341 Meeting: Also known as the meeting of creditors, this is a meeting where the debtor is questioned about his bankruptcy and his property.
Adequate Protection: Protection that must be given to a secured creditor in bankruptcy, to assure that the creditor receives the value of its security.
Adversary Proceeding: A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court.
Allowed Claim: A creditor’s claim for which the debtor or trustee has raised no objection. The creditor will be allowed to participate in distributions from the bankruptcy estate.
Assume: An agreement to continue performing duties under a contract or lease.
Automatic Stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed.
Avoidance: The Bankruptcy Code permits the debtor or trustee to recover certain transfers of property such as preferences or fraudulent transfers or to void liens under certain circumstances.
Bankruptcy Administrator: An officer of the Judiciary serving in the judicial districts of Alabama and North Carolina who, like the United States trustee, is responsible for supervising the administration of bankruptcy cases, estates, and trustees, monitoring plans and disclosure statements, and performing other duties.
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: A formal request for the protection of the federal bankruptcy laws. There is an official form for bankruptcy petitions.
Bankruptcy Trustee: A private individual or corporation appointed in all Chapter 7 and Chapter 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.
Business Bankruptcy: A bankruptcy usually filed by a business or an individual involved in business who is seeking to restructure or eliminate business debts.
Chapter 7: The chapter of the Bankruptcy Code providing for “liquidation,” that is, the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.
Chapter 13: The chapter of the Bankruptcy Code providing for the adjustment of debts of an individual with regular income, often referred to as a “wage-earner” plan. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.
Claim: A creditor’s assertion of a right to payment from a debtor or the debtor’s property.
Clerk of the Court: The court officer who oversees administrative functions, especially managing the flow of cases through the court.
Confirmation: The court’s approval of a plan of reorganization or liquidation in Chapter 11, or payment plan in Chapter 12 or 13.
Conversion: Cases may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13.
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.
Creditor: A person or entity to whom the debtor owes money or that claims to be owed money by the debtor.
Current Monthly Income: The average monthly income received from all sources derived during the six months prior to a bankruptcy filing. The calculation of current monthly income is used to determine whether an individual debtor qualifies for Chapter 7 or must file under Chapter 13.
Debtor: An individual (also known as a debtor in possession in Chapters 11, 12, and 13) or business entity that is unable to repay its debts and seeks relief through bankruptcy.
Debtor in Possession: In a Chapter 11 case, the debtor usually remains in possession of its assets and assumes the duties of a trustee. The debtor in possession is a fiduciary for the creditors of the estate, and owes them the highest duty of care and loyalty.
Disclosure Statement: A written document prepared typically by the debtor that is designed to provide “adequate information” to creditors to enable them to evaluate the Chapter 11 plan of reorganization.
Dismissal: The act of terminating a bankruptcy case without either entering a discharge or denying a discharge. After a case is dismissed, creditors may start to collect debts, unless a discharge is entered.
Domestic Support Obligation: A debt or an amount that is in the nature of alimony, maintenance, or support of a spouse, former spouse, or child of the debtor.
Entity: A person, estate, trust, governmental unit, and United States trustee.
Estate: The legal entity, separate from the debtor, created in a bankruptcy proceeding. The estate consists of all the debtor’s legal or equitable interests in property, wherever located, as of the commencement of the case.
Executory Contract or Lease: 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 (keep the contract) or reject it (terminate the contract).
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.
Filing Fee: The fee required for filing various types of petitions and motions and for lodging certain papers.
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.
Involuntary Bankruptcy: A bankruptcy case initiated by creditors petitioning the court to place a debtor in bankruptcy.
Lien: A charge upon specific property designed to secure payment of a debt or performance of an obligation.
Liquidated Claim: A creditor’s claim for a fixed amount of money.
Liquidation: The sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.
Means Test: A test applied in Chapter 7 cases to determine whether the debtor’s income exceeds a certain amount, and thus whether the debtor can afford to repay a portion of their debts through a Chapter 13 plan.
Meeting of Creditors: A meeting at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs.
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.
Nondischargeable Debt: A debt that cannot be eliminated in bankruptcy.
Objection to Discharge: A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargeable debts.
Official Form: Forms prescribed by the Judicial Conference of the United States for use in all bankruptcy courts.
Plan: A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.
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.
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.
Proof of Claim: The written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money.
Property of the Estate: All legal or equitable interests of the debtor in property as of the commencement of the case.
Reaffirmation Agreement: An agreement by a debtor to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of keeping collateral or mortgaged property that would otherwise be subject to repossession.
Relief from Stay: A court order that allows a creditor to continue with collection activities that would otherwise be halted by the automatic stay; for example, proceeding with a foreclosure action.
Reorganization: The process by which a debtor restructures his financial affairs through a plan of reorganization approved by the bankruptcy court. In effect, it’s a way of consolidating or restructuring debts to pay them off over a period of time.
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.
Secured Debt: Debt backed or secured by collateral to reduce the risk associated with lending.
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.
Unsecured Claim: A claim or debt for which a creditor holds no special assurance of payment, such as a lien or other security. Unsecured debts are generally those for which the creditor has no right to collect against particular property owned by the debtor.
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.
Voluntary Transfer: A transfer of a debtor’s property with the debtor’s consent.
Wage Earner’s Plan: A chapter 13 bankruptcy, which allows a debtor with regular income to repay a portion of their debts over a period of three to five years. The debtor proposes a repayment plan and makes payments to creditors through the trustee.