Bankruptcy Glossary A to Z
Adversary proceeding – A lawsuit related to a debtor’s bankruptcy, including complaints to determine the dischargeability of a debt and the extent and validity of liens.
Arrears – The unpaid and overdue amount as of the date a bankruptcy case is filed, such as past due alimony, child support and mortgage payments.
Assets – Personal possessions including, cash, real estate, vehicles and investments.
Automatic stay – An injunction that automatically stops lawsuits and all collection activity against the debtor once a bankruptcy a petition is filed.
Avoidance – Elimination of certain types of liens which interfere with an exemption claimed in bankruptcy. Certain liens tied to a debtor’s home can be avoided if the amount of the liens is greater than the value of the property, sometimes called “lien stripping”
Avoidance powers – Right of bankruptcy trustee to recover property fraudulently conveyed, or to void liens created before the commencement of a bankruptcy case.
Bankruptcy Code – Title 11 of the U.S. Code, outlining the rules governing consumer and business bankruptcy.
Bankruptcy estate – All of the debtor’s legal or equitable property interests at the time of the bankruptcy filing.
Bankruptcy petition – The document filed by a debtor (in a voluntary case) or creditors (in an involuntary case) file to open a bankruptcy case.
BAPCPA – Acronym for the Bankruptcy Abuse Prevention and Consumer Protection Act
Chapter 7 – The Bankruptcy Code chapter providing for liquidation of a debtor’s non-exempt property and distribution of the proceeds to creditors.
Chapter 13 – The Bankruptcy Code chapter allowing a debtor to keep property and pay debts over time, usually three or five years.
Claim – A creditor’s assertion of a right to payment from the debtor or the debtor’s property.
Collateral – Property subject to a lien for payment of a debt or performance of a contract. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral.
Consumer debts – Debts incurred for personal, as opposed to business, needs.
Contested matter – A disputed matter not encompassed within the definition of an adversary proceeding.
Contingent claim – A claim that a debtor may owe, such as when the debtor is a co-signer on another person’s loan and that person fails to pay.
Credit report – A report outlining an individual’s credit history, public records and credit worthiness.
Creditor – One to whom the debtor owes money or who claims to be owed money by the debtor.
Credit 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 before filing under any chapter of the Bankruptcy Code, or (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.
Creditors’ meeting – Meeting where the creditors, trustee, an examiner or the U.S. trustee question the debtor under oath about his financial affairs.
Current monthly income – The average monthly income received by the debtor over the 6 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.
Debtor – A person or business entity that has filed a petition for relief under the Bankruptcy Code.
Default – Failure to make payments within a specified period of time governed by contract.
Delinquency – Failure to make payments when due.
Denial of discharge – A penalty imposed upon a debtor for misconduct which results in the debt becoming non-dischargeable in a subsequent bankruptcy.
Discharge – A release of a debtor from liability for dischargeable debts, preventing creditors from taking any action to collect the debts and/or communicating with the debtor regarding the debt.
Dischargeable debt – A debt which can be eliminated through bankruptcy.
Equity – The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered.
Executory contract or lease – Contracts or leases under which both parties have duties remaining to be performed.
Exemptions – Certain property the debtor may keep from the reach of unsecured creditors during a bankruptcy.
Foreclosure – Process by which a homeowner in default on a mortgage is deprived of his/her interest in the mortgaged property.
Fraudulent transfer – A transfer of property made with intent to defraud or for less than the transferred property’s value.
Garnishment – A method of debt collection in which a portion of a person’s salary is withheld and paid to a creditor.
General unsecured claim – A non-priority claim for which the creditor holds no security or collateral.
Joint petition – Bankruptcy petition filed by a husband and wife together.
Lien – The right to take or sell debtor’s property as security or payment for a debt or duty.
Liquidation – Sale of a debtor’s property where the proceeds are split amongst creditors.
Liquidated claim – A creditor’s claim for a fixed sum of money.
Means test – Test to determine whether a Chapter 7 filing is abusive, requiring dismissal or conversion of case to a Chapter 13. Abuse can be presumed if the debtor’s monthly income exceeds certain levels.
No-asset case – A Chapter 7 case in which no assets are available to satisfy any unsecured claims.
Non-dischargeable debt – A debt that cannot be eliminated in bankruptcy.
Objection to dischargeability – An objection to the debtor being released from liability for certain debts, including those incurred by false pretenses or because debts arising from fraud.
Objection to exemptions – An objection to the debtor’s attempt to claim certain property as exempt from liquidation.
Perfection – When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. The trustee can avoid an unperfected lien.
Personal property – Property that is not real property or affixed to real property, such as cars, stock and furniture.
Petition – Document which initiates a bankruptcy case and institutes the automatic stay.
Plan – A debtor’s proposal to repay creditors over a fixed period of time.
Post-petition transfer – A transfer of property made after the commencement of a bankruptcy.
Pre-bankruptcy planning – The arrangement of property to afford the debtor the maximum possible exemptions.
Preferential debt payment – A payment made to a creditor shortly before a debtor files for bankruptcy that gives the creditor more than the creditor would have receive in the debtor’s Chapter 7 case.
Pre-petition – Claims or events arising prior to the filing of the debtor’s bankruptcy petition.
Priority – Ranking of unsecured claims to determine the order in which unsecured claims will be repaid.
Priority claim – An unsecured claim that is entitled to be paid ahead of other unsecured claims.
Proof of claim – Statement filed by a creditor that describes a debtor’s obligation to it.
Property of the estate – All interests of the debtor in property at the start of a bankruptcy case.
Reaffirmation – Agreement by a debtor to continue payments to a creditor on a dischargeable debt, made for purposes retaining possession of the property which could be subject to repossession.
Relief from stay – If granted by the court, creditor is exempted from bankruptcy stay and would be free to pursue collection activities against debtor.
Repossession – Self help measures taken creditor to regain possession of property under debtor’s control.
Secured creditor – A creditor with the right to take or sell property of the debtor to satisfy its claim in the event of delinquency on the debtor’s obligation.
Secured debt – A debt obtained with a mortgage, pledge of collateral or other lien, including home mortgages, auto loans and tax liens.
Schedules – Lists filed by the debtor setting forth assets, liabilities and other financial information.
Statement of financial affairs – A series of questions the debtor must answer regarding sources of income, transfers of property, lawsuits by creditors, etc.
Statement of intention – A declaration made by a Chapter 7 debtor concerning plans for dealing with secured debts.
Substantive consolidation – Pooling the assets and liabilities of two or more related debtors to pay creditors.
Transfer – Disposition of property by a debtor.
Trustee – Bankruptcy representative who acts on behalf of unsecured creditors, under the general supervision of the court and/or U.S. trustee or bankruptcy administrator who reviews the debtor’s petition and schedules and takes actions to protect the bankruptcy estate. In a Chapter 7 bankruptcy, the trustee liquidates the debtor’s property and makes distributions to creditors.
Undersecured claim – A secured debt worth less than its original amount.
Unliquidated claim – A claim of undetermined value.
Unscheduled debt – A debt omitted from debtor’s schedules filed with his/her bankruptcy petition.
Unsecured claim – A creditor’s claim which holds no guarantee of payment.
Voluntary transfer – Consensual transfer of debtor’s property.