Glossary – Terms
debtors who file a bankruptcy petition, and many of their creditors,
know very little about the bankruptcy process. This glossary on
bankruptcy terminology explains, in layman's terms, many of the
legal terms that are used in cases filed under the Bankruptcy Code.
Meeting. The meeting of creditors required by section 341
of the Bankruptcy Code at which the debtor is questioned under oath
by creditors, a trustee, examiner, or the U.S. trustee about his/her
financial affairs. Also called creditors' meeting.
Proceeding. A lawsuit arising in or related to a bankruptcy
case that is commenced by filing a complaint with the court. A nonexclusive
list of adversary proceedings is set forth in Fed. R. Bankr. P.
Stay. An injunction that automatically stops lawsuits,
foreclosures, garnishments, and all collection activity against
the debtor the moment a bankruptcy petition is filed.
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).
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.
Code. The informal name for title 11 of the United States
Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.
Court. The bankruptcy judges in regular active service
in each district; a unit of the district court.
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. The estate technically becomes
the temporary legal owner of all of the debtor’s property.
Judge. A judicial officer of the United States district
court who is the court official with decision-making power over
federal bankruptcy cases.
Petition. The document filed by the debtor (in a voluntary
case) or by creditors (in an involuntary case) by which opens the
bankruptcy case. (There are official forms for bankruptcy petitions.)
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.
Bankruptcy. A bankruptcy case in which the debtor is a
business or an individual involved in business and the debts are
for business purposes.
File. A complete collection of every document filed in
court in a case.
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.) 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.
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.
11. The Chapter of the Bankruptcy Code providing (generally)
for reorganization, 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.)
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.)
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 debtor.
A creditor's assertion of a right to payment from the debtor or
the debtor's property.
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.
Bankruptcy judges's approval of a plan of reorganization or liquidation
in Chapter 11, or payment plan in Chapter 12 or 13.
Bankruptcy. A bankruptcy case filed to reduce or eliminate
debts that are primarily consumer debts.
Debtor. A debtor whose debts are primarily consumer debts.
Debts. Debts incurred for personal, as opposed to business,
Matter. Those matters, other than objections to claims,
that are disputed but are not within the definition of adversary
proceeding contained in Rule 7001.
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.
Reporter. A person who makes a word-for-word record of
what is said in court, generally by using a stenographic machine,
shorthand or audio recording, and then produces a transcript of
the proceedings upon request.
One to whom the debtor owes money or who claims to be owed money
by the debtor.
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.
Meeting. see 341 meeting
Monthly Income. The average monthly income received by
the debtor over the six calendar months before commencement of the
bankruptcy case, including regular contributions to household expenses
from nondebtors and income from the debtor's spouse if the petition
is a joint petition, but not including social security income and
certain other payments made because the debtor is the victim of
certain crimes. 11 U.S.C. § 101(10A).
A person who has filed a petition for relief under the Bankruptcy
Plan. A debtor's detailed description of how the debtor
proposes to pay creditors' claims over a fixed period of time.
Education. see credit counseling
An individual (or business) against whom a lawsuit is filed.
A release of a debtor from personal liability for certain dischargeable
debts set forth in the Bankruptcy Code. (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 to collect the debts. The discharge also
prohibits creditors from communicating with the debtor regarding
the debt, including telephone calls, letters, and personal contact.)
Debt. A debt for which the Bankruptcy Code allows the debtor's
personal liability to be eliminated.
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 the Chapter
11 plan of reorganization.
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.
A log containing the complete history of each case in the form of
brief chronological entries summarizing the court proceedings.
The value of a debtor's interest in property that remains after
liens and other creditors' interests are considered.
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.)
Assets. Property that a debtor is allowed to retain, free
from the claims of creditors who do not have liens on the property.
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.
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
Transfer. A transfer of a debtor's property made with intent
to defraud or for which the debtor receives less than the transferred
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.)
(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 a corporation
of which the debtor is a director, officer, or person in control.
(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.
Administration. A court-approved mechanism under which
two or more cases can be administered together. (Assuming no conflicts
of interest, these separate businesses or individuals can pool their
resources, hire the same professionals, etc.)
Petition. One bankruptcy petition filed by a husband and
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.
A sale of a debtor's property with the proceeds to be used for the
benefit of creditors.
claim. A creditor's claim for a fixed amount of money.
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) $10,950, or (ii) 25% of the debtor's
nonpriority unsecured debt, as long as that amount is at least $6,575.
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.
A request by a litigant to a judge for a decision on an issue relating
to the case.
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.
Case. A Chapter 7 case where there are no assets available
to satisfy any portion of the creditors' unsecured claims.
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.
Assets. Property of a debtor that can be liquidated to satisfy claims
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.
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.
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.
Preparer. A business not authorized to practice law that
prepares bankruptcy petitions.
A debtor's detailed description of how the debtor proposes to pay
creditors' claims over a fixed period of time.
A person or business that files a formal complaint with the court.
Transfer. A transfer of the debtor's property made after
the commencement of the case.
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.)
A court decision in an earlier case with facts and legal issues
similar to a dispute currently before a court. Judges will generally
"follow precedent" - meaning that they use the principles
established in earlier cases to decide new cases that have similar
facts and raise similar legal issues. A judge will disregard precedent
if a party can show that the earlier case was wrongly decided, or
that it differed in some significant way from the current case.
or 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.
of Abuse. see means test
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.
For example, under the Bankruptcy Code's priority scheme, money
owed to the case trustee or for prepetition alimony and/or child
support must be paid in full before any general unsecured debt (i.e.
trade debt or credit card debt) is paid.
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.
of Claim. A written statement and verifying documentation
filed by a creditor that describes the reason the debtor owes the
creditor money. (There is an official form for this purpose.)
of the Estate. All legal or equitable interests of the
debtor in property as of the commencement of the case.
Agreement. An agreement by a Chapter 7 debtor to continue
paying a dischargeable debt (such as an auto loan) after the bankruptcy,
usually for the purpose of keeping collateral (i.e. the car) that
would otherwise be subject to repossession.
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.
Detailed lists filed by the debtor along with (or shortly after
filing) the petition showing the debtor's assets, liabilities, and
other financial information. (There are official forms a debtor
Creditor. A creditor (an individual or business) holding
a claim against the debtor who has the right to take and hold or
sell certain property of the debtor in satisfaction of some or all
of the claim.
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.
Business Case. 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.
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.)
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.
A command, issued under a court's authority, to a witness to appear
and give testimony.
Duces Tecum. A command to a witness to appear and produce
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.)
Any mode or means by which a debtor disposes of or parts with his/her
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.
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.
Attorney. A lawyer appointed by the President in each judicial
district to prosecute and defend cases for the federal government.
The U.S. Attorney employs a staff of Assistant U.S. Attorneys who
appear as the government's attorneys in individual cases.
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. Compare, bankruptcy administrator.
Claim. A debt secured by property that is worth less than
the full amount of the debt.
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.
Claim. A claim for which a specific value has not been
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.)
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.
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
A transfer of a debtor's property with the debtor's consent.
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.