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For more information about bankruptcy, please call us at 408-294-6100, or e-mail us via This email address is being protected from spambots. You need JavaScript enabled to view it. . One of our attorneys will be able to answer any questions which you may have in greater detail. Please remember that the foregoing information is of a general nature, and does not constitute legal advice. The facts of each situation are unique, and we must discuss those facts with you before any advice can be given.

Bankruptcy Glossary

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This page explains common bankruptcy terminology, in layman's terms. Many of the legal terms that are used in cases filed under the Bankruptcy Code are found on this page.

Abatement
Permission from the Court to skip a plan payment.

Abuse
A disregard of financial capability. For example, purchasing luxury items on pre-bankruptcy shopping sprees with no reasonable or probable means of repayment.

Absolute Priority
The order of payment to the different classes of creditors mandated by the Bankruptcy Code. In theory, claims with higher priority are paid in full before other claims receive anything. Junior creditors and shareholders are paid after senior creditors. Specifically, the usual order is: first, administrative claims; second, statutory priority claims such as tax claims, rent claims, consumer deposits, and unpaid wages and benefits from before the filing; third, secured creditors' claims; fourth, unsecured creditors' claims; and fifth, equity claims.

Adequate Protection
The right of a party with an interest in the debtor's property (such as a secured creditor) to assurance that its interest will not be diminished during the bankruptcy proceedings.

Administrative Claim (or administrative expense claim)
Debt incurred by the debtor, with court approval, after the bankruptcy filing including necessary costs of preserving the bankruptcy estate, wages, salaries, court costs, lawyers' fees, accountants' fees, trustees' expenses, etc.

Adversary Proceeding
A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the bankruptcy court.

Allowed Claim (or allowed interest)
A claim of a creditor (or an equity interest) that is approved by the court for satisfaction under the plan of reorganization.

Appeal
A request to the U.S. District Court or the Bankruptcy Appellate Panel, if there is on in the circuit, to review a decision of the Bankruptcy Court. A request to the Circuit Court of Appeals to review a decision of the U.S. District Court.

Arrearage
The amount of money or number of payments behind on a debt.

Arrangement
May refer to a variety of formal or informal agreements worked out concerning the conditions under which a bankrupt company may operate; often, it refers to an extension of time in which debt can be paid off. This was the term used under old Chapter XI.

Asset
Any property belonging to the debtor, or to which the debtor is entitled at the time of filing. An economic resource or item owned by a business that is expected to benefit its future operations.

Assume
An agreement to continue performing duties under a contract or lease.

Automatic Stay
An automatic injunction requiring the suspension of collection activity on any debts listed in bankruptcy. The automatic stay goes into effect upon the filing of the bankruptcy, not when the Creditor receives the notice of bankruptcy. This action protects the debtor from creditors seeking to seize its assets. It also protects some creditors in that it prevents one creditor from obtaining an excessive share of the assets of the bankrupt to the exclusion of the other creditors.

Avoidance Power
The power of the court to invalidate certain obligations or transactions undertaken by a debtor prior to filing bankruptcy. It is generally intended to reverse transfers of property that favor one Creditor over another.

Ballot Date
Concerning a bankruptcy reorganization, the date and time, set by the bankruptcy court by which all votes for accepting or rejecting the plan of reorganization must be received.

Bankrupt
The entity that files a bankruptcy; the debtor; the insolvent entity. This is a non-technical term and is not used in the Bankruptcy Code.

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 Act of 1898
The basis of the federal bankruptcy statutes used until the Bankruptcy Reform Act of 1978; provided primarily for liquidation of companies; reorganization could be effected indirectly under the 1898 Act through equity receiverships (these were used to keep creditors from seizing the assets of distressed companies).

Bankruptcy Act of 1933
A statutory expansion of reorganization for companies; (see Section 77); the Bankruptcy Act of 1933 and the Bankruptcy Act of 1934 were superseded by the Chandler Act of 1938.

Bankruptcy Act of 1934
A further statutory expansion of reorganization for companies; the Bankruptcy Act of 1933 and the Bankruptcy Act of 1934 were superseded by the Chandler Act of 1938.

Bankruptcy Amendments of 1984
A set of amendments to the Bankruptcy Reform Act of 1978. It contains a number of provisions including: limiting the jurisdiction of the bankruptcy court, limiting the right of companies to invalidate labor contracts while in bankruptcy and providing for the prevention of " substantial abuse."

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 estates, cases, and trustees, monitoring plans and disclosure statements 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. The name given to the statutory body of bankruptcy laws after the Bankruptcy Reform Act of 1978.

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, whether real or personal, 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 anther person.) ( Co-debtors' or spouse's income or property may be part of the bankruptcy estate.)

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 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 from for bankruptcy petitions.)

Bankruptcy Reform Act of 1994
Most comprehensive piece of bankruptcy legislation since the Bankruptcy Reform Act of 1978; signed into law on October 22, 1994 with most provisions effective immediately; included in the 1994 Act are: provisions to expedite bankruptcy proceedings; provisions to standardize fees; provisions to encourage individual debtor to use Chapter 13 to reschedule their debts rather than use Chapter 7 to liquidate; provisions to aid creditors in recovering claims against bankrupt estates; creation of a National Bankruptcy Commission to investigate further changes in bankruptcy law; etc.

Bankruptcy Reform Act of 1978
First substantive Bankruptcy Code revision since the Chandler Act of 1938; took effect on October 1, 1979; some of the major elements of this act were 1) upgrading the jurisdiction of the U.S. bankruptcy courts to deal with cases handled by other courts (subsequently modified); 2) allowing the filing of a single joint petition of bankruptcy by husband and wife; 3) reorganizing the Chapters of bankruptcy; in particular, concerning business reorganization, Chapters X, XI and XII of the old code are replaced by Chapter 11; 4) expanding the number of people eligible and the type of relief available to people in a new Chapter 13, wage-earner reorganization bankruptcy; 5) altering the appellate procedure allowing direct appeal to the U.S. courts of appeal (subsequently modified); and 6) generally, making federal exemption provisions and options for debtors more extensive.

Bankruptcy Rule 2004
A provision of the Bankruptcy Code that allows one party in a bankruptcy proceeding to compel discovery or other examination against another party.

Bankruptcy Tax Act of 1980
The Bankruptcy Reform Act of 1978 did not specify how certain tax matters concerning bankruptcies should be handled. The Bankruptcy Tax Act of 1980 was passed to specify the tax treatment of bankruptcy tax issues. It specifies the tax treatment of, among other things, tax loss carry-forwards and exchanges of equity for debt.

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.

Bar Date
Last date for a creditor to timely file a Complaint to Determine Dischargeability of a debt. For non-governmental creditors, this date is 90 days after the conclusion of the Meeting of creditors ( 341 Meeting). Governmental units, such as the IRS, have 180 days from the date the petition was filed to file a claim.

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.

Cash Collateral
Cash and cash equivalents held by the debtor in Chapter 11 subject to liens of other parties.

Chandler Act of 1938
Legislation providing substantial modifications to the Bankruptcy Act of 1898.

Chapter
The Bankruptcy Code is organized into Chapters. Except for chapter 12, the Chapters of the present code are all odd-numbered and are enumerated with Arabic numerals. (Before the Bankruptcy Reform Act of 1978, the Chapters were numbered with Roman numerals.) Chapters 1, 3, and 5 cover matters of general application. Chapters 7, 9, 11, 12 and 13 concern, respectively: liquidation (business or non-business); municipality bankruptcy; business reorganization; family farm debt adjustment; and wage-earner or personal (i.e. non-business) reorganization.

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.)

Chapters X, XI and XII
Before the Chapter 11 of the Bankruptcy Reform Act of 1978, these three chapters of bankruptcy existed for company bankruptcies that involved reorganization. Chapter X involved reorganization for big companies that held public debt or equity, Chapter XI was for readjustment of debts of smaller, non-publicly held companies and Chapter XII was for companies with extensive holdings of real property.

Chapter 10
A new chapter of the Bankruptcy Code proposed in 1992. The proposed Chapter 10, like Chapter XI of the old code, is designed for small business reorganizations. This chapter has never passed the legislature and is therefore not part of the bankruptcy code.

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.) The debtor maintains control of the business in Chapter 11 (unless the Court appoints a trustee.)

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.

Chapter 13
Bankruptcy proceedings for an individual with the intention of rescheduling the individual's debt (rather than liquidating the individual's assets and debt; an individual files under Chapter 7 to liquidate); Chapter 13 is referred to as wage-earner bankruptcy, personal bankruptcy or consumer bankruptcy; Chapter 13 cannot be used by a partnership or a corporation; it can be used by a sole proprietorship. 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 form debtors, and disbursing plan payment to creditors.)

Chapter 20
An unofficial term describing the filing of a Chapter 7 proceeding followed by a Chapter 13. The Chapter 7 filing eliminates unsecured debts while the Chapter 13 filing handles continuing liens.

Chapter 22
An unofficial term describing a company that has filed for Chapter 11 twice.

Chapter 33
An unofficial term describing a company that has filed for Chapter 11 three times.

Claim
A creditor's assertion of a right to payment from a debtor or the debtor's property. Rights to repayment made by creditors against a debtor; they may be liquidated, unliquidated, fixed, contingent, matured, unmatured, secured, unsecured, subordinated, legal or equitable.

Class
Each of the different categories of claims against a debtor.

Co-Debtor
An individual who signs a contract for credit with another debtor.

Co-Debtor Stay
There is an automatic stay that protest persons who did not file bankruptcy but are liable on the same debt along with the person or entity who did file. Joint cardholders or co-signers of the debt could be protected by the automatic stay. This co-debtor protection is available only in Chapter 13 cases.

Co-Signed Debt
Debt for which more than one person is legally responsible.

Collateral
Property pledged for the payment of a loan or line of credit.

Community Property
Only applicable in community property states; this consists of all property acquired by either spouse during the term of marriage. For example, during marriage the wages of either spouse would be considered community property.

Complaint
The first or starting 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.

Complaint to Determine Dischargeability
The official complain a creditor's attorney files with the court to decide the dischargeability of a particular debt. This action must be commenced prior to the Bar Date.

Confirmation
The final approval by the bankruptcy court of a debtor's plan of reorganization. Confirmation takes place after the plan has been approved by creditors.

Contested Matter
A dispute among the parties to a bankruptcy proceeding, instituted by the filing of a motion of the court.

Conversion
Changing chapters in bankruptcy (e.g., converting from Chapter 11 to Chapter 7 or vice-versa).

Consumer Bankruptcy
A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.

Consumer Debts
Debts incurred for personal, family, or household purposes, as opposed to business purposes.

Contingent Claim
A claim that may be owed by the debtor under certain circumstances, for example, where the debtor is cosigner on another person's loan and that person fails to pay.

Core Proceedings
Those proceedings that are inherent in and fundamental to the administration of a bankruptcy case. Core proceedings are subject to the jurisdiction of the bankruptcy court. Non-core proceedings may be conducted outside the jurisdiction of the bankruptcy court.

Cramdown
Also known as lien stripping. This is the process where a creditor's secured claim is split into secured and unsecured amounts based on the market value of the collateral. The creditor ends up with two separate claims.

Credit Grantor
Business or individual who gives a loan or line of credit; also referred to as the creditor.

Creditor
A person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.

Creditors' Committee
A committee of representatives of a debtor's creditors appointed by the U.S. Trustee. The committee acts on behalf of all creditors on negotiating a plan of reorganization and other major actions. In large, complex cases, there may be more than one such committee.

Cure Defaults
Bring accounts up-to-date that were past due at the time of filing.

Debt
Something that is owed to another: normally money or property.

Debtor
The person or entity who owes the debt. A person who has filed a petition for relief under the bankruptcy law.

Debtor-in-Possession
The debtor which remains in control of operations; as opposed to having a trustee operate the company.

Default
The failure by a person or entity to abide by the covenants in a loan, debt obligation or other agreement to which they are a party. The most common default is non-payment of interest or principal.

Defendant
An individual (or business) against whom a lawsuit is filed.

Deficiency
The amount left owing on a debt following repossession of the collateral.

Delinquent
Overdue, not pain on the agreed due date.

Dependant
Someone who looks to the debtor for their support, maintenance, food, clothing, comfort, and protection. Dependants include the debtor's spouse, children, and any other family members who reside with the debtor.

Deposition
The testimony of a witness taken down in writing under oath. This is normally taken outside of the courtroom in an informal setting.

Discharge
A release of a debtor form personal liability for certain dischargeable debts. (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 telephone calls, letters, and personal contact.)

Discharge Order
An order that relieves the legal obligation to repay a debt.

Dischargeability
The extent to which a debt may be legally released.

Dischargeable Debt
A debt for which the Bankruptcy Code allows the debtor's personal liability to be eliminated.

Disclosure Statement
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 and vote on the chapter 11 plan of reorganization.

Discovery
The disclosure of pertinent facts or documents by either party prior to trial. This includes such things as interrogatories, requests for production of documents, requests for admissions, and oral or written depositions.

Dismissal
The termination of a bankruptcy proceeding. An order terminating the bankruptcy. After approval by the bankruptcy court, this order allows creditors to begin collecting on the debt involved in the bankruptcy. See also conversion.

Disposable Income
Funds the debtor has available that are not required for reasonable living expenses.

Distressed
Used to describe securities, companies and related items in or near bankruptcy or insolvency. The term does not have a strict, technical or legal definition. For example, a distressed security might be a security where the issuer has defaulted or a security that is selling at a substantially discounted price where a default is expected in the future.

Docket
The schedule on which the clerk of the court records all motions, pleadings, memoranda, orders and all other court filings.

Effective Date
The date on which a plan of reorganization is implemented; usually it occurs after all the conditions to a plan of reorganization have been satisfied.

Equitable Subordination
The lowering of priority of a claim because the holder of the claim is found to be guilty of some kind of improper conduct.

Equity
The difference between what is owed on a debt and the value of the collateral securing the debt. (Example: If a house valued at $600,000 is subject to a $400,000 mortgage, there is $200,000 of equity.)

Examiner
A professional appointed by the bankruptcy court to investigate and oversee certain aspects of the debtor or the proceedings. (By way of comparison, the role of the trustee is to operate the business of the debtor whereas the role of the examiner is to investigate and report to the court.)

Exchange Offer
An offer by an issuer of debt securities to exchange new securities with less onerous provisions for currently outstanding securities. Companies often make exchange offers in an attempt to avoid bankruptcy.

Exclusivity (Period of)
A debtor in Chapter 11 has the exclusive right to file a plan of reorganization for the first 120 days of its bankruptcy. Thereafter, unless the period of exclusivity is extended by the court, other parties may file reorganization plans.

Executory Contract or Lease
Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. The debtor-in-possession (or trustee) is allowed to reject unilaterally certain executory contracts.

Exempt
A description of any property that a debtor may prevent creditors from recovering.

Exemption
Certain property belonging to the debtor is allowed to be excluded from the bankruptcy. The Bankruptcy Code sets forth guidelines where property can be exempted. This means the debtor is allowed to keep certain property in order to have a " fresh start." The Bankruptcy Code also sets forth provisions allowing each state to create their own exempts. The debtor usually has the option to choose which exemptions will be followed: the exemptions designed by the state in which he or she resides or the federal exemptions set forth in the Bankruptcy Code.

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.)

Fair Mark Value
The liquidation value of property (that is, the amount of money that might be received from the sale of the item or items). This is NOT the original cost of the item(s) or the replacement value.

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.

Feasibility
Likelihood of being successfully completed.

Fee Examiner
Appointed by the court to monitor fees paid to professionals in bankruptcy cases.

Filing Fees
As of May 2004 the filing fee for Chapter 7 is $209, for Chapter 11 the filing fee is $839, for chapter 12 the filing fee is $239, and for Chapter 13 the filing fee is $194.

First Meeting of Creditors
A mandatory meeting between creditors and the debtor. It is usually held within a month of the filing of bankruptcy but often occurs later when the debtor has filed its schedules of financial information. Also known as the " 341 Meeting."

Foreclosure
To take legal title to and possession of collateral after a the default of a secured debt.

Fraud
Intentional misrepresentation or deceit by the debtor. For example, false information given in bankruptcy schedules, an inaccurate income statement, or a false Social Security Number on a credit card application. Proof of fraud usually involves proving the debtor's intent at the time.

Fraudulent Conveyance
The transfer of valuable assets from a debtor which 1) occurs when the debtor is technically insolvent, 2) renders the debtor insolvent, or 3) is made for less than adequate consideration.

Fraudulent Transfer
A transfer of a debtor's property made with intent to defraud or for which the debtor receives less 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.)

Gap Period
The period between the filing of an involuntary petition and the dismissal of the petition, the entry of an order for relief or the filing of a voluntary petition (whichever is the outcome).

Gap Creditor
A creditor that advanced funds to a debtor in a pending Chapter 13 case that is thereafter converted to a Chapter 7 case. Most gap debts are discharged y the Chapter 7 discharge order. However, any unpaid attorney fees from the Chapter 13 case are nondischargeable upon conversion to Chapter 7.

Gap Debt
A debt incurred by a debtor after the filing of a Chapter 13 and before conversion of the case to a Chapter 7 case.

Going Concern Value
What a company is worth if sold as a continuing business, as opposed to its liquidation value.

Good Faith
Honesty of purpose and full and complete disclosure of the financial facts of the debtor.

Guarantor
Person who promises to repay a debt incurred by another (also referred to as co-maker or co-signer).

Impairment
When a Chapter 11 plan of reorganization alters the contractual rights of a class of holders of claims, that class is deemed to be impaired. A class that is unimpaired is deemed to automatically accept a plan of reorganization.

Individual Filing
A bankruptcy case filed by an individual, whether married or not. A married individual may file a bankruptcy case as an individual.

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.

Insolvent
The inability to pay debts as they fall due in the usual course of business or the inability of the debtor to pay current obligations as they become due. There is no requirement of insolvency in the Bankruptcy Code.

Interrogatories
A formal quest or a series of questions that are proposed in writing by one party of an action to another. The answers can be used later in court for various reasons. This is a form of discovery used by attorneys when investigating a case. Sanctions can be levied for willfully refusing to respond timely to interrogatories.

Involuntary Chapter 7
Liquidation bankruptcy that is forced by creditors. A bankruptcy initiated by at least three creditors holding unsecured claims aggregating at least $11,625 against the debtor.

Joint Bankruptcy
A debtor filing bankruptcy together with a spouse.

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.) Frequently, the cases of affiliated entities are jointly administered. Joint administration does not necessarily result in substantive consolidation.

Joint Petition
One bankruptcy petition filed by a husband and wife together.

Jurisdiction
Geographical region over which a court has power.

Last Day to File Complaint to Determine Dischargeability
(also known as Bar Date) This is the last day a Complaint to Determine Dischargeability can be filed against the debtor.

Liability
Another word for debt .

Lien
An interest in specific property designed to secure payment of a debt or performance of an obligation.

Liquidating Reorganization
An informal term for a Chapter 11 proceeding when the company is essentially liquidated through one or more asset sales.

Liquidation
A sale of debtor's non-exempt property with the proceeds to be used for the benefit of creditors. A conversion of assets to cash in order to pay creditors all or a portion of the debt owed.

Liquidation Value
The aggregate value of a debtor's assets if they are sold piecemeal.

Liquidated Claim
A creditor's claim for a fixed amount of money.

Luxuries
Purchases made that provide pleasure or comfort but are not absolutely necessary.

Matrix
List of names and addresses of each creditor. One of the required forms filled out for a bankruptcy case.

Meeting of Creditors
(also known as the 341 Meeting or First Meeting of Creditors) This is an opportunity for the Trustee and the creditors to question the debtor, with the debtor's attorney present, about assets, statements made by the debtor in the bankruptcy schedules, etc. All questions are answered under oath.

Modification of Plan
A repayment plan, normally filed in a Chapter 13 or Chapter 11 bankruptcy, can be modified to change the amount paid to classes within the plan. This can only be done with the Court's approval.

Motion
A formal request to a court to allow or require a specific legal action.

Motion to Dismiss
A formal request filed in Court by the Trustee as a result of some sort of non-compliance with the bankruptcy case. Typically, these tend to be a result of the debtor's failure to provide requested documentation, to file tax returns, or to make timely plan payments. In the event that the motion is granted by the bankruptcy judge, an Order for Dismissal is filed and the case is closed, thereby removing the protection offered by the automatic stay.

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.

National Bankruptcy Review Commission
An independent commission established pursuant to the Bankruptcy Reform Act of 1994 to investigate and study issues relating to the Bankruptcy Code. The Commission completed a final report and ceased to exist as of November 19, 1997. Click here to go to the National Bankruptcy Review Commission's website where you can find lots of information including the commissions final report.

Necessities
Purchases that are required for the sustenance of life without being excessive. For example, food, clothing, shelter, etc.

Net Disposable Income
The amount of income left over after all expenses for the maintenance and support of the debtor or a dependent of the debtor are paid.

Net Disposable Income Test
A review of the bankrupt debtor's income and expenses with the goal of ascertaining whether or not the debtor could pay all or part of his scheduled debts. The resulting issues are whether or not there is substantial abuse under Section 707(b) or additional income that can be used for plan payments under Section 1325(b)(1)(B).

Net Operating Loss
See tax loss carry-forward.

No-Asset Case
A Chapter 7 case where there are no non-exempt assets available to satisfy any portion of the creditors' unsecured claims.

Non-Dischargeable
The extent to which a debt may NOT be legally erased (typically child support, taxes, student loans, and certain judgments like criminal restitution).

Nondischargeable Debt
Certain debts not included in the debtor's discharge. Some are automatically excluded (for example, taxes, alimony, and debts incurred due to any drunk driving violations) and some require action by the creditor in the case. If your debt is declared non-dischargeable, collection activity can resume, after your bankruptcy case is closed, regarding the debt.

Non-Exempt Equity
The portion of equity that exceeds the maximum exemption allowed by law.

Objection to Discharge
A trustee's or creditor's objection to the debtor's being released from personal liability for certain dischargeable debts.

Object 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.

Offset
(also known as Setoff) Using one debt to cancel another debt. For example, the IRS keeping all or part of a tax refund to apply to debt owed to the IRS.

Order
A formal ruling by a judge allowing or requiring a specific legal action.

Over-Secured
A secured loan wherein the collateral is worth more than the debt owed against it.

PACER (Public Access to Court Electronic Records)
A service provided by the court system that gives case filing information. PACER access requires login and password which can be obtained from the PACER Service Center.

Party in Interest
A party who is actually and substantially interested in the subject matter, as distinguished from one who has only a nominal on technical interest in it.

Periodic
Occurring a regular intervals, usually monthly, quarterly, semi-annually or annually.

Petition
(also known as Voluntary Petition when filed by a debtor) A document used to begin a bankruptcy case. It can also be referred to as the face-sheet of the bankruptcy schedules. The petition must be filed in order to begin bankruptcy proceedings, while other bankruptcy documents (such as Schedules, Statement of Financial Affairs, Statement of Intention, etc.) can be filed within 15 days after the filing of the petition document.

Petition Date
The date that a bankruptcy petition is filed with the Court.

Plan
A debtor's detailed description of how the debtor proposes to pay creditors' claims over a fixed period of time.

Plan Payment
The monthly payment required to keep a Chapter 13 bankruptcy active. The plan payments may be made directly by the debtor to the Trustee or by payroll deduction. Failure to make timely plan payments will result in the dismissal of your bankruptcy case.

Plaintiff
A person or business that files a formal complaint with the court.

Post-Petition
Anything that occurs after the filing of a bankruptcy case with the Court. Debt incurred following the filing of a bankruptcy is NOT included in the bankruptcy case.

Post-Petition Arrearage
The amount of money or total payments that are behind after filing a bankruptcy petition.

Post-Petition Indebtedness
Any debt incurred after the filing of the bankruptcy. Post petition charges are not under the jurisdiction of the bankruptcy and the post petition dollar amount can generally be collected without violation of the automatic stay.

Post-Petition Mortgage Payments
Mortgage payments that come due after a bankruptcy is filed with the Court. In a typical Chapter 13 case, these payments are to be made by the debtor directly to the mortgage holder.

Post-Petition Transfer
A transfer of a debtor's property made after the commencement of the case.

Pre-Bankruptcy Planning
The arrangement (or rearrangement) of a debtor's property to allow the debtor to take maximum advantage of exemptions. (Prebankruptcy converting nonexempt assets into exempt assets.)

Preference Period
A ninety-day window before the bankruptcy was filed. The trustee may be able to recover payments made to creditors in that time frame.

Preferential Payment
A 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 a debtor's Chapter 7 case.

Prepackaged Bankruptcy
A situation where a company and its creditors agree to a Chapter 11 plan of reorganization before the company files a bankruptcy petition. In a true prepackaged bankruptcy, a plan of reorganization is circulated and approved by creditors before the petition is filed. The court then confirms the plan and the company emerges from bankruptcy quickly.

Pre-Petition
Anything that occurs before the date a bankruptcy case is filed with the Court.

Pre-Petition Arrearage
The mount of money or total payments that are behind before filing a bankruptcy petition.

Presiding Officer
The trustee or a representative of the Trustee at a 341 Meeting.

Presumption Period
According to Section 523(a)(2)(C), purchases incurred over $1,225 for "luxury goods or services" within 60 days of the date of the bankruptcy filing or cash advanced over $1,225 made within 60 days of the bankruptcy filing are presumed to be non-dischargeable.

Priority
The Bankruptcy Code's statutory ranking of unsecured claims that determines the order in which unsecured claim 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.

Projected Filing Date
The date assigned during the initial consultation with the attorney by which all fees must be paid. This is also the target date for filing your case with the Court.

Pro Per
Short for "Proper Person." A debtor who makes court appearances in their own "proper person" without representation by legal counsel. Also known as Pro Se.

Pro Rata Basis
Divided proportionately. For example if a debtor owes $100,000 in debts and there is $1,000 to be distributed to creditors in a bankruptcy case, a pro-rata distribution would mean that each creditor would receive $.01 for each dollar it is owed -- in this example a 1% dividend.

Pro Se
Appearing for oneself, as in the case of a debtor who does not retain a lawyer and appears for himself in court. Also known as Pro Per.

Proof of Claim
A form used to file a claim in order to receive payment from the bankruptcy estate. (Click here for the 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.

Purchase Money Security Interest
A lien that allows the creditor which financed the purchase of a specific item of property to repossess that item purchased with its loan proceeds.

Reaffirmation Agreement
You can voluntarily agree to pay back any of your debts. If you sign a reaffirmation agreement, it binds you to repaying the debt despite the bankruptcy. In some cases, the bankruptcy court Judge must approve the reaffirmation agreement. Reaffirmed debt is not affected by the discharge. If the debtor defaults on the reaffirmation agreement, the creditor may pursue all avenues of collection activity available after your bankruptcy.

Receiver
Particularly in foreign proceedings, or state court proceedings, a person appointed by the court to take custody of a debtor's property.

Recession Period
The debtor may rescind (cancel) a reaffirmation agreement at any time before discharge, or within 60 days after filing the agreement with the court, whichever occurs later.

Redemption
A lump sum payment to redeem collateral in lieu of a reaffirmation of the debt or surrender of the collateral.

Relief From Stay
In certain situations, a creditor may obtain an Order for Relief from Stay to allow them to enforce their claims, pursue collections on a Co-debtor, or any other activity that would otherwise violate the automatic stay. When an order for relief of stay is granted by the court, the automatic stay is canceled as to that creditor only.

Restitution
In the context of bankruptcy recovery, the act of repaying debt incurred as a result of fraud or abuse. The Court usually imposes this. A state court will order the debtor to pay back all or a part of the debt usually as a result of a criminal conviction or a plea bargain agreement. Criminal restitution is a non-dischargeable debt in bankruptcy.

Restructuring
A general term applied to an out-of-court attempt to reorganize and satisfy debts. Similar to workout.

Retired Benefits Bankruptcy Protection Act
Passed on June 16, 1988, this act allows the debtor to continue to pay insurance premiums for employees during the course of a bankruptcy.

Reverse Leveraged Buyout
When a company that was a leveraged buyout restructures its (usually unmanageable) debt by issuing new equity (usually in exchange for some or all of the outstanding debt incurred during the original leveraged buyout).

Sanction
A monetary penalty placed upon a party or its attorney in response to a violation of the Bankruptcy Code or rules. The penalty ranges in dollar amount depending on the violation, the intent of the party, and the district in which the violation occurred.

Section 304
The section of the present U.S. Bankruptcy Code that handles multi-national bankruptcies; only a few of these are filed each year.

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.

Secured Debt
Debt backed by a mortgage, deed of trust, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default.

Setoff
An equitable right to cancel or offset mutual debts or cross demands, commonly used by a bank in reducing a customer's checking account or other deposit account in satisfaction of a debt the customer owes the bank.

Schedules
Written information given by the debtor filed with the bankruptcy court on the day of filing or by the 15th day after. These forms give the bankruptcy court and trustee a financial picture of the debtor and are required to be filled out truthfully and accurately under penalty of perjury. These schedules include item such as the Voluntary Petition, a list of all assets, debts, income and expenses, the Statement of Financial Affairs, etc.

Skeleton Filing
A term used at bankruptcy courts to describe a bankruptcy filing in which not all the necessary forms have been filed. Certain courts allow a case to commence if only certain important forms are filed so long as the balance of required forms are forthcoming within a certain period of time. Should only be done in the case of an extreme emergency requiring the automatic stay (stopping a foreclosure sale, trustee sale, repossession sale, etc.).

Sole Proprietorship
A business owned by an individual; not incorporated.

Special Classification
Legally allowed to be treated differently. In some cases a creditor in a Chapter 13 bankruptcy case can be classified as a "special class" creditor and be paid separately through the plan. Co-signed debt is one example of a debt that can be legally classified for special treatment in a Chapter 13 plan.

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. (Click here for the official form that debtors 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.

Stipulation
An agreement between adversaries in a legal proceeding.

Stipulation for Judgment
An agreement between the bankrupt debtor and creditor that ends in lawsuit. The document is filed with the court usually requiring repayment of a debt. In the event of default, a judgment may be immediately entered in favor of the creditor.

Straight Bankruptcy
An informal term for a Chapter 7 bankruptcy or liquidation; used more commonly to describe liquidation before the Bankruptcy Reform Act of 1978.

Subpoena
A formal notice usually issued by a court, commanding specific action be taken under penalty of contempt of court.

Substantial Abuse
The court may dismiss a bankruptcy case on the motion of a United States trustee if the debts are primarily consumer debts and if the Trustee believes that the Chapter 7 petition represents substantial abuse under the Bankruptcy Code. The main reason for a finding of substantial abuse is excess income under the Net Disposable Income Test. (See Section 707(b) of the Bankruptcy Code.)

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 creditor receives, but also the harm that other creditors suffer as a result.)

Summons
An order to answer a lawsuit within a specified time.

Super-Priority Claim
An administrative claim that will be paid ahead of other administrative and priority claims.

Tax Loss Carry-Forward
Losses, for tax purposes, that can be carried forward and applied to reduce taxable income in future years. The Tax Reform Act of 1986 imposed stringent restrictions on the use of tax loss carry-forwards.

To File for Bankruptcy
To take a set of prepared and signed bankruptcy documents (i.e. Voluntary Petition, Schedules, and Statement of Financial Affairs, etc.) to the bankruptcy court where they are stamped with the date, time, and a case number. It is not necessary for debtors to be present at the filing.

341 Meeting
This meeting is held at the Federal Courthouse by the Trustee assigned to your case. The meeting, which lasts approximately 5 minutes, is mandatory and is conducted in every bankruptcy case, regardless of chapter. During the meeting, the Trustee has the opportunity to clarify any issues in your particular case. It is also an opportunity for creditors to appear on their own behalf. Your attorney will be with you at your meeting. Also known as the " First Meeting of Creditors."

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 exercise statutory powers principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the United States trustee or Bankruptcy Administrator.

Trustee (Chapter 7 Panel Trustee)
A person appointed to collect the non-exempt assets of the debtor and liquidate them to pay creditors. Each judicial division within a judicial district will often have several trustees (a panel of trustees) that are assigned to Chapter 7 bankruptcy cases filed in that judicial district.

Trustee (Chapter 13 Standing Trustee)
A person appointed to collect fund from the debtor and pay the funds over to creditors over a three- or five-year period pursuant to a court approved plan. Each judicial division within a judicial district will often have only one trustee (a standing trustee) that is assigned to all Chapter 13 bankruptcy cases filed in that judicial district.

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. The Chapter 13 Standing Trustees and Chapter 7 Panel Trustees report to the United States Trustee. The United States Trustee oversees the operation of the trustee offices and appoints and removes trustees from office.

Undersecured Claim
A debt secured by property that is worth less than the amount of the debt.

Unsecured Creditor
A creditor whose debt is not secured by property or collateral. This would include credit card debts.

Unsecured Debt
Any debt not secured by collateral (typically medical and credit card 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.

Unliquidated Claim
A claim for which a specific value has not been determined.

Unscheduled Debt
A debt that should have been listed by a 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.

VCIS (Voice Case Information System)
A touchtone telephone service provided by the court system that gives case filing information.

Voluntary Petition
A bankruptcy petition filed by a debtor.

Voluntary Transfer
A transfer of a debtor's property with the debtor's consent.

Wage-Earner Bankruptcy
See Chapter 13 bankruptcy.

Workout
An arrangement , outside of bankruptcy, by a debtor and its creditors for payment or re-scheduling of payment of the debtor's obligations. Usually applies to an informal agreement between a business and its creditors, although it can be a formal agreement and it can apply to consumer debtors also.

Consumer Law Center, Inc., designated as a Federal Debt Relief Agency by an Act of Congress and the President of the United States, proudly assists consumers seeking relief under the United States Bankruptcy Code.

For more information about bankruptcy, please call us at 408-294-6100, or e-mail us via This email address is being protected from spambots. You need JavaScript enabled to view it. . One of our attorneys will be able to answer any questions which you may have in greater detail. Please remember that the foregoing information is of a general nature, and does not constitute legal advice. The facts of each situation are unique, and we must discuss those facts with you before any advice can be given.