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.
arrearage:
The amount by which one is past due on
a secured debt obligation. For example, if your mortgage payment is $2,000 per month and you are three months behind,
your are $6,000 in arrears.
assets: anything, in any form, that a debtor owns. This includes tangible
assets such as real estate, cars, and jewelry, as well as intangible assets, such as business goodwill, the right to sue someone,
stock options, or future interests in a will.
assume or assumption: 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.
avoidance: the ability to remove a lien. The bankruptcy code allows certain
types of liens to be avoided, such as judgment liens if they impair an exemption claimed in the bankruptcy case.
avoidance
powers: rights to recover certain transfers
of property such as preferences or fraudulent transfers, or to void liens created prior to filing a bankruptcy case.
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
Abuse Prevention and Consumer Protection Act:
The name (mis-name) given by Congress to the new bankruptcy law legislation passed and signed into law by President GW Bush,
effective October 17, 2005 which was designed to dramatically changed the way eligiblity for filing bankruptcy was determined.
It was neither designed to protect consumers nor to address actual bankruptcy abuse.
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.)
business
bankruptcy: a case in which the majority
of total debts owed are business (or, non-consumer) related.
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
debt: liability on a claim
debtor: A person who has filed a petition for relief under the Bankruptcy
Code.
debtor-in-possession: This refers to the debtor in a Chapter 11 case because the debtor
usually remains in possession and control of his/her/its assets. A debtor-in-possession has all the duties and rights
of a trustee and is a fiduciary for the creditors of the estate and, therefore, owes them the highest duty of care and loyalty.
If a debtor-in-possession fails in its duties, a separate trustee can be appointed in a Chapter 11 case and take over possession
of the debtor's assets and interests.
debtor
education: see credit counseling.
debt relief agency: A debt relief agency is a made-up designation that our Congress created as
part of the 2005 Bankruptcy Reform Act and is defined in 11 U.S.C. 101(12A). It includes "any person who provides any
bankruptcy assistance to an 'assisted person' in return for the payment of money or other valuable consideration,
or who is a bankruptcy petition preparer...". Debt Relief Agencies are required to give certain additional disclosures
and incur more costs by virtue of this designation which is neither honorary nor punitive.
defendant: An individual (or business) against whom a lawsuit is filed.
denial
of discharge: a creditor, trustee, U.S.
Trustee or other party of interest may, pursuant to 11 USC 727, file a complaint to deny the discharge of any debtor
if certain things can be proved (such as material misstatements in the bankruptcy schedules, like omission of assets, etc.).
If successful at trial, this results in the entire discharge being denied, not just the discharge of a particular individual
debt.
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.
dismissal: the termination of a case without either entry of a discharge or a denial
of discharge. After dismissal, the debtor and creditors have the same rights and remedies as they had prior to the case
being commenced--as if the case had never been filed (almost).
disposable
income: In general, this is any income
left over each month after you pay all your necessary monthly expenses. However, for Chapter 13 bankruptcy purposes,
Congress has re-defined this to mean your current monthly income (as that term is defined, above) less allowed expenses according
to IRS standards.
domestic
support obligation: debts owed for alimony,
maintenance or support to a child, spouse or other entity for support or maintenance of a child or spouse.
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 (or if multiple states have been lived in in the past 2 years, there is a formula for deciding which state's
law applies).
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)
G
General
Unsecured Claim: a claim by a creditor
against a bankrupt debtor which does not have a priority for payment and for which the creditor holds no security interest
or collateral.
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.
Involuntary
Petition: A bankruptcy case may be commenced
by a specific number of creditors against a debtor without the debtor's consent. There are specific requirements
for the amount of claims the creditors must hold and number of valid creditors who may commence the case. 11 U.S.C. 303 sets
forth the requirements. (please not that the information contained on that link may not be up to date)
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.
judgment: a court order giving a creditor the ability to take any collection remedy allowed under applicable
state or federal law against a debtor (for example, wage garnishment, liens, levies, etc.)
judgment
proof: a debtor who has all exempt assets
and income so that a creditor cannot collect anything from them even if they obtain a court judgment against them.
L
lien: The right to take and hold or sell the property of a debtor as security
or payment for a debt or duty.
lien
stripping: Refers to the mechanism by which
a lien (deed of trust, mortgage, etc.) against property is removed when the value of the property is less than
the amount owed to any liens senior (above) the one(s) being stripped.
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. Even if the amount is not known, it is liquidated if it is "readily capable" of being determined.
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 (for relief from) 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
net
income: this is basically "take-home"
pay. The amount you receive after necessary tax withholding deductions have been taken, union dues, insurance, etc.
If you are self-employed, this is the amount left after paying your ordinary business expenses.
new
bankruptcy laws: See Bankruptcy Abuse Prevention
and Consumer Act
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 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.
non-contingent
debt: debt which is owed now without any
contingent acts needing to occur first.
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.
personal
bankruptcy: A bankruptcy where the majority
of debts are non-business. Usually this is a Chapter 7, but can also be Chapter 11 or Chapter 13 depending on the circumstances.
personal
property: Any property or interests held
by someone that is not real estate. For example, cars, jewelry, clothes, stocks, rights to sue someone, etc.
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. Plans are required in Chapter 13 and Chapter 11 cases.
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.
pre-petition: Occurring prior to the commencement of a bankruptcy case.
post
petition: Occurring after the commencement
of a bankruptcy 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 pre-petition 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. In order to be valid, the reaffirmation agreement must
be signed and filed with the court prior to the discharge being entered.
real
property: land and, generally, anything
affixed to the land.
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.)
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.
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.)
341a
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 or assets.
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 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 13 cases 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.
undue
hardship: A Congressionally-created and
undefined term used to describe the level required to discharge a student loan in bankruptcy.
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
Petition a bankruptcy petition may be commenced
by the debtor, as a voluntary petition, or it can be commenced involuntarily by creditors.
Voluntary
transfer: A transfer of a debtor's property with the
debtor's consent.
