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adversary proceeding A lawsuit arising in or related
to a bankruptcy case that is commenced by filing a complaint with the court.
assume An agreement to continue performing duties
under a contract or lease.
automatic stay An injunction that automatically stops
lawsuits, foreclosure, garnishments, and all collection activity against the
debtor the moment a bankruptcy petition is filed.
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.
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 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 mill A business not authorized to practice law
that provides bankruptcy counseling and prepares bankruptcy petitions.
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, chapter 12, and chapter 13 cases to represent
the interests of the bankruptcy estate and the debtor's creditors.
chapter 7 The chapter of the Bankruptcy Code providing
for "liquidation," i.e., the sale of a debtor's nonexempt
property and the distribution of the proceeds to creditors.
chapter 7 trustee A person appointed in a chapter 7
case to represent the interests of the bankruptcy estate and the unsecured
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 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 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.)
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.)
claim A creditor's assertion of a right to payment
from a debtor or the debtor's property.
complaint The first or initiatory document in a
lawsuit that notifies the court and the defendant of the grounds claimed by
the plaintiff for an award of money or other relief against the defendant.
confirmation Approval of a plan of reorganization 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, for example, where the debtor is a
cosigner on another person's loan and that person fails 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.
debtor A person who has filed a petition for relief
under the bankruptcy laws.
defendant An individual (or business) against whom a
lawsuit is filed.
discharge A release of a debtor from personal
liability for certain dischargeable debts. (A discharge releases a debtor
from personal liability for certain debts known as dischargeable debts
(defined below) 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 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.
(Example: If a house valued at $60,000 is subject to a $30,000 mortgage,
there is $30,000 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.)
exempt A description of any property that a debtor may
prevent creditors from recovering.
exemption Property that the Bankruptcy Code or
applicable state law permits a debtor to keep from creditors.
exempt property Property or value in property that a
debtor is allowed to retain, free from the claims of creditors who do not
have liens.
face sheet filing A bankruptcy case filed either
without schedules or with incomplete schedules listing few creditors and
debts. (Face sheet filings are often made for the purpose of delaying an
eviction or foreclosure.)
family farmer An individual, individual and spouse,
corporation, or partnership engaged in a farming operation who meet certain
debt limits and other statutory criteria for filing a petition under chapter
12.
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 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 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 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.)
joint petition One bankruptcy petition filed by a husband
and wife together.
lien A charge upon specific property designed to secure
payment of a debt or performance of an obligation.
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.
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.
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.
objection to discharge A trustee's or creditor's objection
to the debtor's being released from personal liability for certain
dischargeable debts.
objection to exemptions A trustee's or creditor's objection
to a debtor's attempt to claim certain property as exempt, i.e., not
liable for any prepetition debt of the debtor.
plan A debtor's detailed description of how the debtor
proposes to pay creditors' claims over a fixed period of time.
plaintiff A person or business that files a formal complaint
with the court.
postpetition transfer A transfer of a 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. (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 after the bankruptcy, usually for
the purpose of keeping collateral or mortgaged property that would otherwise
be subject to repossession.
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.
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.)
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.
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.)
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 financial affairs.
transfer Any mode or means by which a debtor disposes of or
parts with his/her property.
typing service A business not authorized to practice law
that prepares bankruptcy petitions.
United States 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.
undersecured claim A debt secured by property that is worth
less than the amount of the debt.
unlawful detainer action A lawsuit brought by a landlord
against a tenant to evict the tenant from rental property--usually for
nonpayment of rent.
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