The following is a glossary of most commonly used bankruptcy terms together with general, basic definitions based upon the meaning of these terms as used in the United States Bankruptcy Code and as used by the United States Bankruptcy Courts.
Adequate Protection – is a provision by which the value of a secured creditor’s secured interest is protected during the course of a bankruptcy.
Adversary Proceeding – is a lawsuit filed in a United States Bankruptcy Court to determine the dischargability of a debt, to force the turn over of property, or to seek damages against a party that are related to a bankruptcy case.
Alimony – is an obligation ordered pursuant to a non-bankruptcy order of a state court to pay support to a spouse or former spouse. See Domestic Support Obligations.
Allowed Secured Claim – is a claim that is allowed by the Bankruptcy Court to be paid under a confirmed bankruptcy plan of reorganization.
Amendment of Schedules – is the process by which schedules disclosing a debtor’s debts, assets and financial affairs are changed to correct an error contained in the original schedule or previously amended schedule.
Assisted Person – means any person whose debts consist primarily of consumer debts and the value of whose nonexempt property is less than $150,000.00.
Automatic Stay – is an injunction of a United States Bankruptcy Court that arises automatically and immediately upon the filing of a bankruptcy petition and enjoins any and all collection activities of a creditor until such time a relief from the injunction is granted by the Court.
Bad Faith – is a term used to describe the use of the bankruptcy process by a debtor for improper purposes.
Bankruptcy – is the term used to describe an action filed pursuant to the authority of the United States Bankruptcy Code.
Bankruptcy Code – refers to the United States Bankruptcy Code that codifies the bankruptcy laws and rules enacted by Congress pursuant to the United States Constitution that authorizes and controls the process of filing for Bankruptcy protection.
Bankruptcy Court – is a court of the United States of America existing as a unit of the various District Courts of the United States designated to preside over cases filed under the United States Bankruptcy Code.
Bankruptcy Estate – means all property interests of a debtor held at the time of the filing of a Bankruptcy case.
Bankruptcy Judge – is the judicial officer empowered to preside over cases filed in the United States Bankruptcy Courts pursuant to the United States Bankruptcy Code.
Bankruptcy Petition – is the petition filed by or on behalf of a debtor under the United States Bankruptcy Code to commence a bankruptcy case.
Cash Collateral – refers to the security interest of a creditor in accounts receivables.
Child Support – – is an obligation ordered pursuant to a non-bankruptcy order of a state court to pay support to or on behalf of a child of the debtor. See Domestic Support Obligations.
Claim – means a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, or contingent
Codebtor – means any person signed onto a debt obligations jointly with a debtor whether as the primary obligor or secondary obligor.
Codebtor Stay – is the provision under Chapter 13 of the Bankruptcy Code that applies the automatic stay to a non-filing codebtor of the debtor.
Confirmation Hearing – Is the hearing in the United States Bankruptcy Court to determine if a plan of reorganization filed under Chapters 11, 12 or 13 of the Bankruptcy Code is to become binding on the debtor and all creditors.
Confirmation of Plan – a plan of reorganization filed under Chapters 11, 12 or 13 of the Bankruptcy Code must be confirmed by the Bankruptcy Court for the plan to be binding on all interested parties.
Consumer Debt – means a debt incurred by an individual primarily for a personal, family or household purpose
Contempt is a contested matter brought before the Bankruptcy Court seeking to enjoin violation of an order of the Court and/or seeking sanctions for such a violation.
Conversion – is the procedure set forth in the Bankruptcy Code that allows a debtor to change its bankruptcy petition from treatment under one Chapter of the Bankruptcy Code to treatment under another Chapter of the Code.
Core Proceeding – is a bankruptcy term that describes the relationship of a dispute between interested parties to the bankruptcy issues in a bankruptcy case.
Cram Down is a term that describes the reduction of the amount paid through a Bankruptcy plan for a secured asset such as a vehicle or furniture from the amount owed to the actual value of the asset on the date of filing of the bankruptcy case.
Creditor – means an entity that has a claim against the debtor that arose at the time of or before the filing of a bankruptcy.
Credit Counseling – is a term that refers to a non bankruptcy procedure whereby a credit counselor attempts to consolidate unsecured debts of a debtor into one monthly payment and in the process attempts to reduce the interest to be paid and in some instances the principal to be paid. The term also is used to refer to the credit briefing that is required by the 2005 Bankruptcy reform before a debtor is allowed to file a bankruptcy petition.
Creditors’ Meeting – is also known as a 341 meeting and is provided by section 341 of the Bankruptcy Code to require a debtor to appear to be questioned by a Trustee and creditors about its petition, schedules, financial records, plans and intentions to treat creditors.
Curing Defaults – refers to the payment of defaulted payments through a bankruptcy plan or the voluntary agreement of a creditor to allow the debtor to catch up defaults in payments required under a plan of reorganization.
Current Monthly Income – means the average monthly income from all sources that the debtor receives without regard to whether such income is taxable income, derived during the 6-month period ending the last day of the calendar month immediately preceding the filing of the bankruptcy.
Debt – means liability on a claim of a creditor.
Debtor – means a person concerning which a bankruptcy case has been filed.
Debtor’s Principal Residence – means a residential structure, including incidental property, without regard to whether that structure is attached to the real property, and also including an individual condominium, modular home, manufactured home, or trailer.
Debt Relief Agency – means any person who provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration.
Defendant – is the party to an Adversary Proceeding against whom the action is filed.
Direct Payments – refers to payments that are paid directly to a creditor outside of and in addition to the payments paid under a plan of reorganization to the Trustee.
Discharge – means the forgiveness of debts in a Bankruptcy granted by the Court after the successful filing of a petition under the Bankruptcy Code and the successful completion of all requirements established by the Code and the Court.
Dischargeable Debt – means a debt that is not excepted from discharge under the Bankruptcy Code.
Dismissal – refers to the termination of a bankruptcy case prior to its successful completion and prior to the discharge of any debts.
Distribution – refers to the payment of claims by a Trustee to holders of allowed proof of claims.
Domestic Support Obligations – means a debt that accrues before, on or after the date of the filing of a bankruptcy, including interest that accrues on the debt as provided under a non-bankruptcy domestic relations order that is owed to or recoverable by a spouse, former spouse, or child of the debtor or such child’s parent.
Entity – includes a person, estate, trust, governmental unit and the United States Trustee.
Equitable Division of Property– is the term referring to the division of assets and debts between spouses or former spouses pursuant to a non-bankruptcy order of a state court that divides said assets and debts in proportion to the equitable interests of the spouses. This is distinguishable from domestic support obligations, which are non-dischargeable in Bankruptcy. Debts between spouses or former spouses created by equitable division are dischargeable in bankruptcy.
Equity – is the value of a debtor’s interest in property that is unencumbered by a lien or security interest.
Executory Contract or Lease – is a contract or lease in which the parties are still obligated to perform duties pursuant to the agreement.
Exemptions – are the laws set forth by the Bankruptcy Code and/or state law that removes a property interest from attachment or liquidation to satisfy a debt claim.
Exempt Property – any property that is exempted from attachment or liquidation to satisfy a debt claim.
Family Farmer or Fisherman – means a individual and spouse engaged in a farming operation whose aggregate debts do not exceed $3,237,000.00 (or as modified from time to time) and not less than 50 percent of whose aggregate non contingent debts arise out of a farming operation or an individual and spouse engaged in a commercial fishing operation whose aggregate debts do not exceed $1,500,000.00 and not less than 50 percent of whose aggregate non contingent debts arise out of a commercial fishing operation.
Feasibility – is a term that refers to the probability that a plan as proposed by a debtor will be successful under the current circumstances of the debtor.
Foreclosure – is a state procedure by which a creditor holding a security interest in real estate is allowed to strip the debtor’s ownership interest and sell the property to satisfy the debt owed to the creditor that is secured by the real property.
Fraudulent Transfers – is any transfer of a property interest owned
Good Faith – is a term that refers to the filing of a Bankruptcy petition for proper purposes.
Insider – includes a relative of the debtor or a general partner of the debtor, or corporation of which Debtor is in control for an individual, and a director, officer, or person in control of the debtor if the debtor is a corporation.
Insolvent – means a financial condition such that the sum of such entity’s debts is greater than all of such entity’s property at a fair valuation.
Joint Debtor – refers to a married couple that files a Bankruptcy petition together as one petition.
Joint Petition – is a single Bankruptcy petition filed by married debtors.
Judicial Lien – is a lien that is created by the entry of a judgment resulting from the filing of a lawsuit by a creditor against a debtor.
Judicial Foreclosure – refers to the foreclosure process that is conducted from the beginning to end by filing foreclosure proceedings through the appropriate court of the state. Some states require judicial foreclosures while others allow for non-judicial foreclosures. A non-judicial foreclosure allows for the creditor to foreclose property by running notice in the legal newspaper for the county and calling out the foreclosure on the Courthouse steps. Once foreclosed, the foreclosure is then confirmed by the Court.
Lien – means a charge against or interest in property to secure payment of a debt or performance of an obligation.
Lien Avoidance – is the process in the Bankruptcy Court in which a judicial lien or a non-purchase money security interest is made of no effect.
Liquidation – is the process by which an asset is sold or otherwise converted into cash or whereby the interest of a debtor in property is terminated.
Luxury items – refers to property interests in which the value of the property exceeds that necessary for a successful reorganization of the debtors financial affairs. For example, a Chapter 13 Trustee may object to a debtor paying for a vehicle in excess of $20,000.00 unless an amount equal to the excess is paid to unsecured creditors.
Means Test – is a formula established under section 707(b)(2) of the Bankruptcy Code to determine if a debtor is able to repay certain debts. If the debtor does not pass the means test, it is forced into a Chapter 13 plan in which the debtor will pay excess income into the plan for five years.
Meeting of Creditors – See creditors’ meeting. This is the meeting established in section 341 of the Bankruptcy Code that requires a debtor to appear and answer questions from the Trustee and creditors concerning the petition and schedules filed by the debtor.
Modification of Plan – is the process by which a plan of reorganization is amended. This can occur prior to confirmation or after confirmation, but the rules of modification are much more restricted for post confirmation modification.
No Asset Case – is a term that refers to a Chapter 7 case in which no assets will be available for liquidation and distribution to unsecured creditors.
Nondischargeable Debt – is any debt that is expressly excepted from discharge in Section 523 of the Bankruptcy Code or by order of the Court.
Nonjudicial Foreclosure – A non-judicial foreclosure allows for the creditor to foreclose property by running notice in the legal newspaper for the county and calling out the foreclosure on the Courthouse steps. Once foreclosed, the foreclosure is confirmed by the Court.
Nonpurchase Money Security Interest – is a lien created by agreement between the debtor and creditor against collateral where the loan amount is not used to purchase the collateral.
Objection to Dischargeability – refers to an adversarial complaint filed in the Bankruptcy Court to determine whether a debt is dischargeable.
Objection to Plan – is an objection filed in the Bankruptcy Court whereby a creditor contends that its treatment in a plan of reorganization is not fair or is proposed in bad faith.
Objection to Proof of Claim – is the process by which a debtor or Trustee objects to the claim asserted by the creditor in its filed proof of claim. A proof of claim is deemed to be correct unless objected to by the debtor or the Trustee.
Party In Interest – is any party that has an interest in the Bankruptcy estate created by the filing of a Bankruptcy petition.
Person – includes an individual, partnership or corporation.
Plan – is a plan of reorganization filed pursuant to Chapters 11, 12 or 13 of the Bankruptcy Code. A plan must be confirmed to be binding on parties in interest.
Plan Payments – are the payments set forth in a plan of reorganization. These payments are binding upon confirmation unless a subsequent successful modification of the plan is later filed.
Petition – means a petition filed with the Bankruptcy Court to commence a bankruptcy case.
Plaintiff – is the party that files an adversarial proceeding in the Bankruptcy Court.
Pre-Petition – refers to the time preceding the time a petition is filed in the Bankruptcy Court.
Preference or Preferential Transfer – refers to the debtor’s transfer of a property interest to an unsecured creditor during the 90 days immediately preceding the filing of a Bankruptcy case if the creditor is not an insider or during the year immediately preceding the filing of a Bankruptcy case if the creditor is an insider.
Priority – is the provision of the Bankruptcy Code that specifies the order in which allowed claims will be paid in Bankruptcy.
Proof of Claim – is the form filed by a creditor in the Bankruptcy Court to assert a claim against the debtor or the debtor’s Bankruptcy estate.
Property of the Estate – Is all property interests owned by the debtor at the time the Bankruptcy petition is filed with the Court.
Purchase Money Security Interest – is a lien that attaches to property that is purchased with loan proceeds that are loaned for the express purpose of purchasing the property.
Reaffirmation Agreement – is an agreement signed by the debtor and creditor pursuant to the Bankruptcy Code that excepts the debt from discharge and obligates the debtor to continue making payments pursuant to the terms of the loan agreement or other terms as may be set forth in the reaffirmation agreement.
Redemption – is the process by which the debtor retains property by paying the current value of collateralized property, which is typically less than the total amount owed to the creditor under the security agreement.
Relief from Automatic Stay – is an order of the Court that upon motion of a creditor lifts the injunction against repossession of collateral or collection of debt that sprang into existence automatically upon the filing of a Bankruptcy petition.
Repossession – is the non-bankruptcy process by which a creditor gains possession of property that is subject to a defaulted security agreement.
Retirement Plan – is a plan of retirement allowed pursuant to the Internal Revenue Code. These plans typically are expressly excluded from the property of the estate.
Secured Creditor – is a creditor that holds a security interest in property held by a debtor.
Secured Debt – is a debt that is secured by collateral pursuant to agreement.
Security Agreement – means an agreement that creates or provides for a security interest.
Security Interest – means a lien created by an agreement.
Schedules – are the documents required by the Bankruptcy Code to disclose the assets, debts and financial affairs of the debtor.
Statement of Financial Affairs –is the document required by the Bankruptcy Code that discloses miscellaneous financial affairs of the debtor.
Statement of Intentions – is the document required by the Bankruptcy Code to inform secured creditors of debtor’s intention to reaffirm the secured debt, redeem the secured collateral, or surrender the secured collateral to the creditor.
Statutory Lien – is a lien arising solely by force of a statute on specified circumstances or conditions, but does not include a security interest or judicial lien.
Student Loans – are government backed student loans that are non dischargeable in Bankruptcy unless a hardship can be established.
Surrender of Property – occurs when a debtor surrenders its interest in secured property and discharges the debt.
Transfer – means the creation of a lien, the retention of title as a security interest, the foreclosure of a debtor’s equity of redemption, or each voluntary or involuntary disposing of or parting with property or an interest in property.
Trustee – refers to the officer appointed by the U.S. Trustees office to oversee the debtor’s bankruptcy case to ensure the debtor is treating creditors properly and more specifically to ensure that unsecured creditors are treated fairly.
United States (US) Trustee – is the agency head appointed to select, manage and oversee the Trustees in the execution of their duties.
Undersecured Debt – refers to debt that is secured with collateral pursuant to a security agreement, but in which the value of the collateral is less than the debt owed to the creditor.
Unscheduled Debt – is a debt of the debtor that existed at the time the Bankruptcy petition was filed but was not listed in the debtor’s schedules.
Unsecured Claim – is a claim of debt that is not secured by any collateral, such as most credit card debt, medical bills, and deficiencies remaining after repossession and liquidation of secured claims.
Valuation – is the method prescribed by the Bankruptcy Code and Courts by which a value is assigned to assets.