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Bankruptcy Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Absolute Priority - Refers to the order of payment to different creditors, which is determined by the U.S. Bankruptcy Code. Generally, claims with higher priority are paid in full before "lesser" claims, allowing senior creditors to be paid first and junior creditors and shareholders to be paid second.

Adequate Protection - Refers to the right of a person or company that has interest in the debtor's property to assurance that its interest won't be devalued during the debtor's bankruptcy filing.

Adversary Proceeding - This is a document in a lawsuit in U.S. bankruptcy court. These proceedings are initiated by a person or company filing a complaint. It may be filed by the bankruptcy trustee, other parties or the debtor himself if he wants to formally complain that a creditor violated the bankruptcy automatic stay.

Allowed Claim - A claim, which is allowed by the Bankruptcy Court, to be paid under a confirmed bankruptcy plan of reorganization.

Amendment of Schedules - The process by which schedules disclosing a debtor's debts, assets and financial affairs are changed to correct an error contained in the original schedule or previously amended schedule.

Automatic Stay - An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

B

Bankrupt - This is a non-technical term that describes the person or company that files for bankruptcy protection.

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 Court - This is the federal tribunal where bankruptcy cases are reviewed and litigated under the U.S. Bankruptcy Code.

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 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.)

C

Cash Collateral - Refers to cash and equivalents held by the debtor that are subject to creditors' liens.

Claim - A creditor's assertion of a right to payment from the debtor or the debtor's property.

Co-debtor (cosigner) - Refers to any person signed onto a debt obligation jointly with a debtor whether as the primary or secondary obligor. Legally, a cosigner can be held liable for the payments on the loan if the primary borrower fails to do so.

Co-debtor Stay - is the provision under Chapter 13 of the Bankruptcy Code that applies the automatic stay to a non-filing co-debtor of the debtor. This stops collection on consumer debts.

Confirmation - Bankruptcy judge's approval of a plan of reorganization or liquidation.

Confirmation Hearing - Is the court hearing held to determine if a plan of reorganization is to become binding on the debtor and all creditors.

Consumer debtor - A debtor whose debts are primarily consumer debts (personal, family, or household.)

Consumer debts - Debts incurred for personal, as opposed to business, needs.

Conversion - This is the act of changing chapters in bankruptcy when you are already involved in a bankruptcy filing.

Cram Down - A term that describes the reduction of the amount paid for a secured asset (vehicle, furniture, ect..) from the amount owed to the actual value of the asset on the date of filing of the bankruptcy case.

Creditor - One to whom the debtor owes money or who claims to be owed money by the debtor.

Credit Counseling - For the purpose of Chapter 7 or 13 filings, credit counseling is the act of receiving a credit briefing before a debtor is allowed to file a bankruptcy petition.

Current 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 non-debtors 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.

D

Debt - means liability on a claim of a creditor.

Debtor - A person who has filed a petition for relief under the Bankruptcy Code.

Debtor's Principal Residence - means a residential structure, including incidental property, in which the debtor resides.

Defendant - is the party (individual or business) to an Adversary Proceeding against whom the action is filed.

Direct Payments - refers to payments that are paid directly to a creditor outside of and in addition to the payments paid under a plan of reorganization to the Trustee.

Discharge - 1) Exit from bankruptcy .You will receive your discharge after cooperating with all the terms and conditions of the bankruptcy court. 2) The elimination of debt. In Chapter 7 bankruptcy filings, unsecured debts can be discharged, or excused by a bankruptcy judge.

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

Dismissal - refers to the termination of a bankruptcy case prior to its successful completion and prior to the discharge of any debts. This could be due to the debtor not meeting the agreed upon payments and/or conditions of the Chapter 13 plan.

E

Equity - The value of a debtor's interest in property that remains after liens and other creditors' interests are considered.

Exemptions - 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.

F

Feasibility - is a term that refers to the probability that a plan as proposed by a debtor will be successful under the current circumstances of the debtor.

Foreclosure - is a state procedure by which a creditor holding a security interest in real estate is allowed to strip the debtor's ownership interest and sell the property to satisfy the debt owed to the creditor that is secured by the real property.

Fraudulent Transfers - 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, free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)

G

Garnishment - When money owed a debtor is ordered given to a creditor to cover some of the debt owed. The money is generally garnished from the debtor's paycheck.

Good Faith - Is a term that refers to the filing of a Bankruptcy petition for proper purposes.

I

Insider - includes a relative of the debtor or a general partner of the debtor, or corporation of which Debtor is in control for an individual, and a director, officer, or person in control of the debtor if the debtor is a corporation.

Insolvency - This is a term used to describe a failing debtor. It means that the debtor obligations exceed his or her assets and/or the debtor can't pay his or her bills.

Involuntary Bankruptcy - This is when bankruptcy proceedings are started by three or more creditors against a debtor. In order for this to be accepted by the bankruptcy court, the debtor must have unsecured debt of at least $5,000.

J

Joint Debtor - refers to a husband and wife that file a Bankruptcy petition together as one petition.

Joint Petition - is a single Bankruptcy petition filed by a husband and wife together.

L

Lien - a claim on property in exchange for debt owed. Liens can be voluntary or involuntary; home mortgages and auto loans, for example, are voluntary liens. You agree that your creditor can have the house or car back if you can't make payments. Involuntary liens result when a judge rules that you must surrender property to a creditor.

Liquidation - A sale of a debtor's property with the proceeds to be used for the benefit of creditors.

M

Means Test - The means test is used to determine who qualifies for protection under Chapter 7 of the U.S. Bankruptcy Code. It's based on median income comparisons, disposable income available and unsecured debts owed. You have to pass the means test to file for Chapter 7 bankruptcy. If the debtor does not pass the means test, it is forced into a Chapter 13 plan in which the debtor will pay excess income into the plan for up to five years.

Meeting of Creditors (341 hearing) - The meeting of creditors is a court date at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Normally, only the trustee is there.

Modification of Plan - is the process by which a plan of reorganization is amended. Modifications can happen either before or after confirmation.

Motion 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 which is otherwise prohibited by the automatic stay.

N

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

Non-dischargeable Debt - A debt that cannot be eliminated in bankruptcy. Examples include: home mortgage's, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans, and numerous others.

O

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

Objection 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.

P

Plan - Debtors detailed plan as to how they plan to pay creditors claims and the time period in which it is to be accomplished.

Petition - This document begins the bankruptcy proceeding.

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

Post-Petition - This is a period that occurs after the filing of a petition.

Pre-Petition - This is a period that occurs before the bankruptcy petition is filed.

Priority - Is the order in which allowed claims will be paid in Bankruptcy.

Proof of Claim - This is a form filed by a creditor that lays out its claims against a debtor filing bankruptcy.

Property of the Estate - All legal or equitable interests of the debtor, in property, as of the time the Bankruptcy petition is filed with the Court.

R

Reaffirmation Agreement - An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, in effect, protecting an asset that may otherwise be repossessed.

Relief from Automatic Stay - An order of the Court that upon motion of a creditor lifts the injunction against repossession of collateral or collection of debt that sprang into existence automatically upon the filing of a Bankruptcy petition.

Repossession - The process of reclaiming property, by the creditor, when the debtor has defaulted on the agreed upon payments.

S

Schedules - Detailed lists filed by the debtor showing the debtor's assets, liabilities, and other financial information.

Secured Creditor - is a creditor that holds a lien on property held by a debtor.

Secured Debt - is a debt that is backed by collateral (house, mortgage, furniture, ect.)

Statement of Financial Affairs - Questions the debtor must answer in writing concerning income, transfers of property, lawsuits by creditors, and several others, which gives a detailed picture of the debtor's financial situation.

Statement of Intentions - A document used to inform secured creditors of debtor's intentions in regard to the secured debt (reaffirm or surrender).

Straight Bankruptcy - This is one of the unofficial names for a Chapter 7 bankruptcy (or liquidation).

Student Loans - are government backed loans that are generally non-dischargeable in Bankruptcy.

T

Transfer - Any mode or means by which a debtor disposes of or parts with his/her property.

Trustee - refers to the agent of the court who watches over the debtor's bankruptcy case to ensure the debtor is treating creditors (both secured and unsecured) properly.

U

Undersecured claim - Debt that is secured by property whose value is less than the debt owed to the creditor.

Unscheduled Debt - is a debt that should have been listed by the debtor at the time the Bankruptcy petition was filed, but was not.

Unsecured Claim - A claim of debt that is not secured by property (credit card, medical expenses, certain taxes).

W

Wage-Earner Bankruptcy - This is the unofficial name used for a Chapter 13 Bankruptcy.

Do you live in Valdosta or the greater southern Georgia area? Get answers from the attorneys at Woodall & Woodall. Our attorneys empower our clients by educating them and helping them understand their options. We serve communities such as Albany and Thomasville as well. Call us at 229-232-8585 or complete our online contact form.

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