Glossary of Terms

 
NOTE: THIS GLOSSARY OF COMMON TERMS APPLICABLE TO A TYPICAL CHAPTER 11 BANKRUPTCY CASE IS FOR ILLUSTRATIVE PURPOSES ONLY AND IS NOT INTENDED TO BE ALL INCLUSIVE LISTING OR TO REPRESENT LEGAL ADVICE TO THE READER. CREDITORS OF THE DEBTOR IN THIS MATTER ARE URGED TO SEEK PROPER ADVICE FROM AN ATTORNEY OF THEIR CHOOSING. 
 
Source: The Federal Judiciary at www.uscourts.gov
 
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 an Executory Contract or Unexpired Lease.
 
Automatic Stay
An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor, including telephone calls, 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 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) that starts the bankruptcy case. (There are official forms for bankruptcy petitions.)
 
C
 
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. A chapter 11 case can also propose the sale of property of the Bankruptcy Estate.  People in business or individuals can also seek relief in chapter 11.
 
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.
 
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.
 
Creditors' Meeting
(see Section 341 meeting)
 
D
 
Debtor
A person who has filed a petition for relief under the Bankruptcy Code.
 
Defendant
An individual (or business) against whom (or which) 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 an $80,000 mortgage, there is $20,000 of equity.)
 
Executory Contract or Unexpired 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
 
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 while insolvent, or that makes the transferor insolvent.
 
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 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.
 
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
 
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
 
Non-Dischargeable 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 non-dischargeable only if a creditor timely files and prevails in a non-dischargeability action.
 
O
 
Objection to Claim
A trustee's or debtor's objection to a claim filed by a creditor.
 
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.
 
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.
 
Post-Petition Transfer
A transfer of the debtor's property made after the commencement of the case.
 
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.
 
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.
 
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.)
 
Section 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 the "first meeting of creditors."
 
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 the entire 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.
 
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.)
 
T
 
 
 
Transfer
Any mode or means by which a debtor disposes of or parts with his/her property.
 
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.