341 meeting – In a bankruptcy proceeding, a meeting
of creditors at which the debtor is questioned under oath by creditors, a trustee,
an examiner, or the U.S. Trustee about his or her financial affairs.
Adversary proceeding – A lawsuit arising in or related
to a bankruptcy case that begins by filing a complaint with the court, that
is, a "trial" that takes place within the context of a bankruptcy
case
Affidavit/Declaration – A written or printed statement
made under oath.
Appeal – A request made after a trial by a party that
has lost on one or more issues that a higher court review the decision to determine
if it was correct. To make such a request is "to appeal" or "to
take an appeal." One who appeals is called the "appellant;" the
other party is the "appellee."
Article III Judge – A federal judge who is appointed
for life, during "good behavior," under Article III of the Constitution.
Article III judges are nominated by the President and confirmed by the Senate.
Assets – Property of all kinds, including real and personal,
tangible and intangible.
Assume – An agreement to continue performing duties under
a contract or lease.
Automatic stay – An injunction that automatically stops
lawsuits, foreclosure, repossessions, wage garnishments, bank levies and most
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 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;
monitoring creditors' committees; monitoring fee applications; and performing
other statutory 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 interests of the debtor in property
at the time of the bankruptcy filing. The estate technically becomes the temporary
legal owner of all of the debtor's property.
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 case in which the
debtor is a business or an individual involved in business and the debts are
for business purposes.
Cause of Action – A legal claim.
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. In order to be eligible for
Chapter 7, the debtor must satisfy a "means test." The court will
evaluate the debtor's income and expenses to determine if the debtor may proceed
under Chapter 7.
Chapter 7 trustee – A person appointed in a Chapter 7
case to represent the interests of the bankruptcy estate and the creditors.
The trustee's responsibilities include reviewing the debtor's petition and schedules,
liquidating the property of the estate, and making distributions to creditors.
The trustee may also bring actions against creditors or the debtor to recover
property of the bankruptcy estate.
Chapter 13 – The chapter of the Bankruptcy Code providing
for 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 use his or her disposable income to pay debts over time, usually three to
five years.
Chapter 13 trustee – A person appointed to administer
a Chapter 13 case. A Chapter 13 trustee's responsibilities are similar to those
of a Chapter 7 trustee; however, a Chapter 13 trustee has the additional responsibilities
of overseeing the debtor's plan, receiving payments from debtors, and disbursing
plan payments 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 – A reorganization bankruptcy, 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," as that term is defined
in the Bankruptcy Code.
Claim – A creditor's assertion of a right to payment
from a debtor or the debtor's property.
Clerk of Court – The court officer who oversees administrative
functions, especially managing the flow of cases through the court. The clerk's
office is often called a court's central nervous system.
Collateral – Property that is promised as security for
the satisfaction of a debt.
Common law – The legal system that originated in England
and is now in use in the United States that relies on the articulation of legal
principles in a historical succession of judicial decisions. Common law principles
can be changed by legislation.
Complaint – A written statement that begins a civil lawsuit,
in which the plaintiff details the claims against the defendant.
Confirmation – Approval of a plan of reorganization in
Chapter 11, 12, 13 by a bankruptcy judge.
Consumer bankruptcy – A bankruptcy case filed to reduce
or eliminate debts that 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.
Contract – An agreement between two or more persons that
creates an obligation to do or not to do a particular thing.
Court – Government entity authorized to resolve legal
disputes. Judges sometimes use "court" to refer to themselves in the
third person, as in "the court has read the briefs."
Creditor – A person to whom or business to which the
debtor owes money or that 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.
Debtor – A person who has filed a petition for relief
under the Bankruptcy Code. defendant An individual (or business) against whom
a lawsuit is filed.
Debtor's plan – A debtor's detailed description in Chapter
11, 12 or 13 bankruptcy of how the debtor proposes to pay creditors' claims
over a fixed period of time.
Default Judgment – A judgment awarding a plaintiff the
relief sought in the complaint because the defendant has failed to appear in
court or otherwise respond to the complaint.
Discharge – A release of a debtor from personal liability
for certain dischargeable debts. Notable exceptions to dischargeability are
taxes and student loans. 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 or the debtor's property
to collect the debts. The discharge also prohibits creditors from communicating
with the debtor regarding the debt, including through telephone calls, letters,
and personal contact.
Dischargeable debt – A debt for which the Bankruptcy
Code allows the debtor's personal liability to be eliminated.
Discovery – Procedures used to obtain disclosure of evidence
before trial.
Disposable income – Income not reasonably necessary for
the maintenance or support of the debtor or dependents. If the debtor operates
a business, disposable income is defined as those amounts over and above what
is necessary for the payment of ordinary operating expenses.
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 $60,000 is subject to a $30,000 mortgage, there is $30,000
of equity.)
Executory contracts – 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).
Exempt assets – Property that a debtor is allowed to
retain, free from the claims of creditors who do not have liens on the property.
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.
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.)
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.
Insider (of individual debtor) – Any relative of the
debtor or of a general partner of the debtor; partnership inwhich the debtor
is a general partner; general partner of the debtor; or corporation of which
the debtor is a director, officer, or person in control.
Joint petition – One bankruptcy petition filed by a husband
and wife together.
Lawsuit – A legal action started by a plaintiff against a defendant
based on a complaint that the defendant failed to perform a legal duty which
resulted in harm to the plaintiff.
Lien – A charge on specific property that is designed
to secure payment of a debt or performance of an obligation. A debtor may still
be responsible for a lien after a discharge.
Litigation – A case, controversy, or lawsuit. Participants
(plaintiffs and defendants) in lawsuits are called litigants.
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) $10,000,
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 – A request by a litigant to a judge for a decision
on an issue relating to the case.
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.
No-asset case––A Chapter 7 case in which 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.
Nonexempt assets – Property of a debtor that can be liquidated
to satisfy claims of creditors.
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.
Petition – The document that initiates the filing of
a bankruptcy proceeding, setting forth basic information regarding the debtor,
including name, address, chapter under which the case is filed, and estimated
amount of assets and liabilities.
Plan – A debtor's detailed description in a Chapter 11,
12 or 13 bankruptcy of how the debtor proposes to pay creditors' claims over
a fixed period of time.
Pleadings – Written statements filed with the court which
describe a party's legal or factual assertions about the case.
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.)
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.
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 describing the reason
a debtor owes a creditor money, which typically sets forth the amount of money
owed. (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 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.
Redemption – A procedure in a Chapter 7 case whereby
a debtor removes a secured creditor's lien on collateral by paying the creditor
the value of the property. The debtor may then retain the property.
Schedules – Lists submitted by the debtor along with
the petition (or shortly thereafter) showing the debtor's assets, liabilities,
and other financial information. (There are official forms a debtor must use.)
Secured creditor – A secured creditor is an individual
or business that holds a claim against the debtor that is secured by a lien
on property of the estate. The property subject to the lien is the secured creditor's
collateral.
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.
Service of process – The delivery of writs or summonses
to the appropriate party.
Settlement – Parties to a lawsuit resolve their dispute
without having a trial. Settlements often involve the payment of compensation
by one party in at least partial satisfaction of the other party's claims, but
usually do not include the admission of fault.
Small business case can be a Chapter 7 or 13 or 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.
Statute of Limitations – The time within which a lawsuit
must be filed or a criminal prosecution begun. The deadline can vary, depending
on the type of civil case or the crime charged.
Subordination – The act or process by which a person's
rights or claims are ranked below those of others.
Substantial abuse – The characterization of a bankruptcy
case filed by an individual whose debts are primarily consumer debts where the
court finds that the granting of relief would be an abuse of chapter 7 because,
for example, the debtor can pay its debts.
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.)
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 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 bankruptcy estate. In chapter 7, the trustee
liquidates property of the estate, and makes distributions 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 payments from debtors,
and disbursing plan payments to creditors.
U.S. trustee – An officer of the U.S. Department of Justice
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.
Undersecured claim––A debt secured by property
that is worth less than the amount of the debt.
Undue hardship––The most widely used test for evaluating
undue hardship in the dischargeability of a student loan includes three conditions:
(1) the debtor cannot maintain––based on current income and expenses––a
minimal standard of living if forced to repay the loans; (2) there are indications
that the state of affairs is likely to persist for a significant portion of
the repayment period; and (3) the debtor made good faith efforts to repay the
loans.
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.
Unsecured debt – Debt that is not backed or secured by
collateral, or other lien; debt for which the creditor has no right to pursue
a specific pledged property upon default. Examples are credit card debt or medical
debt.
Venue – The geographic area in which a court has jurisdiction.
A change of venue is a change or transfer of a case from one judicial district
to another.
Voluntary transfer – A transfer of a debtor's property
with the debtor's consent.
Wage garnishment – A nonbankruptcy legal proceeding whereby
a plaintiff or creditor seeks to subject to his or her claim the future wages
of a debtor. In other words, the creditor seeks to have part of the debtor's
future wages paid to the creditor for a debt owed to the creditor.