This page contains many terms you may need to know to better understand your bankruptcy case.
An officer of the Bankruptcy Court, specifically serving in the judicial districts of Alabama and North Carolina, who 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. Most other districts use the term “Trustee” for the office that manages these functions.
A lawsuit arising in or related to a bankruptcy case that is started by filing a complaint with the court.
A contract or agreement to continue performing duties under a contract or lease, i.e. taking over car payments or occupying and paying rent on a leased property for the duration of the original lease.
Automatic stay is one of the most important parts of a bankruptcy proceeding. It is an injunction that immediately and automatically stops lawsuits, foreclosures, garnishments, and all collection activity against a debtor the moment a bankruptcy petition is filed with the Bankruptcy Court.
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). Chapter 7 and Chapter 13 are the most common types of Bankruptcy cases filed for individuals or businesses.
The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal law that establishes the guidelines and procedures for filing and managing bankruptcy cases.
United States bankruptcy courts are courts created under Article I of the United States Constitution. The current system of bankruptcy courts was created by the United States Congress in 1978, effective April 1, 1984. United States bankruptcy courts function as units of the district courts and have subject-matter jurisdiction over bankruptcy cases. The federal district courts have original and exclusive jurisdiction over all cases arising under the bankruptcy code, (see 28 U.S.C. § 1334(a)), and bankruptcy cases cannot be filed in state court. Each of the 94 federal judicial districts handles bankruptcy matters.
When you file for bankruptcy, all of your property becomes part of an estate that is managed by the bankruptcy trustee.
A U.S. bankruptcy judge is a judicial officer of the U.S. district court who is appointed by the majority of judges of the U.S. court of appeals to exercise jurisdiction over bankruptcy matters. The number of bankruptcy judges is determined by Congress. Bankruptcy judges are appointed for 14-year terms. The bankruptcy judge ultimately controls the outcome of any bankruptcy filing.
This is a document filed by the debtor (usually by an attorney representing that debtor), in a voluntary case of bankruptcy, or by creditors (in an involuntary case of bankruptcy). When you file bankruptcy, you must disclose all of your financial information on official bankruptcy forms; the petition is just one of many of those forms.
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.
The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).
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.
The chapter of the Bankruptcy Code providing for adjustment of debts of a "family farmer," or a "family fisherman" as those terms are defined in the Bankruptcy Code.
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.
The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.
A creditor's assertion of a right to payment from the debtor or the debtor's property. Creditors must file a claim to be included in bankruptcy court notifications and ultimately to receive partial or full payment of the debt owed to them.
In the case of a chapter 11 bankruptcy, approval of a reorganization plan or liquidation of the debtors assets. In the case of chapter 13 (or 12), approval of a payment plan submitted by a debtor.
A debtor whose debts are primarily consumer debts, such as credit cards, revolving consumer accounts, auto loans, etc.
Consumer debt is personal debt that is owed due to purchasing goods or services that are used for individual or household consumption. This includes credit card debt, payday loans, revolving charge accounts, retail store cards, auto loans, student loans, and mortgages. Consumer debt does not include other debts that are used for investments in running a business or debt incurred through government operations (i.e. taxes).
Those matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in Rule 7001.
A claim that may be owed by the debtor under certain circumstances. This includes, for example, a cosigner on another person’s loan, and that person doesn’t fulfill their obligation to pay, so the cosigner is required to pay.
Creditor is a person or organization who claims the debtor owes them money.
In individual bankruptcy cases, credit counseling is a phone, online or in-person course a debtor must attend prior to filing under any chapter of the Bankruptcy Code. It also refers to the instruction course in financial management that a debtor must attend prior to the discharge of their chapter 7 or chapter 13 case.
see 341 meeting
current monthly income
Current monthly income for a debtor in a bankruptcy case is the average income received by the debtor over six calendar months prior to filing a bankruptcy case. This includes income from a debtor’s spouse or other nondebtor household members. There are some exemptions, including social security income and certain other payments made because the debtor is a victim of certain crimes.
A person who files a petition under the Bankruptcy Code for relief from debt.
An individual (or business) against whom a lawsuit is filed.
Release from liability for certain dischargeable debt as set forth in the Bankruptcy Code. The discharge prevents creditors from communicating with the debtor about the debt, including letters, personal contact and phone calls. The creditor is not allowed to take any action against the debtor to collect the debt, once discharged, and the debtor is no longer legally required to pay the debt.
The Bankruptcy Code allows certain debt to be discharged, where the debtor no longer has a liability to pay (essentially eliminating that debt).
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 is the net value of a property that remains after creditors’ interests (including liens) are taken into account. For example, if a house valued at $250,000 has a mortgage with a $200,000 balance, the equity in that property is $50,000.
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.)
exemptions, exempt property
In a bankruptcy case, the individual debtor is permitted by the Bankruptcy Code to keep certain unsecured property. Two common examples are: some or all “tools of the trade” used by a debtor to make a living (i.e. auto tools for a mechanic); and the equity in a debtor’s primary residence (called the homestead exemption). Other non-exempt property will be included in the bankruptcy to be sold to pay some of the debtor’s debt.
insider (of individual debtor)
Any relative or close friend 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.
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.
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.)
A bankruptcy petition filed by a debtor and their spouse, typically a husband and wife filing together.
A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt. The purpose of a lien is to ensure the debtor repays the debt without selling the property. Common types of liens are a mortgage on a home, or an auto loan company holding the title to a vehicle until the debt is paid, a tax lien by the Internal Revenue Service, or a construction lien by a contractor who completed work on a home but was not paid
The process of selling a debtor’s non-exempt property for the purpose of paying all or part of a debtor’s debt to creditors.
A bankruptcy claim is an amount a creditor hopes to recover from a debtor’s bankruptcy funds to satisfy the debt. The claim is considered “unliquidated” if the creditor doesn’t know how much the debtor will eventually owe. A liquidated claim is when the debt can be easily calculated to determine the amount owed.
The means test determines whether a debtor is eligible to file for debt forgiveness under chapter 7 of the Bankruptcy Code. Essentially, it’s a calculation to determine whether you have enough disposable income to repay your debts. If a debtor has too much income, he or she may not be able to file chapter 7 bankruptcy. In addition, if a debtor has certain assets they wish to keep, such as a house or expensive car, they may choose (or be required) to file chapter 13 bankruptcy and follow a debt payment plan.
motion to lift the automatic stay
Sometimes, a creditor makes a motion (request) to the bankruptcy court to allow them to pursue collection or take other action against a debtor, such as filing suit, that would otherwise be prohibited by the automatic stay.
Debtors who file for relief under chapter 7 of the Bankruptcy Code rarely relinquish assets to be sold to repay the creditors in the case. This is known as a “no-asset” case, since the debtor has no non-exempt assets to be sold.
Not all debt can be eliminated by filing bankruptcy. Examples of non-dischargeable debt include a home mortgage; certain taxes (i.e. some federal, state and local income taxes); arrears in a child support or alimony case; debt for restitution or a fine imposed as part of a sentence in a criminal conviction; and most student loans.
objection to dischargeability
A creditor or trustee in a bankruptcy case may object to allowing a debt to be discharged, often due to the debt being incurred by the debtor under false pretenses or fraud.
objection to exemptions
A creditor or trustee in a bankruptcy case may object to a debtor claiming certain property as an exemption from the case, arguing that the property should be included in the case and sold by the trustee to pay all or part of the debt in the case.
party in interest
Any party who has legal standing to be heard by the court in a bankruptcy case. For example, a debtor, the case trustee, creditors, and the U.S. trustee or bankruptcy administrator are parties in interest for most matters.
A business not authorized to practice law that prepares bankruptcy petitions.
Usually prepared by a bankruptcy attorney with input from a debtor, the “plan” is a debtor's detailed description of how the debtor proposes to pay creditors' claims over a fixed period of time in a chapter 13 bankruptcy case.
A person or business that files a formal complaint in a court.
A transfer of the debtor's property made after the commencement of the case. This is allowed only with the approval of the trustee or bankruptcy court.
People who are considering filing bankruptcy must determine how to best protect their assets from creditors before filing. One example would be converting a nonexempt asset into an exempt asset, to avoid the asset being included in the bankruptcy estate and sold to pay debts. This is usually discouraged, as the court will rarely allow asset transfers for changes to ownership within 12 months of filing for bankruptcy. Consult an attorney to determine ways to legally protect your assets prior to filing bankruptcy.
preference or preferential debt payment
The bankruptcy court will scrutinize most financial activity within the previous 12 months of filing a bankruptcy case. An example of preferential debt payment: if a debtor makes a payment to a creditor in the 90-day period before filing bankruptcy that would be more than the creditor would receive in the debtor’s chapter 7 case.
In most bankruptcy cases, the debtor will not have enough money to pay all unsecured debt claims in full. Some obligations are considered more important than others. These debts receive special treatment and must be paid. For example, many taxes and unpaid back child support or alimony accrued prior to filing must be paid before other unsecured consumer debt.
Unsecured debt in a bankruptcy case is classified as priority if it’s a type of debt that may not be discharged as part of the case. Priority refers to the order in which unsecured claims are paid. For example, many taxes and unpaid back child support or alimony accrued prior to filing must be paid before other unsecured consumer debt.
proof of claim
Proof of claim is a written statement (on an official form) and documentation filed by a creditor that describes the reason the creditor is owed money by the debtor.
property of the estate
All legal or equitable interests of the debtor in property as of the commencement of the case.
In a bankruptcy case, a debtor may be able to reaffirm a debt instead of discharging it in bankruptcy, usually for the purpose of keeping collateral. An example would be a car with an outstanding loan balance that would be subject to repossession, but the debtor wishes to keep the car. They would enter into a reaffirmation agreement to continue making payments on the car and keep it.
Debtors must file detailed lists of the debtor’s assets, liabilities, and other financial information as part of their bankruptcy case. Schedules must be filed on official forms, and are usually handled by your bankruptcy lawyer.
A creditor owed money as a party to a secured asset, such as a vehicle or real estate. A secured creditor has the right to repossess a car or foreclose on real estate to pay some or all of the debt incurred for the asset (prior to filing) and may get permission from the court to do so after filing.
Debt where the creditor has the right to pursue specific collateral upon default. Usually debt backed by a mortgage, collateral (i.e. a vehicle), or other lien. Home mortgages, auto loans and tax liens are examples of secured debt.
small business case
A special type of chapter 11 case in which the debtor is subject to more oversight by the U.S. trustee than other chapter 11 debtors.
statement of financial affairs
An official form that the debtor must complete that answers a series of questions in writing concerning sources of income, transfers of property, lawsuits by creditors, etc.
statement of intention
Made by a chapter 7 debtor, this is a declaration concerning plans for dealing with consumer debts that are secured by property of the estate.
Combining the assets and liabilities of two or more related debtors into a single pool to pay creditors.
Section 341 of the Bankruptcy Code requires this meeting of the creditors. The debtor is questioned by the trustee about his or her financial affairs, and about specific items in the case. Creditors are allowed to attend and ask the debtor questions, but that rarely happens. Also known as the creditors’ meeting and a first meeting of creditors.
A debtor may dispose of his or her property with a transfer. Usually scrutinized closely by the court, especially any transfers occurring within 12 months preceding the bankruptcy case filing.
The representative of the court who supervises the debtor’s estate in a bankruptcy proceeding. Appointed in all chapter 7, chapter 12, and chapter 13 cases, this is a private individual or corporation that works under the direct supervision of the U.S. trustee or bankruptcy administrator and under the general supervision of the court. Responsibilities of the trustee include reviewing the debtor’s petition and schedules, liquidation of any of the debtors’ nonexempt assets, and managing payments to creditors. In a chapter 13 case, the trustee oversees the debtor’s plan, receives payments from debtors, and disburses funds to creditors.
An officer of the United States Justice Department who is responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors' committees (in chapter 11 cases); monitoring fee applications; and performing other statutory duties.
A debt secured by property that is worth less than the full amount of the debt.
A claim for which a specific value has not been determined.
A debt that was excluded by a debtor in schedules filed with the court, but should have been included. An unscheduled debt may or may not be discharged, depending on the circumstances.
A claim where a creditor has no special guarantee of payment, where credit was extended based only on the creditor’s evaluation of the debtor’s future ability to pay. Most consumer debt is unsecured.
Transfer (i.e. sale or liquidation) of a debtor's property with the debtor's consent.