Banruptcy Glossary of Terms

A

• Absolute Priority-The order of payment to different types of creditors dictated by the Bankruptcy Code. Claims of higher priority are to be paid off fully before starting to pay off the debt to lower priority creditors.

• Acceleration Clause- If the debtor default it is the creditor’s right to demand the immediate payment of the entire amount owed.

• Adequate Protection-The right of a creditor to be guaranteed a relatively constant interest on the debtor’s property during bankruptcy proceedings.

• Adjustable Rate Mortgage- A mortgage with variable monthly payments.

• Administrative Claim-Debt that the court allows the debtor to bring upon himself after the filing of bankruptcy in order to pay for the whole legal process involved with bankruptcy.

• Adversary Proceeding- A lawsuit that involves a bankruptcy case.

• Affidavit- A written statement taken under oath in the presence of an authorized official and with witnesses.

• Allowed Claim- A creditor’s claim that has been approved by the court.

• Answer- The defendant’s written defenses against the plaintiff’s accusations and claims.

• Arm’s Length- Disputes between parties that are unrelated (not relatives or spouses). Each party has relatively equal power in court proceedings.

• Arrangement-Agreements on how the bankrupt individual or company is to pay off the debt or run its operations in the future.

• Asset- All and any property owned by the debtor that could benefit the creditor. (Ex. gold, currency, houses, land, etc.).

• Assume- When one debtor agrees to take over a contractual agreement, such as a lease, mortgage presented in a legal document (lease, contract, and other official papers).

• Automatic Stay- Upon the filing of bankruptcy by a debtor, the court will issue an “automatic stay”.  The automatic stay will require all creditors to stop collections immediately.

• Automatic Discharge- Applies to first time bankruptcy claims in which the creditor is not opposed to the creditor’s discharge. The Debtor should be compliant with counseling requests and should then be discharged after 9 month’s from the filing of the bankruptcy.

• Avoidance-This allows the debtor to disregard some liens. This is highly relevant in cases in which liens against the debtor’s home is greater than the actual value of the property.

• Avoidance Power- The court can get rid of some of the debtor’s obligations in order to avoid disputes over which creditor should be given preferential treatment in payment.

B

• Bankruptcy- A legal process by which debts are “discharged”.

• Bankruptcy Act of 1898-The major bankruptcy authority until 1978. It was used mainly for the liquidation of companies.

• Bankruptcy Administrator- A judicial officer who is responsible for serving as the supervisor to bankruptcy related issues and administration.

• Bankruptcy Amendments of 1984- It amended the Reform act of 1978. It limited the jurisdiction of the bankruptcy court and set restrictions on bankrupt company’s ability to end labor contracts.

• Bankruptcy Code- This is a commonly used name for the Federal Bankruptcy law (Title 11 of the United States Code).

• Bankruptcy Court- A specific unit of the district court that deals with bankruptcy cases

• Bankruptcy Estate- All property assets of the bankrupt debtor.

• Bankruptcy Judge- Judge in the district courts who is responsible for handling bankruptcy cases.

• Bankruptcy Reform Act of 1978- Takes the place of Bankruptcy Act of 1898. It increased the jurisdiction of the bankruptcy court, allowed spouses to file bankruptcy together as one, replaced chapters 10-12 of the old code with chapter 11, allowed for direct appeal to the US courts for appeals, and gave people in debt more options and relief.

• Bankruptcy Petition- A document filed by either the debtor or creditor in order to present the financial status of the debtor. (The manner in which a bankruptcy case is started).

• Ballot Date- The final date and time that the reorganization plan must be voted and agreed upon.

• Bankruptcy Reform Act of 1994-Makes the bankruptcy process faster, standardizes fees, promotes reorganizing debt rather than liquidating, helps creditors reclaim their lent money, creates the national bankruptcy commission.

• Bankruptcy Tax Act of 1980- Specifies how tax issues are to be treated in bankruptcy cases.

• Bar Date- The final date in which the creditor is still allowed the opportunity to file a claim against the debtor.

C

• Cash Collateral- A debtor cash on hand, that creditors can hold liens on.

• Chapter- Parts of the Bankruptcy code. Chapter 7, 9, 11, 12, and thirteen involve liquidation, municipality bankruptcy, business reorganization, family farm debt adjustment, and personal reorganization.

• Chapter 7- This Chapter of the Bankruptcy Code allows for the organized liquidation of the debtor’s assets

• Chapter 11-Describes the proceedings for the bankruptcy of a business which usually involves a plan of reorganization presented by the debtor in order to pay off debt in the future while keeping the business operational.

• Chapter 13-Describes proceedings of debt adjustment for a person with normal income. The debtor is usually allowed to keep their property and is usually required to pay the debt off within three to five years.

• Class- The different types of claims that can be made against a debtor.

• Claim- When the creditor asserts his right to the debtor’s owed money or property.

• Complaint-The document that begins a lawsuit by informing both the court and the accused of the need for some kind of reimbursement/repayment from the debtor to the creditor.

• Confirmation- The approval of a payment plan by a bankruptcy judge.

• Consumer Debtor- A person who has debt from excessive personal spending

• Consumer Debts- A Debt from personal expenditures rather than from business related purposes.

• Contested Matter- Disputed matters not described within adversary proceedings.

• Contingent Claim-A claim that is owed only under certain circumstances.

• Conversion- The act of changing from one chapter to another.

• Core Proceedings- Proceedings that are under the jurisdiction of the bankruptcy court. They are proceedings that are necessary for the administration of bankruptcy cases.

• Cram-down- A reorganization plan that gets confirmed even though some creditors do not approve of the plan.

• Creditor- Person who lends money. Person who the debtor owes money to.

• Credit Counseling-before filing under any chapter the debtor is required to speak with a budget or credit counseling agency. The debtor must also take a course in personal financial management.

• Current monthly income-The average income earned over the last 6 months, not including social security.

• Creditor’s meeting-A meeting at which the debtor is questioned under oath about their financial issues and status.

• Collateral- Property that can back up a loan under unfortunate circumstances.

• Cosigner- Person who voluntarily signs to serve as back up if another person should fail to pay back their loan.

• Credit report- This is a document that outlines your credit history. It will show data such as your payment history and account status. Everyone is entitled to one report per year from the following companies: Equifax, Experian, and Transunion.

• Credit Bureau- A Company that collects and reports information about consumer credit.

• Credit Score (300-850pts.)- A score that helps lender’s get an idea of the risk involved by lending to certain borrower’s. High is good and low is bad.

D

• Debtor- A person that owes money to a Creditor.

• Debt- The amount owed by a debtor.

• Default- When the debtor fails to follow his contractual agreements.

• Discharge From bankruptcy- Event in which the debtor is freed from his debt.

• Dividend- Shares of a bankrupt debtor’s estate that are distributed as payment to creditors.

• Dischargeable- The ability to be legally freed from debt.

• Debtor-In-Possession- A debtor that is permitted to keep managing his operations.

• Delinquency- A failure to make payments on time.

• Denial of Discharge- As a consequence of the debtor’s lack of cooperation in the bankruptcy case they may be denied a discharge. This means that debtor will continue to assume responsibility for paying their debt even if they try to file bankruptcy again. Rulings will go in the creditor’s favor from then on.

• Disclosure Statement-A document issued to creditor’s during a Chapter 11 when they are asked to vote on the debtor’s reorganization plan.

• Dismissal- When a bankruptcy court turns down a case because it is unsolvable or because there isn’t sufficient cause to go through with the case.

• Distressed- Describes companies that are near bankruptcy.

• Docket- The schedule where the court clerk keeps a record of the proceedings and filings of the court.

E

• Effective date- The date on which the reorganization plan begins to take effect.

• Equitable subordination- If a creditor/lender is found guilty of some sort of misconduct then the creditor’s claim may be moved to a lower priority.

• Equity-The difference between the value of the debtor’s property and the amount still owed on liens.

• Examiner- Person who investigates the debtor’s situation and reports to the bankruptcy court.

• Estate- Refers to all the property that a person owns.

• Exempt- This is property that is not to be used to pay creditor’s claims. This property remains with the debtor in order to help the debtor get started on the right track after bankruptcy.

• Encumbrance- A claim on property that can lessen its value.

F

• Fair Market Value- The value of property based on a comparison and or analysis or similar property that has been purchased and sold.

• Fee Examiner-Supervises the paying of fees to professionals during bankruptcy cases.

• Fiduciary- A person who is given the responsibility of performing duties for another person.

• Filing fees- There is a filing fee for filing bankruptcy.  This fee will vary among the states.

• First Meeting of Creditors- This is a mandatory meeting held within the first month of filing bankruptcy, in which both the debtor and creditors must attend.

• Fraudulent Conveyance- A transfer of assets when entering bankruptcy so as to hide assets from creditor’s who may wish to claim them.

• Fraudulent Transfer-When the debtor’s property is transferred to lenders at value less than its true worth.

• Fresh Start- Refers to a debtor’s cleared financial status after having left the bankruptcy process.

G

• Garnishment- Process by which a third party turns over the debtor’s property. Ex. When the court orders that the money you make will go directly to the lender.

• Guarantor-Someone who takes over the responsibility of another person’s debt.

H

• Hypothec- Certain rights on a piece of property given to a creditor as a result of fulfilling an obligation.

I

• Inspector- An experienced individual, hired by creditors, that is supposed to supervise and assist the trustee’s financial decisions.

• Insolvency- A term used to represent bankruptcy. Describes a situation in which the debtor is unable to make payments or has more liabilities than assets.

• Interim Receiver- A person that the court appoints to ensure the safety/security of assets.

• Impairment- Term used to describe a type of claim holder whose contractual rights have been changed as a result of the reorganization plan.

• Involuntary Bankruptcy- A type of bankruptcy that requires a minimum of three creditors, holding a total of at least $5,000 in unsecured claims against the debtor.

J

• Joint Administration- A situation approved by the court in which multiple cases can be administered together.

• Joint Petition- A single bankruptcy petition filed by Husband and Wife.

L

• Lien- A form of payment security in which the lender holds the rights to the debtor’s property in the event that the debtor is unable to follow the contractual agreements of a loan.

• Liquidation- When the debtor’s assets are sold off in order to repay the creditors.

• Liquidated claim- When a creditor makes a claim for a specific sum of money.

• Liquidating reorganization- When a company is liquidated through the sale of assets during a Chapter 11 case.

• Liquidation value- The total value of company’s assets if they were to be sold individually.

• Liability- A financial obligation.

M

• Means Test- Determines who is eligible for filing Chapter 7.

• Medical bankruptcy-Bankruptcy that results from medical expenses.

• Motion to lift the automatic stay- Request in which the creditor asks to make claims to parts of the debtor’s property that are protected under automatic stay.

N

• No Asset Case- A debt that can’t be discharged through bankruptcy.

• Non-Dischargeable Debt- Debt that remains even after a bankruptcy discharge.

O

• Offences- Violations punishable by law.

• Orderly Payment of Debts- Procedure for allowing a debtor to pay off debt.

• Omnibus Hearing- A hearing held by the court in which a wide variety of issues relating to bankruptcy case are discussed.

P

• Public Access to Court Electronic Records- Court service available to the public that provides case filing information.

• Petition- A legal document that starts a bankruptcy case.

• Plan of Reorganization-Document made by the debtor that outlines a plan on how to pay back creditors.

• Property of the Estate- All non- exempt property that belongs to the bankruptcy estate.  This property is sold by the trustee and creditors are paid from the proceeds.

• Post-Petition- All those matters occurring after the filing of the petition.

• Preference- A payment made by the debtor to a creditor prior to the filing of a petition. 

• Pre-Petition- All that occurs before the filing of the Petition.

• Priority Claims- An unsecured claim that is paid before other unsecured claims.  This refers to the order that unsecured claims are paid.

• Proof of Claim- A written statement by a creditor which describes why the debtor owes that creditor.

• Property of the Estate- All money, goods, land, real or personal of the debtor before the filing of the Petition.

• Proposal- A formal written offer or agreement to a creditor to negotiate or settle a debt owed. 

R

• Receiver- A person who has been appointed by the bankruptcy court or by agreement to protect or collect the property of the debtor that is part of the estate.  The receiver will usually take and sell the property.

• Reaffirm- The debtor can choose to keep a dischargeable property after the bankruptcy by agreeing to the original debt.  When a debt is reaffirmed, all parties have the same rights and liabilities as before the bankruptcy.  If the reaffirmed debt is not paid the creditor can once again sue or reposes the property.

• Relief from Stay- A creditor can ask a judge to lift (remove) the automatic stay and allow the creditor to proceed against the debtor or his/her estate.

• Reorganization- Where a company agrees with creditors to a plan of reorganization for payment of debts and confirmed by the court.

S

• Schedules- A list provided by the debtor of all his/her assets and liabilities filed with the bankruptcy court.

• Secured Creditors- A creditor having a claim against a debtor that has a right to take or sell certain property of the debtor.

• Secured Debt- Those debts that you owe to a creditor who has certain collateral (property) of yours which secures your promise to pay back the obligation. Home mortgages, auto loans, tax liens. 

• Statement of Financial Affairs- A question and answer form the debtor must answer, in writing.  Questions involving your sources of income, property, judgments against you, etc.

• Straight Bankruptcy- An informal term for Chapter 7 bankruptcy.

T

• Transfer- The manner in which a debtor disposes of property.

• Trustee- The person designated to oversee and administer your bankruptcy case.

U

• Under-secured Claim- A debt that is secured by property that has a market value of less than what it is worth.

• Unsecured Debt- All those debts the creditor does not have a piece of property to claim or take back.  Credit cards, hospital bills, personal signature loans, phone bill, attorney bills, subscriptions, etc.

Published by Real Estate Florida law attorney Dania Fernandez • To schedule a no charge, no obligation consultation about any Real Estate situation contact Dania Fernandez now at FloridaLawAttorney.com