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Bankruptcy Terms
This page is intended to assist creditors, investors, and various interested parties understand basic bankruptcy terminology by providing definations to common bankruptcy terms used in practice. These definitions were obtained from a variety of sources and may not be the actual definition as defined in the U.S. Bankruptcy Code. The definitions for these terms may vary depending on the Court and/or jurisdiction. To view definitions, click on the term you would like defined.
| Abandonment | Creditors' Committee | Preference |
| Administrative Claim | Debtor | Priority |
| Adversary Proceeding | Defendant | Priority Claim |
| Automatic Stay | Disclosure Statement | Proof of Claim |
| Avoidance Power | Equity | Property of the Estate |
| Bankruptcy | Executory Contract or Lease | Schedules |
| Bankruptcy Code | Fraudulent Transfer | Secured Creditor |
| Bankruptcy Court | Insider | Secured Debt |
| Bankruptcy Court Clerk | Joint Administration | Statement of Financial Affairs |
| Bankruptcy Estate | Joint Petition | Substantive Consolidation |
| Bankruptcy Judge | Lien | 341 Meeting |
| Bankruptcy Petition | Liquidated Claim | Trustee |
| Bankruptcy Trustee | Liquidation | Undersecured Claim |
| Chapter 7 | Motion to Lift the Automatic Stay | United States Trustee |
| Chapter 11 | Party in Interest | Unliquidated Claim |
| Claim | Plaintiff | Unscheduled Debt |
| Contingent Claims | Plan | Unsecured Claim |
| Creditor | Post-petition Transfer |
Abandonment
A disclaimer of any interest by the trustee or debtor in burdensome or inconsequential property. Once property has been "abandoned," it is no longer property of the estate, and parties with a security interest in the property may proceed against it.
Creditors' Committee
A group of unsecured creditors appointed by the U.S. Trustee to represent the interests of all unsecured creditors before the Court. The Committee may retain counsel and other professionals at the expense of the estate in order to be heard in a wide range of matters.
Preference
A transfer of the debtor's property to or for the benefit of a creditor, for or on account of an antecedent debt, made while the debtor was insolvent, within 90 days before bankruptcy (or within one year before the petition was filed in an "insider" situation), and the effect of which was to give the creditor more than he would have otherwise received in a Chapter 7 distribution.
Administrative Claim
A priority claim including the cost and expenses of preserving the estate or operating the business after the petition, and all professional fees and charges that are allowed.
Debtor
The person or entity who seeks voluntary relief under the Bankruptcy Code, or has been forced involuntarily into a Chapter 7 or 11 bankruptcy case by petitioning creditors.
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.
Adversary Proceeding
A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the bankrutpcy court.
Defendant
An individual ( or business) against whom a lawsuit is filed.
Priority Claim
An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status.
Automatic Stay
An injuction that automatically stops lawsuits, foreclosure, garnishment, and all collection activity against the debtor the moment a bankruptcy petition is filed. The purpose of the stay is to give the debtor or trustee "breathing time" for rehabiliation or the administration of the estate assets.
Disclosure Statment
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.
Proof of Claim
A written statement describing the reason a debtor owes a creditor money. (There is an official form for this purpose.)
Avoidance Power
The Bankrutpcy Code grants the trustee the power to avoid certain transactions or transfers occuring before the commencement of the case, including preferences and fraudulent conveyances.
Equity
The value of a debtor's interest in property that remains after liens and other creditors' interests are considered.
Property of the Estate
All legal or equitable interests of the debtor in property as of the commencement of the case.
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 Bankrutpcy Code).
Executory Contract or Lease
Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. The Code grants the trustee the ability to assume, assign or reject executory contracts and unexpired leases for the benefit of estate, subject to bankruptcy court approval.
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 offical forms a debtor must use.)
Bankruptcy Code
The informal name of title 11 of the United States Code (11 U.S.C. § 101-1330), the federal bankrutpcy law.
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.
Secured Creditor
An individual or business holding a claim against the debtor that is secured by a lien on property of the estate or that is subject to a right of setoff.
Bankruptcy Court
The bankrutpcy judges in regular active service in each district; a unit of the district court.
Insider
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.
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.
Bankruptcy Court Clerk
The Clerk at the Bankruptcy Court receives all documents that are placed in the court record in a bankrutcy case. In addition, the Clerk's office schedules hearings for the bankrutpcy judges, usually upon written request by an attorney.
Joint Administration
A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate firms or individuals can pool their resources, hire the same professionals, etc.)
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 offical form a debtor must use.)
Bankruptcy Estate
All legal or equitable interests of the debtor in property at the time of the bankrutpcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)
Joint Petition
One bankruptcy petition filed by a husband and wife together
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 than other creditors suffer as a result.)
Bankruptcy Judge
A judical officer of the United States District Court who is the court official with decision-making power over federal bankrutpcy cases. The role of the Bankrutpcy Judge is to preside over the administration of a bankruptcy case, and to decide contested aspects of that case, which involve either the liquidation or reorganization of a debtor.
Lien
A charge upon specific property designed to secure payment of a debt or performance of an obligation.
341 Meeting
A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, examiner, or the United States Trustee about his/her property.
Bankruptcy Petition
A formal request for the protection of the federal bankruptcy laws.
Liquidated Claim
A creditor's claim for a fixed amount of money.
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 United States Trustee or Bankruptcy Adminstrator.
Bankruptcy Trustee
The court-appointed representative of the estate who actually administers the estate. A Chapter 7 Trustee is in charge of liquidating the estate. In some Chapter 11 cases, the debtor-in-possession is replaced by a Chapter 11 Trustee who administers the estate.
Liquidation
A sale of a debtor's property with the proceeds to be used for the benefit of creditors.
Undersecured Claim
A debt secured by property that is worth less than the amount of the debt.
Chapter 7
The chapter of the Bankrutpcy Code providing for "liquidation," i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors.
Motion to Lift the Automatic Stay
A request by a creditor to allow the creditor to take an action against a debtor or the debtor's property that would otherwise be prohibited by the automatic stay.
United States Trustee
Responsible for matters of administration of a bankruptcy case. Employed by the U.S. Department of Justice , the U.S. Trustee's responsibilities include (1) appointing from the private sector the members of a panel of Trustee who administer bankrutpcy cases; and (2) supervising the actions of the private Trustee and the administration of all bankruptcy cases.
Chapter 11
A reorganization bankrupcy, usually involving a corporation or partnership. The purpose of Chapter 11 is to rehabilitate a business as a going concern or reorganize an individual's finances. (A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time.)
Party in Interest
A party who is actually and substantially interested in the subject matter, as distinguished from one who has only a nominal or technical interest in it.
Unliquidated Claim
A claim for which a specific value has not been determined.
Claim
A creditor's assertion of a right to payment from a debtor or the debtor's property.
Plaintiff
A person or business that files a formal complaint with the court.
Unscheduled Debt
A debt that should have been listed by a debtor in the schedules filed with the court but was not.
Contingent Claims
A claim that may be owed by the debtor under certain circumstances, for example, where the debtor is a cosigner on another person's loan and that person fails to pay.
Plan
A debtor's detailed description on how the debtor proposes to pay creditors' claims over a fixed period of time.
Unsecured Claim
A claim or debt for which a creditor hold 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.
Creditor
A person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.
Post-Petition Transfer
A transfer of a debtor's property made after the commencement of the case.