Bankruptcy Glossary

We have listed below many common bankruptcy terms.

Adversary Proceeding
A lawsuit that is related to or arises from an existing bankruptcy case. This type of proceeding is commenced by filing a complaint with the bankruptcy court.

Arrearage
The amount a person is behind on making payments, such as mortgage payments, car payments and/or child support payments.

Automatic Stay
An injunction that stops creditors from taking action to continue collecting on accounts or debts. The stay takes effect the moment a bankruptcy petition is filed.

Bankruptcy
A legal procedure, which is regulated by federal law that allows both individuals and business to deal with debt and seek reorganization or discharge of their debts.

Bankruptcy Code
Title 11 of the United States Code, which governs and regulates all bankruptcy actions.

Bankruptcy Court
A branch of the United States Court System, which is organized into districts in each state.

Bankruptcy Petition
The actual documents that are filed by a debtor to obtain relief and discharge of debts.

Chapter 7
A chapter of bankruptcy that allows the debtor to eliminate obligation on unsecured dischargeable debts.

Chapter 9
A chapter of bankruptcy that allows municipalities to reorganize debt.

Chapter 11
A chapter of bankruptcy that allows businesses and corporations to reorganize their debts and pay creditors over a fixed period of time. Individual consumers may qualify for this depending upon how much debt they have and the nature of the debt.

Chapter 12
A chapter of bankruptcy that allows reorganization of debts for those who qualify as "family farmers" or "fisherman".

Chapter 13
A chapter of bankruptcy that allows consumers to consolidate their debts and set up a structured repayment plan over a fixed period of time.

Chapter 15
A chapter of bankruptcy that deals with cases of cross-border insolvency.

Claim
An assertion by a party that they have a right to payment, property or relief.

Confirmation
Approval of the bankruptcy plan by the presiding bankruptcy judge.

Consumer Debts
Debts that are incurred for the personal needs of a debtor rather than for business purposes.

Creditor
A person or business to whom the debtor owes money and has an outstanding financial obligation.

Current Monthly Income
The average monthly income the debtor receives from all sources including, wages, child support, benefits, regular payments of any kind, and money contributed by household members for the six months prior to the filing of the debtor's bankruptcy case.

Debtor
An individual who files a bankruptcy petition.

Discharge
The release of a debtor for personal liability of certain debts.

Dischargeable Debt
A debt for which the Bankruptcy Code allows elimination of personal liability.

Equity
The values of property after all outstanding liens and mortgages have been deducted from the current property value.

Executory Contract (or Lease)
Contracts or leases under which both parties have remaining duties and obligations to perform.

Exemptions (Exempt Property)
The Bankruptcy Code and applicable state statutes set out the total amount of property that a debtor can own and keep from unsecured creditors. The amount of property that a debtor may exempt is dependent upon which state the debtor lives in.

Fraudulent Transfer
A transfer of property done with the intent to defraud or for which the value received is less than the actual property value.

Joint Petition
A petition that is filed by a husband and wife.

Lien
A legal claim to or hold on a piece of property belonging to another party.

Liquidation
The sale of property belonging to the debtor(s), from which proceeds are used to pay creditors.

Means Test
In 2005, Congress put certain restrictions in place to regulate bankruptcy filings, and as a result of these regulations, debtors must under what is known as the "Means Test." This is a paper test that looks at several factors to determine if an individual qualifies to file bankruptcy and if so, which chapter. The primary purpose of the test is to determine if the debtor's household earnings are more than or above the earnings of an average household of the same size in the same state. If so, the test goes further to see how much disposable monthly income the debtor has. This test/form is required in all consumer bankruptcy filings.

Non-Dischargeable Debt
A debt that cannot be discharged or eliminated by filing bankruptcy. Following are some examples of non-dischargeable debts: child support, periodic alimony, certain taxes, certain debts for government funded educational and student loans, criminal restitution, court fines and costs.

Objection to Discharge
A creditor or trustee can object to a debtor being released, or discharged, from bankruptcy by filing a written Objection to Discharge with the court. The objection will set out the basis on which the trustee or creditor is objecting.

Objection to Exemption
A creditor or trustee can object to a debtor's claim that certain property is exempt from liquidation by either creditors or trustees.

Plan
A detailed Chapter 13 re-payment plan that sets out the terms under which the debtor proposes to pay creditors over a specified period of time.

Preferential Debt Payment
Any payment that is made to a creditor within the 90 days immediately preceding the filing of a bankruptcy case whereby the creditor is paid more than they would receive in a Chapter 7 case.

Priority Claim
Priority refers to the order in which unsecured debts are paid, and a priority claim is one that is entitled to payment ahead of other unsecured claims that do not qualify a priority claims.

Proof of Claim
An official form that is filed with the Bankruptcy Court that provides written verification of a debtor's personal liability and responsibility for a debt.

Reaffirmation Agreement An agreement that is entered into between a creditor and a Chapter 7 debtor wherein the debtor agree to pay the debt after bankruptcy. This is most often seen when a debtor seeks to continue and maintain possession of specific property while continuing to make payments once the bankruptcy has been closed. Common examples are automobile loans and home mortgages.

Schedules
Lists that detail the information a debtor is required to disclose to the Bankruptcy Court, such as property owned, debtors owed, household income and household expenses.

Secured Creditor
A creditor that holds a claim against the debtor for certain property that has been financed, mortgaged, or pledged to the creditor for payment of a debt.

Secured Debt/ Claim
Debt or claim that is linked to property has been financed, mortgaged, pledged as collateral, or has any kind of lien in place that allows the creditor to pursue specific remedies

Statement of Financial Affairs
Specific questions that the debtor must answer in full and verify in writing, which discloses information such as transfers of property, potential or existing lawsuits, preferential payments and sources of income.

Statement of Intention
A form that is completed by a Chapter 7 debtor which discloses the debtor's plans, or intentions, for dealing with secured debts.

341 Meeting of Creditors
A hearing, or meeting, which is required by United States Bankruptcy Code S341, where the trustee takes sworn testimony from the debtor regarding information contained in the bankruptcy petition. Creditors have the right to show up and ask questions about the information contained in your bankruptcy petition and the trustee has the opportunity to ask additional questions about assets, property, debts, expenses and income.

Trustee
A bankruptcy trustee acts under the general supervision of the Court and the U.S. Trustee and is appointed to review Chapter 7, Chapter 11 and Chapter 13 cases. A trustee is responsible for reviewing the petitions, schedules and other documents filed by the debtor. A Chapter 13 trustee also receives payments from the debtor and disburses plan payments to creditors. A Chapter 7 trustee liquidates property of the debtor's estate and distributes the proceeds to creditors.

Unscheduled Debt
A debt that should have been listed in the debtor's petition and schedules but was not. Depending on the nature of the debt and the circumstances, the schedules can sometimes be amended and the debt added.

Unsecured Debt/ Claim
A debt or claim for which credit was extended based on the creditor's determination of the debtor's ability to pay, such as a signature loan, where there has been no pledge of property or collateral.

Voluntary Transfer
A transfer of the debtor's property done with the consent of the debtor.

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