Filing for bankruptcy can be an overwhelming process. The more knowledge and facts you have available to you, the better. If you have questions or want to learn about certain key words associated to bankruptcy and the overall process, please check out our glossary. There is a wealth of information explained in details for you to better understand key terms associated with bankruptcy and the overall process.
341 Meeting of Creditors A mandatory first meeting between a debtor who has filed for bankruptcy and his or her creditors. Often occurs approximately 30 days after filing. Your attorney will be present with you at this meeting.
Adversary Preceding A lawsuit that arises within a bankruptcy proceeding through the filing of a complaint.
Automatic Stay Upon the filing of a bankruptcy petition, creditors must seize collections efforts against the filer. This protects not only the filer, but also creditors who do not have to worry about someone else gaining more than their fair share from a debtor.
Bankruptcy A legal declaration by an individual or business of inability to meet one’s financial obligations. The result may be a liquidation of one’s assets and discharge of debt, or a reorganization of assets in the context of a realistic payment plans. Bankruptcy either may be in voluntary or involuntary.
Bankruptcy Estate All property owned by the debtor or with which the debtor has interest at the time of a bankruptcy filing.
Bankruptcy Petition The official paperwork and declaration filed with a bankruptcy court to begin bankruptcy proceedings.
Business Bankruptcy Bankruptcy filed by a company rather than an individual. It must be categorized by the courts as such.
Chapter A division within the bankruptcy code. Some chapters concern specific types of bankruptcy that have come to be known by their numbers. Examples include Chapter 7, Chapter 11, and Chapter 13 bankruptcies.
Chapter 7 Liquidation bankruptcy for both individuals and businesses.V
Chapter 9 Reorganization bankruptcy for municipalities including cities, counties, and school districts.
Chapter 11 Reorganization bankruptcy for both individuals and businesses,but usually utilized by businesses.
Chapter 12 Reorganization bankruptcy for eligible family farmers or fisherman.Generally only a couple hundred such cases are filed every year.
Chapter 13 Reorganization bankruptcy for individuals.
Claims Creditors assert that they have aright to repayment or to the debtor’s property.
Contested Matter A dispute among the parties of a bankruptcy case that is filed with the court, but is not a claim or objection.
Conversion Switching from one type of bankruptcy to another.
Cramdown Court approval of a reorganization plan despite the disapproval of one of more creditors.
Credit Counseling Professional advice given to consumers about financial planning, budget management, and methods of debt repayment. It is required for individuals who wish to file Chapter 7 or Chapter 13 bankruptcies. Individuals looking to file must attend or complete the required class and produce a certificate of credit counseling prior to filing with the court.
Current Monthly Income A debtor’s average income for the six months prior to filing bankruptcy.
Discharge A borrower is relieved of liability for repayment of debt. This can be accomplished through liquidation bankruptcy.
Dismissal A bankruptcy case is cancelled by the court because it is determined that filing was unnecessary or that a plan cannot be formulated.
Equity Usually defined as the difference between the market value of a piece of property and any debts against it, such as outstanding mortgages,claims, liens, rights or liabilities. Equity in a home rises as such debts decrease and/or as the value of the property increases.
Exemption As related to bankruptcy, property that a filer legally may keep from creditors, such as a primary residence or property that is necessary for one’s income. Laws vary by state.
Fraudulent Transfer Property is transferred from the debtor to another individual so that it is unavailable to creditors.
Involuntary Bankruptcy Bankruptcy that is filed by at least three of an individual’s creditors to whom at least $5000 in unsecured debt is owed.
Lien A legal claim that attaches to one’s property as security for repayment of a debt. It can make property transfer very difficult.
Liquidation One of two main types of bankruptcy (the other is Reorganization). An individual’s or business’s assets are liquidated and sold to pay off as many debts as possible. Those debts that remain unpaid generally are discharged, and the filer no longer is responsible for their repayment.
Liquidation Value The estimated value of all assets that may be sold after having been liquidated through bankruptcy.
No-asset Case An individual or business files Chapter 7 bankruptcy, but has no assets that can be liquidated.
Non-dischargeable Debt Debt that cannot be eliminated through bankruptcy. Such debts include student loans,alimony, child support, taxes, and other debts that are considered obligatory.
Personal Bankruptcy Bankruptcy filed by an individual rather than a business. It must be categorized by the courts as such.
Plan of Reorganization Essential element of Chapter 11 bankruptcy in which a documented plan is Bankruptcy filed by a company rather than an individual. It must be categorized by the courts as such.
Preference A payment made by a debtor to one creditor before filing bankruptcy rather than to others.Often, such payments are cancelled by the bankruptcy court.
Priority Claims Outstanding expenses that we reincurred prior to filing bankruptcy for which the debtor (often a business) has an obligation of payment. Such claims include wages,salaries, and taxes.
Proof of Claim An official document filed by a creditor that outlines claims against the debtor in bankruptcy proceedings.
Reaffirmation Agreement After debts have been discharged in bankruptcy, the filer agrees to repay a debt anyway, possibly in order to protect one’s secured property or to“make things right”.
Reorganization One of two main types of bankruptcy (the other is Liquidation). The debtor follows a realistic repayment plan for debts under the discretion of the bankruptcy court. Any debts above and beyond those included generally are discharged, and the filer no longer is held responsible for their payment.
Restructuring An attempt to rearrange finances and settle debts out of court.
Secured Debt A secured debt is a debt which is secured by some type of collateral (property),where you have pledged in writing some property as collateral or security for a loan; examples are a home mortgage or a car loan.
Skeleton Filing A bankruptcy case in which not all paperwork has been filed, but that may be allowed to continue if certain forms have been filed and others will be returned in the future.
Substantial Abuse A debtor takes advantage of the privilege of filing bankruptcy, usually in cases of fraud.
Trustee A court-appointed third party in a bankruptcy case who holds and manages the assets of the debtor for his or her creditors. Not to be confused with a United States Trustee.
United States Trustee A professional appointed by the Department of Justice to assist in a number of different duties in a bankruptcy case. Not to be confused with a“trustee”.
Unsecured Claim A secured debt in which the attached property is of insufficient value to cover the cost of the debt.
Unsecured Debt An unsecured debt is one in which no security or collateral is pledged for a debt; examples are most credit cards, medical bills, legal bills and other debts which are not secured debts nor defined as non dischargeable under the Bankruptcy Code
Voluntary Bankruptcy Bankruptcy that is filed by the debtor(s).