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US Courts Glossary of Bankruptcy TermsAAdversary Proceeding- 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 for in Fed R.Bankr.P 7001
AssumeAn agreement to continue performing duties under a contract or lease
Automatic StayAn injunction that automatically stops lawsuits, foreclosure, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
BBankruptcyA legal proceeding 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 AdministratorAn 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 creditor’s committees; monitoring fee applications; and performing other statutory duties. Compare U.S. Trustee.
BankruptcyCodeThe informal name for title 11 of the United States Code (11 U.S.C Sec 101-1330), the federal bankruptcy law.
Bankruptcy CourtAll legal or equitable interest 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 JudgeA judicial officer of the United States District court who is the Court official with decision making power over federal bankruptcy cases.
Bankruptcy PetitionThe 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)
CChapter 7The chapter of the bankruptcy code providing for the “liquidation” (i.e. sale of the debtor’s non exempt property and the distribution of the proceeds to creditors).
Chapter 9The chapter of the bankruptcy code providing for the reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).
Chapter 11The chapter of the bankruptcy code providing (generally) for reorganization, usually involving corporations or partnerships. (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 12The chapter of the bankruptcy code providing for adjustments of debs of a “family farmer” or a “family fisherman” as those terms is defined in the bankruptcy code.
Chapter 13The chapter of the bankruptcy code providing for the 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 15The chapter of the bankruptcy code dealing with cases of cross-border insolvency.
ClaimA creditor’s assertion of a right to payment from the debtor or the debtor’s property.
ConfirmationBankruptcy Judge’s approval of a plan of reorganization or liquidation in Chapter 11 or payment plan in Chapter 12 or 13.
Consumer debtorA debtor whose debts are primarily consumer debts.
Consumer debtsA debtor whose debts are primarily consumer/personal as opposed to business or needs.
Contested mattersThose matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in rule 7001
Contingent claimsA claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loans and that person fails to pay
Cramdowns/Stripping loansCramdown and Stripping are terminology used in Bankruptcy Court that allows the debtor to pay for the fair market value of the secured items vs. the contract price that you agreed upon the purchase of the secured item.
A cramdown with a car can be allowed if the debtor redeems the secured property by paying in full the amount of the current fair market value of the secured claim. For example, you may sign a contract to purchase a car for $25,000 by making monthly payments of $600 a month which includes perhaps 9% interest. Three years later you are still paying $600 a month but the car is no longer worth $25,000 but perhaps $17,000 (depending on the condition of the car). In bankruptcy the debtor can redeem the value of the car saving thousands of dollars.
Cramdowns and Stripping in Chapter 13 allows for the mortgagee to pay the principal/first mortgage and to cramdown or stip a second mortgage. Recently a change for home mortgages was presented to the House and Senate of the 111 Congress which allows a Bankruptcy Judge to restructure home mortgages. This allows the debtors with outstanding home loan mortgages to reduce a mortgagees secured claim to the value of the security when such value is less than the total indebtedness.
To discuss these issues and other concerns, please make an appointment to speak with one of our attorneys…let us help you get out from debt.
CreditorOne to whom the debtor owes money or who claims to be owed money by the debtor
Credit CounselingGenerally 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 chapter 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 administrators have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.
Creditor’s meetingSee Section 341 meeting
Current Monthly IncomeThe average monthly income received by the debtor over the six month calendar months before commencement of the bankruptcy case, including regular contribution 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 Sec 101 (10A)
DDebtorA person who has filed a petition for relief under the Bankruptcy Code.
Debtor educationSee credit counseling
DefendantAn individual or business against whom a lawsuit is filed.
DischargeA 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 debt. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact).
Dischargeable debtsA debt for which the Bankruptcy Court allows the debtor’s personal liability to be eliminated.
Disclosure StatementA 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 for reorganization.
EEquityThe value of a debtor’s interest in property that remains after liens and other creditor’s interests are considered. (Example: if a house valued at $100,000 is subject to a $80,000 mortgage, there is $20,000 equity).
Executory contract or leaseGenerally 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 propertyCertain property owned by the 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 the property the debtor may exempt depends on the state the debtor lives in.
FFamily farmer or family fishermanAn 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 transferA 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 startThe characterization of a debtor’s status after bankruptcy, i.e. free of most debts (Giving debtor’s a fresh start is one purpose of the bankruptcy code).
IInsider (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.
JJoint administrationA court approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate business or individuals can pool their resources; hire the same professionals, etc.)
Joint petitionOne bankruptcy petition filed by a husband and wife together
LLienThe right to take and hold or sell the property of a debtor as a security or payment for a debt or duty.
LiquidationA sale of a debtor’s property with the proceeds to be used for the benefit of creditors.
Liquidated claimA creditor’s claim for a fixed amount of money.
MMeans testSection 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 five years, net of certain statutorily allowed expenses is more than (i) $10,950 or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,575. 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 stayA request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited from the automatic stay.
NNo asset caseA chapter 7 case where there are no assets available to satisfy any portion of the creditor’s unsecured claims.
Non-dischargeable debtA debt that can not be eliminated in bankruptcy. Example include a home mortgage, debts for alimony or child support, certain taxes, debts for government funded or guaranteed education 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 pretense and debts for fraud or defalcation while acting in a fiduciary capacity may be declared non-dischargeable only if the creditor timely files and prevails in a non-dischargeability action.
OObjection to dischargeabilityA 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 pretense or that debt arose because of the debtor’s fraud while acting as a fiduciary.
Objection to exemptionA trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.
PParty in interestA 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 administrators, the case trustee and creditors are parties in interest for most matters.
Petition preparerA business not authorized to practice law that prepares bankruptcy petitions.
PlanA debtor’s detailed description of how the debtor proposes to pay creditor’s claims over a fixed period of time.
PlaintiffA person or business that files a formal complaint with the court
Post petition transferA transfer of the debtor’s property made after the commencement of the case.
Prebankruptcy planningThe arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Pre bankruptcy planning typically includes converting nonexempt assets into exempt assets.).
Preference or preferential debt paymentsA debt payment made to a creditor in the 90-day period before a debtor file 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 abuseSee means test
PriorityThe Bankruptcy Code’s statutory ranking of unsecured claims that determine 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 or child support must be paid in full before any general unsecured debts (i.e. trade debt or credit debt) is paid.
Priority ClaimAn 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 ClaimA 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 EstateAll legal or equitable interests of the debtor in property as of the commencement of the case.
RReaffirmation agreementAn 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
SSchedulesDetailed 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 that a debtor must use).
Secured CreditorA 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 claims.
Secured DebtDebt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has a right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.
Small business caseA special type of chapter 11 case in which there is no creditor’s committee (or the creditor’s 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 affairsA 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 IntentionA declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.
Section 341 MeetingThe 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 creditor’s meeting.
TTransferAny mode or means by which a debtor disposes of or parts with his/her property.
TrusteeThe 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 estate, and makes distribution 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 payment from debtors, and distributing plan payments to creditors.
UU.S TrusteeAn officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates and trustees; monitoring plans and disclosing statements; monitoring creditor committees; monitoring fee applications; and performing other statutory duties. Compare, bankruptcy administrator.
Under secured CreditorA debt secured by property that is worth less than the full amount of the debt.
Unliquidated ClaimA claim for which a specific value has not been determined
Unscheduled debtA 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 claimA claim or debt for which a creditor holds no specific assurance of payment, such as a mortgage lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
VVoluntary transferA transfer of a debtor’s property with the debtor’s consent.
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