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Public Information Series of the Bankruptcy
Judges Division - December 1998
| While the information presented herein is accurate as of the
date of publication, it should not be cited or relied upon as legal authority. This
information should not be used as a substitute for reference to the United States
Bankruptcy Code (title 11, United States Code) and the Bankruptcy Rules, both of which may
be reviewed at local law libraries, or to any local rules of practice adopted and
disseminated by each bankruptcy court. Finally, this fact sheet should not substitute for
the advice of competent legal counsel. For additional copies of this publication, please
contact the Bankruptcy Judges Division, Administrative Office of the United States Courts
(202) 502-1900. |
adversary proceeding A lawsuit arising in or related to a
bankruptcy case that is commenced by filing a complaint with the court.
assume An agreement to continue performing duties under a
contract or lease.
automatic stay An injunction that automatically stops
lawsuits, foreclosure, garnishments, and all collection activity against the debtor the
moment a bankruptcy petition is filed.
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 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.
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 The bankruptcy judges in regular active
service in each district; a unit of the district court.
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 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 form for bankruptcy petitions.)
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.
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.
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.)
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.)
chapter 12 The chapter of the Bankruptcy Code providing
for adjustment of debts of a "family farmer," as that term is defined in the
Code.
chapter 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.)
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 from debtors, and disbursing plan
payments to creditors.)
claim A creditor's assertion of a right to payment from a
debtor or the debtor's property.
complaint 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.
confirmation Approval of a plan of reorganization by a
bankruptcy judge.
consumer bankruptcy A bankruptcy case filed to reduce or
eliminate debts that are primarily consumer debts.
consumer debts Debts incurred for personal, as opposed to
business, needs.
contingent claim 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.
creditor A person to whom or business to which the debtor
owes money or that claims to be owed money by the debtor.
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.
discharge 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.)
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 the chapter 11 plan of
reorganization.
equity 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.)
executory 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.)
exempt A description of any property that a debtor may
prevent creditors from recovering.
exemption Property that the Bankruptcy Code or applicable
state law permits a debtor to keep from creditors.
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.) 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.
fraudulent transfer 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,i.e., free of most debts. (Giving debtors a fresh start is one
purpose of the Bankruptcy Code.)
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.
joint 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.)
joint petition One bankruptcy petition filed by a husband
and wife together.
lien A charge upon specific property designed to secure
payment of a debt or performance of an obligation.
liquidation A sale of a debtor's property with the
proceeds to be used for the benefit of creditors.
liquidated claim A creditor's claim for a fixed amount of
money.
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.
no-asset case A chapter 7 case where there are no assets
available to satisfy any portion of the creditors' unsecured claims.
nondischargeable debt A debt that cannot be eliminated in
bankruptcy.
objection to discharge A trustee's or creditor's objection
to the debtor's being released from personal liability for certain dischargeable debts.
objection 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.
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.
plan A debtor's detailed description of how the debtor
proposes to pay creditors' claims over a fixed period of time.
plaintiff A person or business that files a formal
complaint with the court.
postpetition transfer A transfer of a debtor's property
made after the commencement of the case.
prebankruptcy 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.)
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.
priority 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.
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.
proof of claim A written statement, filed by a creditor,
describing the reason a debtor owes the creditor money. (There is an 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.
reaffirmation agreement An agreement by a chapter 7 debtor
to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of
keeping collateral or mortgaged property that would otherwise be subject to repossession.
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, pledge of
collateral, or other lien; debt for which the creditor has the right to pursue specific
pledged property upon default.
schedules Lists submitted by the debtor along with the
petition (or shortly thereafter) showing the debtor's assets, liabilities, and other
financial information. (There are official forms a debtor must use.)
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. (There is an official form a debtor 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.
substantial abuse The characterization of a bankruptcy
case filed by an individual whose debts are primarily consumer debts where the court finds
that the granting of relief would be an abuse of chapter 7 because, for example, the
debtor can pay its debts.
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 creditors receives, but also the harm that other creditors
suffer as a result.)
341 meeting A meeting of creditors at which the debtor is
questioned under oath by creditors, a trustee, examiner, or the United States trustee
about his/her financial affairs.
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
exercises 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.
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.
undersecured claim A debt secured by property that is
worth less than the amount of the 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.
voluntary transfer A transfer of a debtor's property with
the debtor's consent.
Sources:
Doran, Personal Bankruptcy and Debt Adjustment 135-139 (1991)
Griffin, Personal Bankryptcy: What You Should Know 145-1149 (1884)
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