Bankruptcy glossary

A

Adversary proceedingA separate lawsuit connected to a bankruptcy case, started by filing a complaint with the court.

AssumeTo agree to continue performing the obligations of a contract or lease.

Automatic stayA legal protection that generally pauses many collection actions, lawsuits, foreclosures, and garnishments when a bankruptcy case is filed. Exceptions can apply.

B

BankruptcyA federal legal process for addressing debt through one of the chapters of the United States Bankruptcy Code.

Bankruptcy CodeThe common name for Title 11 of the United States Code, the federal law governing bankruptcy cases.

Bankruptcy courtThe court system and judges responsible for deciding matters arising under federal bankruptcy law.

Bankruptcy estateThe legal or equitable interests in property held by a debtor when a bankruptcy case begins, subject to applicable rules and exclusions.

Bankruptcy judgeA judicial officer who decides matters assigned to the bankruptcy court.

Bankruptcy petitionThe document that starts a voluntary bankruptcy case when filed by a debtor, or an involuntary case when filed by qualifying creditors.

C

Chapter 7A bankruptcy chapter commonly associated with liquidation. A trustee may administer nonexempt property, while eligible debts may be discharged.

Chapter 9A chapter providing a reorganization process for eligible municipalities.

Chapter 11A reorganization chapter used most often by businesses, though certain individuals may also qualify.

Chapter 12A chapter providing debt adjustment for eligible family farmers and family fishermen.

Chapter 13A chapter allowing an individual with regular income to propose a court-approved repayment plan, often lasting three to five years.

Chapter 15A chapter addressing certain cross-border insolvency matters.

ClaimA creditor’s asserted right to payment from a debtor or from property of the bankruptcy estate.

ConfirmationThe court’s approval of a reorganization, liquidation, or repayment plan when the applicable legal requirements are met.

Consumer debtDebt incurred primarily for personal, family, or household purposes.

CreditorA person or organization to whom a debtor owes money, or that asserts a right to payment.

Credit counselingRequired counseling or financial-management education that may apply before filing or before discharge in an individual case, subject to legal requirements and exceptions.

Current monthly incomeA defined measure generally based on average income during the six calendar months before a bankruptcy case begins, with statutory inclusions and exclusions.

D

DebtorA person or entity that has filed a bankruptcy petition or against whom an involuntary case has been commenced.

DischargeA court-related release from personal liability for certain qualifying debts. Not every debt is dischargeable.

Dischargeable debtA debt for which bankruptcy law permits personal liability to be eliminated, subject to exceptions and case-specific rules.

Disclosure statementA document intended to provide creditors with information needed to evaluate a Chapter 11 plan.

E

EquityThe value remaining in property after secured debts and other relevant interests are considered.

Executory contract or leaseA contract or lease under which both sides still have significant duties to perform.

ExemptionProperty that applicable federal or state law may allow an individual debtor to protect from certain creditor or trustee claims. Availability depends on the governing law and facts.

I

InsiderA person or entity with a close legal or personal relationship to a debtor, as defined by bankruptcy law.

J

Joint petitionA single bankruptcy petition filed by two spouses together.

Joint administrationA court-approved arrangement allowing related bankruptcy cases to be administered together while remaining separate cases.

L

LienA legal interest in property that secures payment or performance of an obligation.

LiquidationThe sale or conversion of property into funds for distribution according to applicable law.

Liquidated claimA claim for a fixed or readily determinable amount.

M

Means testA statutory calculation used in certain Chapter 7 cases to evaluate whether a presumption of abuse applies.

Motion to lift the automatic stayA creditor’s request for permission to take an action that the automatic stay would otherwise pause.

N

No-asset caseA Chapter 7 case in which the trustee determines that there are no nonexempt assets available for distribution to unsecured creditors.

Nondischargeable debtA debt that bankruptcy law does not allow to be eliminated, or that requires a separate determination before discharge can be denied.

O

Objection to dischargeabilityAn objection claiming that a particular debt should not be discharged.

Objection to exemptionsAn objection to a debtor’s claim that particular property is protected from administration or liquidation.

P

Party in interestA person or organization with a legally recognized interest that permits participation in a bankruptcy matter.

PlanA debtor’s proposal describing how claims will be treated and paid over a defined period.

Proof of claimA written filing through which a creditor documents the basis and amount of a claim.

PreferenceA payment or transfer made before filing that may give one creditor more than it would otherwise receive, subject to statutory requirements and defenses.

Priority claimAn unsecured claim given a higher payment ranking by the Bankruptcy Code.

Property of the estateProperty interests included in the bankruptcy estate when the case begins, as determined by applicable law.

R

Reaffirmation agreementAn agreement, commonly in a Chapter 7 case, to remain personally responsible for a debt that might otherwise be discharged.

S

SchedulesDetailed forms listing a debtor’s assets, debts, income, expenses, and other required financial information.

Secured creditorA creditor whose claim is supported by a lien or other interest in specific property.

Secured debtDebt backed by collateral, such as a mortgage, vehicle lien, or other security interest.

Statement of financial affairsA required filing containing information about income, transfers, lawsuits, and other financial history.

341 meetingThe meeting at which a debtor answers questions under oath from the trustee and participating creditors. It is also called the meeting of creditors.

T

TransferA method of disposing of, conveying, or parting with an interest in property.

TrusteeThe person appointed to administer a bankruptcy estate and carry out duties established by the applicable chapter and court rules.

U

U.S. trusteeA Justice Department official responsible for supervising many aspects of bankruptcy administration, including trustees, plans, and case compliance.

Undersecured claimA secured claim for which the collateral is worth less than the total debt.

Unliquidated claimA claim whose amount has not yet been fixed or determined.

Unsecured claimA claim not supported by a lien or other specific collateral interest.

V

Voluntary transferA transfer of property made with the owner’s consent.