Commonly used bankruptcy terms
A meeting required by law in all cases during which the debtor is questioned under oath by a trustee and creditors about his or her financial affairs. The debtor’s attendance is mandatory.
A lawsuit arising in or related to a bankruptcy case. An adversary proceeding is started by filing a complaint in the Bankruptcy Court.
A written statement of facts, confirmed by the oath taken before an officer having authority to administer such oath (a notary public) or affirmation of the party making it. For example, an affidavit of service is a sworn statement of facts by the person who served the papers on the person named in the summons.
A defendant’s response setting out the facts, denying or affirming (admitting) allegations of plaintiff’s complaint. An involuntary petition against an alleged debtor filed by petitioning creditors also requires the alleged debtor to file an answer. This answer could be the filing of a voluntary petition by the debtor or a motion by the debtor contesting the involuntary petition.
An unpaid or overdue debt.
An asset case is one in which money is likely to be recovered for distribution to unsecured creditors over and above the costs of administration and the debtor’s exemptions. A no asset case is one in which there is no money to distribute to unsecured creditors.
Everything the debtor owns or has a legal interest in that has value. Assets include homes, cars, bank and other financial accounts, cash, and household goods and furnishings.
An agreement to continue performing duties under a contract or lease.
An injunction that automatically stops lawsuits, foreclosure, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
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.)
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.
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.
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.)
A type of bankruptcy in which debtors attempt to obtain creditor approval of a plan of reorganization providing for the payment of debts and disposition of assets that must be approved by the Bankruptcy Court. A trustee is not appointed unless the creditors convince the Court to oust the debtor’s current management. Corporations, partnerships and individuals may file a Chapter 11 bankruptcy. Chapter 11 was primarily designed for business reorganizations.
This chapter is similar to a Chapter 13 case. However, eligibility to file under this chapter is limited to family farmers or fishermen.
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.)
A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time. When confirmed, the plan becomes binding on the debtor and his or her creditors unless modified under certain limited circumstances.
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.)
A creditor’s assertion of a right to payment from a debtor or the debtor’s property.
Persons who are both liable on the same debt.
Property that is subject to a lien or security interest.
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.
Approval of a plan of reorganization by a bankruptcy judge.
A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.
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.
A person to whom or business to which the debtor owes money or that claims to be owed money by the 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.
The debtor’s breach of contract, often the failure to pay a debt on the due date.
The shortfall that results when a debt is undersecured, that is, when the property securing the debt is worth less than the amount owing, so that the sale of the property does not fully satisfy the debt.
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.)
A dismissal is an order or judgment terminating a motion, adversary proceeding or bankruptcy case.
A contract under which both parties to the agreement have duties remaining to be performed. (If a contract is executory, a debtor may continue to fulfill the terms of the contract or lease (“assume” it) or cancel the contract or lease (“reject” it).) Examples of an executory contract are: a lease for a residence, car or equipment, or an employment agreement, home improvement contract or service contract or for delivery of goods in the future.
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.)
A description of any property that a debtor may prevent creditors from recovering.
Property that the Bankruptcy Code or applicable state law permits a debtor to keep from creditors.
Property or value in property that a debtor is allowed to retain, free from the claims of creditors who do not have liens.
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.)
A term describing the standard for dismissing a Chapter 7 consumer case on the grounds of abuse where the debtor’s disposable income, calculated under a formula established under federal bankruptcy law, is deemed sufficient to support payments under a Chapter 13 repayment plan. A version of the means test is also used to measure the debtor’s disposable income in a Chapter 13 case.
To assume personal liability after bankruptcy for a debt that would otherwise be discharged in the bankruptcy case.
An agreement between a debtor and a creditor in which the debtor agrees to pay all or a portion of a debt even though the debt would have been discharged otherwise.