| Adversary
Proceeding |
A lawsuit filed in the bankruptcy
court which is related to the debtor's bankruptcy case.
Examples are complaints to determine the dischargeability
of a debt and complaints to determine the extent and
validity of liens. |
| Arrears |
The amount that is unpaid and
overdue as of the date the bankruptcy case is filed.
The word "arrears" is usually used when referring to
back child support, back alimony owed, or the amount
that is past due on mortgage payments (including interest
and penalties). |
| Assets |
Personal possessions of value, including
cash, real estate, vehicles and investments. |
| Automatic
Stay |
An injunction that stops lawsuits, foreclosure,
garnishments and all collection activity against the
debtor the exact date a bankruptcy petition is filed
Bankruptcy: By filing in federal bankruptcy court, an
individual or individuals can restructure or relieve
themselves of debts and liabilities. |
| Avoidance |
The Bankruptcy Code permits the debtor to
eliminate (avoid) some kinds of liens that interfere
with (or impair) an exemption claimed in the bankruptcy.
Most judgment liens that have attached to the debtor's
home can be avoided if the total of the liens (mortgages,
judgment liens and statutory liens) is greater than the
value of the property in which the exemption is claimed.
This is sometimes called "lien stripping." |
| Avoidance
Powers |
Rights given to the bankruptcy trustee or
the debtor in possession to recover certain transfers
of property such as preferences or fraudulent transfers
or to void liens created before the commencement of a
bankruptcy case. |
| Bankruptcy
Code |
Title 11 of the United States Code governs
bankruptcy proceedings. Bankruptcy is a matter of federal
law and is, with the exception of exemptions, the same
in every state. When federal bankruptcy law conflicts
with state law, federal law controls. |
| Bankruptcy
Estate |
The estate is all of the legal and equitable
interests of the debtor as of the commencement of the
case. From the estate, an individual debtor can claim
certain property exempt; the balance of the estate is
liquidated in a Chapter 7 to pay the administrative costs
of the proceeding and the claims of creditors according
to their priority. |
| Chapter
7 |
Chapter 7 bankruptcy is a process provided
for under United States federal law by which you are
entitled to a fresh start. Chapter 7 may eliminate most
kinds of unsecured debt. It is usually designed for someone
with no assets. |
| Chapter
11 |
A reorganization proceeding in which the
debtor may continue in business or in possession of its
property as a fiduciary. A confirmed Chapter 11 plan
provides for the manner in which the claims of creditors
will be paid in whole or in part by the debtor. |
| Chapter
12 |
A simplified reorganization plan for family
farmers whose debts fall within certain limits. Chapter
12 was not renewed when it expired this session of Congress. |
| Chapter
13 |
Chapter 13 is an interest-free debt repayment
plan through which you consolidate your debts and make
a payment on your debt over a 3 to 5 year period. This
type of bankruptcy is often used to save a house from
foreclosure or to save a car from repossession. |
| Collateral |
The property that is subject
to a lien as 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. |
| Confirmation |
The process by which the Bankruptcy
Judge approves a plan of reorganization of a debtor in
a Chapter 13 case. |
| Conversion |
Cases under the Bankruptcy Code
may be converted from one chapter to another chapter;
for example, a Chapter 7 case may be converted to a case
under Chapter 13 if the debtor is eligible for Chapter
13. Even though the Chapter of the Code that governs
it changes, it remains the same case as originally filed. |
| Credit
Report |
A report outlining an individuals
credit history, public records and credit worthiness. |
| Creditor |
Any person or business that a
debtor owes money to. |
| Debtor |
Any person who is liable to another
for money. |
| Default |
Failure to make payments within
a specified period of time governed by the original contract. |
| Delinquency |
Failure to make payments when
payments are due. For most mortgages, payments are due
on the first day of the month. Even though they may not
charge a "late fee" for a number of days, the payment
is still considered to be late and the loan delinquent.
When a loan payment is more than 30 days late, most lenders
report the late payment to one or more of the credit
bureaus. |
| Denial
of Discharge |
Penalty for debtor misconduct
with respect to the bankruptcy case or creditors as a
whole. The grounds on which the debtor's discharge may
be denied are found in 11 U.S.C. 727. When the debtor's
discharge is denied, the debts that could have been discharged
in that case cannot be discharged in any subsequent bankruptcy.
The administration of the case, the liquidation of assets
and the recovery of avoidable transfers, continues for
the benefit of creditors. |
| Dischargeable |
Debts that can be eliminated
in bankruptcy. Certain debts are not dischargeable; that
it, they may not be discharged through bankruptcy or
may only be discharged through Chapter 13. Family support
and criminal restitution are examples of debts which
cannot be discharged. Debts incurred by fraud can only
be discharged in Chapter 13. |
| Discharge |
The legal term for the order
eliminating a debt through a bankruptcy case. When a
debt is discharged, it is no longer legally enforceable
against the debtor, though any lien that secures the
debt may survive the bankruptcy case. |
| Equity |
A homeowner's financial interest
in a property. Equity is the difference between the value
of the property and the amount still owed on its mortgage
and other liens. |
| Exempt |
Property that is exempt is removed
from the bankruptcy estate and is not available to pay
the claims of creditors. The debtor selects the property
to be exempted from the statutory lists of exemptions
available under the law of his state. The debtor gets
to keep exempt property for use in making a fresh start
after bankruptcy. |
| Exemptions |
Exemptions are the lists of the
kinds and values of property that is legally beyond the
reach of creditors or the bankruptcy trustee. What property
may be exempted is determined by state and federal statutes,
and varies from state to state. |
| Fiduciary |
One who is entrusted with duties
on behalf of another. The law requires the highest level
of good faith, loyalty and diligence of a fiduciary,
higher than the common duty of care that we all owe one
another. The debtor in possession in a Chapter 11 is
a fiduciary for the creditors, owing loyalty to the creditors
and not the shareholders of the debtor. |
| Fair
Market Value |
The highest price that a buyer,
willing but not compelled to buy, would pay, and the
lowest a seller, willing but not compelled to sell, would
accept. Foreclosure: The legal process by which a borrower
in default under a mortgage is deprived of his or her
interest in the mortgaged property. This usually involves
a forced sale of the property at public auction with
the proceeds of the sale being applied to the mortgage
debt. |
| Garnishment |
A court-ordered method of debt collection in which
a portion of a person's salary is paid to a creditor.
The process by which a judgment creditor seizes money,
which is owed to his judgment debtor, from a third
party known as a garnishee.
|
| General
Unsecured Claim |
Creditor's claim without a priority for payment for
which the creditor holds no security (or collateral).
If the available funds in the estate extend to payment
of unsecured claims, the claims are paid in proportion
to the size of the claim relative to the total of claims
in the class of unsecured claims.
|
| Lien |
A charge upon real or personal
property for the satisfaction of a debt or discharge
of an obligation. Examples would include: judgments,
taxes, mortgages, deeds of trust, etc. |
| Liquidated |
A debt that is for a known number
of dollars is liquidated. An unliquidated debt is one
where the debtor has liability, but the exact monetary
measure of that liability is unknown. Tort claims are
usually unliquidated until a trial fixes the amount of
the liability of the tort feasor. |
| Non-dischargable |
A Chapter 7 case in which the
trustee determines, after the applicable exemptions,
that there are no significant assets to liquidate. The
debtor retains all of their real and personal property. |
| No
Asset Case |
A debt that cannot be eliminated
in bankruptcy. Non dischargeable debts remain legally
enforceable despite the bankruptcy discharge. |
| 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. A mortgage
is perfected by recording it with the county recorder;
a lien in personal property is perfected by filing a
financing statement with the secretary of state. An unperfected
lien is valid between the debtor and the secured creditor,
but may be behind liens created later in time, but perfected
earlier than the lien in question. An unperfected lien
can be avoided by the trustee. |
| Personal
Property |
Property that is not real property
or affixed to real property, such as cars, stock, furniture,
etc. |
| Petition |
The document that initiates a
bankruptcy case. The filing of the petition constitutes
an order for relief and institutes the automatic stay.
Events are frequently described as "prepetition", happening
before the bankruptcy petition was filed, and "post petition",
after the bankruptcy. |
| Preference |
A transfer to a creditor in payment
of an existing debt made within certain time periods
before the commencement of the case. Preferences may
be recovered by the trustee for the benefit of all creditors
of the estate. |
| Pre-petition |
Claims or events arising before
the commencement of the bankruptcy case, that is, before
the filing of the bankruptcy petition. Generally only
pre petition debts may be discharged in a bankruptcy
proceeding. |
| Priority |
The Bankruptcy Code establishes
the order in which claims are paid from the bankruptcy
estate. All claims in a higher priority must be paid
in full before claims with a lower priority receive anything.
All claims with the same priority share pro rata. Claims
are paid in this order: 1) costs of administration 2)
priority claims and 3) general unsecured claims. Secured
claims are paid from the proceeds of liquidating the
collateral which secured the claim. |
| Priority
Claims |
Certain debts, such as unpaid
wages, spousal or child support, and taxes are elevated
in the payment hierarchy under the Code. Priority claims
must be paid in full before general unsecured claims
are paid. |
| Proof
of Claim |
Document a creditor files showing
how much money is owed to them by the debtor, together
with all supporting evidence of such claim. There is
usually a deadline in which to file a Proof of Claim. |
| Property
of the Estate |
The property that is not exempt
and belongs to the bankruptcy estate. Property of the
estate is usually sold by the trustee and the claims
of creditors paid from the proceeds. |
| Reaffirm |
The debtor can choose to reaffirm
debts that would otherwise be discharged by the bankruptcy.
Generally, when a debt is reaffirmed, the parties to
the reaffirmed debt have the same rights and liabilities
that each had prior to the bankruptcy filing: the debtor
is obligated to pay and the creditor can sue or repossess
if the debtor doesn't pay. |
| Relief
from Stay |
A creditor can ask the judge
to lift the automatic stay and permit some action against
the debtor or the property of the estate. If the motion
is granted, the moving party (but no one else) is free
to take whatever action the court permits. Relief can
be absolute, for example, permitting the creditor to
foreclose on property, or limited, as for example, allowing
the recordation of a notice of default. |
| Repossession |
Once in default, as defined by the creditor in the
security agreement, occurs, the creditor can: repossess
the collateral by self-help (depending on state law)
or with the aid of a court order, dispose of the collateral
by public or private foreclosure sale, retain the collateral
in satisfaction of the debt, terminate the debtor's
right of redemption, add the costs of repossession
and foreclosure to the unpaid balance of the debt,
and pursue the debtor for any remaining unpaid balance
or deficiency.
|
| Schedules |
The debtor must file the required
lists of assets and liabilities to commence a bankruptcy
case, collectively called the schedules. |
| Secured
Debt |
A secured debt is one where the
creditor takes personal or real property as collateral.
A creditor whose debt is secured has a right to take
property to satisfy a debt in default. For example, most
homes are burdened by a secured debt in the form of a
mortgage. This means that the lender has the right to
take the home if the borrower fails to make payments
on the loan. |
| Trustee |
A private individual or corporation
appointed in bankruptcy filings who represents the interests
of the creditors in the bankruptcy estate. |
| Unsecured |
A claim or debt is unsecured
if there is no collateral that is security for the debt.
Most consumer debts are unsecured. |
| Unsecured
Debt |
A debt is unsecured if you have
simply promised to pay a creditor a sum of money at a
particular time, and you have not pledged any real or
personal property as collateral for that debt. Generally,
credit cards and medical bills are unsecured debts. |
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