Applicable Commitment Period
The minimum period of time that a debtor must contribute disposable income to fund a Chapter 13 Plan under 11 U.S.C.A. § 1325(b)(4).
Assume
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.
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
A unit of the Federal District Court whose judges are charged with the responsibility of overseeing and administering bankruptcy proceedings.
Bankruptcy Estate
Upon the filing of a Bankruptcy Petition, a legal estate is created and administered by the United States Trustee. The estate consists of 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 Petition
The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case) by which opens the bankruptcy case.
Chapter 7
The chapter of the Bankruptcy Code providing for liquidation, (i.e., sale) of a debtor’s nonexempt property and the distribution of the proceeds to creditors.
Chapter 11
The chapter of the Bankruptcy Code generally providing 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.
Claim
A creditor’s assertion of a right to payment from the debtor or the debtor’s property.
Confirmation
Bankruptcy judge’s approval of a plan of reorganization or liquidation in Chapter 11, or payment plan in Chapter 12 or Chapter 13.
Consumer Debtor
A debtor whose debts are primarily consumer debts.
Consumer Debts
Debts incurred for personal, as opposed to business, needs.
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.
Cramdown
Confirming a Chapter 11, 12 or 13 plan over a secured creditor’s objection by proposing to pay the allowed secured claim in full, with interest, over the term of the plan.
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
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 a 341 Meeting.
Debtor
A person who has filed a petition for relief under the Bankruptcy Code.
Debtor Education
see Credit Counseling.
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.
Equity
The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. For example, if a house valued at $100,000 is subject to an $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.
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.
Joint Petition
One bankruptcy petition filed by a husband and wife together.
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.
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) $10,950, 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 for Relief from 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.
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 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 nondischargeable only if a creditor timely files and prevails in a nondischargeability action.
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.
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.
Pre-bankruptcy 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.
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.
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.
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.
Skeletal Petition
An incomplete bankruptcy filing, requiring a few forms to be initially filed, and the rest of the paperwork filed within fifteen days. The required forms are: the petition, a mailing list of creditors, a form showing the debtor’s Social Security number, and a certificate indicating the completion of credit counseling.
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 Intent
A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.
341 Meeting
See Creditors’ Meeting.
Transfer
Any mode or means by which a debtor disposes of or parts with his/her property.
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. 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 bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in Chapters 12 and 13 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.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 that 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 Claim
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
Voluntary Transfer
A transfer of a debtor’s property with the debtor’s consent.
