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
- 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.
- 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.)
- 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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