapter 7 case.
presumption of abuse
- see means test
priority
- The Bankruptcy Code's statutory ranking of unsecured claims
that determines the order in which unsecured claims will be
paid if there is not enough money to pay all unsecured claims
in full. For example, under the Bankruptcy Code's priority scheme,
money owed to the case trustee or for prepetition alimony and/or
child support must be paid in full before any general unsecured
debt (i.e. trade debt or credit card debt) is paid.
priority claim
- An unsecured claim that is entitled to be paid ahead of other
unsecured claims that are not entitled to priority status. Priority
refers to the order in which these unsecured claims are to be
paid.
proof of claim
- A written statement and verifying documentation filed by a
creditor that describes the reason the debtor owes the creditor
money. (There is an official form for this purpose.)
property of the estate
- All legal or equitable interests of the debtor in property
as of the commencement of the case.
R
reaffirmation agreement
- An agreement by a chapter 7 debtor to continue paying a dischargeable
debt (such as an auto loan) after the bankruptcy, usually for
the purpose of keeping collateral (i.e. the car) that would
otherwise be subject to repossession.
S
schedules
- Detailed lists filed by the debtor along with (or shortly
after filing) the petition showing the debtor's assets, liabilities,
and other financial information. (There are official forms a
debtor must use.)
secured creditor
- A creditor holding a claim against the debtor who has the
right to take and hold or sell certain property of the debtor
in satisfaction of some or all of the claim.
secured debt -
Debt backed by a mortgage, pledge of collateral,
or other lien; debt for which the creditor has the right to
pursue specific pledged property upon default. Examples include
home mortgages, auto loans and tax liens.
small business case -
A special type of chapter 11 case in which
there is no creditors' committee (or the creditors' committee
is deemed inactive by the court) and in which the debtor is
subject to more oversight by the U.S. trustee than other chapter
11 debtors. The Bankruptcy Code contains certain provisions
designed to reduce the time a small business debtor is in bankruptcy.
statement of financial
affairs - A series of questions the debtor
must answer in writing concerning sources of income, transfers
of property, lawsuits by creditors, etc. (There is an official
form a debtor must use.)
statement of intention
- A declaration made by a chapter 7 debtor concerning plans
for dealing with consumer debts that are secured by property
of the estate.
substantive consolidation
- Putting the assets and liabilities of two or more related
debtors into a single pool to pay creditors. (Courts are reluctant
to allow substantive consolidation since the action must not
only justify the benefit that one set of creditors receives,
but also the harm that other creditors suffer as a result.)
341 meeting
- The meeting of creditors required by section 341 of the Bankruptcy
Code at which the debtor is questioned under oath by creditors,
a trustee, examiner, or the U.S. trustee about his/her financial
affairs. Also called creditors' meeting.
T
transfer
- Any mode or means by which a debtor disposes of or parts with
his/her property.
trustee
- The representative of the bankruptcy estate who exercises
statutory powers, principally for the benefit of the unsecured
creditors, under the general supervision of the court and the
direct supervision of the U.S. trustee or bankruptcy administrator.
The trustee is a private individual or corporation appointed
in all chapter 7, chapter 12, and chapter 13 cases and some
chapter 11 cases. The trustee's responsibilities include reviewing
the debtor's petition and schedules and bringing actions against
creditors or the debtor to recover property of the bankruptcy
estate. In chapter 7, the trustee liquidates property of the
estate, and makes distributions to creditors. Trustees in chapter
12 and 13 have similar duties to a chapter 7 trustee and the
additional responsibilities of overseeing the debtor's plan,
receiving payments from debtors, and disbursing plan payments
to creditors.
U
U.S.
trustee - An officer of the Justice Department
responsible for supervising the administration of bankruptcy
cases, estates, and trustees; monitoring plans and disclosure
statements; monitoring creditors' committees; monitoring fee
applications; and performing other statutory duties. Compare,
bankruptcy administrator.
undersecured claim
- A debt secured by property that is worth less than the full
amount of the debt.
unliquidated claim
- A claim for which a specific value has not been determined.
unscheduled debt
- A debt that should have been listed by the debtor in the schedules
filed with the court but was not. (Depending on the circumstances,
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, such as a mortgage or lien; a debt for which credit
was extended based solely upon the creditor's assessment of
the debtor's future ability to pay.
V
Voluntary transfer
- A transfer of a debtor's property with the debtor's consent.
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