Bankruptcy Terms

Adversary Proceeding – A lawsuit that arises from or is related to a bankruptcy case.

Automatic Stay– This is an injunction that occurs at the time that a bankruptcy petition is filed.  It stops lawsuits, foreclosures, garnishments, letters, telephone calls or any other type of collection activity from going forward.

Bankruptcy– A legal proceeding used to address debt problems.

Bankruptcy Court– Part of the Federal court system, it is the court that hears bankruptcy cases and matters related to bankruptcy.

Bankruptcy Estate – All of the property of a debtor, or that the debtor has an interest in at the time of the bankruptcy filing.

Bankruptcy Judge– A Federal judge with decision-making power over bankruptcy cases.

Bankruptcy Petition– The document filed by a debtor to start a bankruptcy case.

Chapter 7– The chapter of the Bankruptcy Code that provides what is commonly known as a “Fresh Start” bankruptcy.

Chapter 13 – The chapter of the Bankruptcy Code that provides what is commonly known as a “Wage Earner” bankruptcy.

Claim– A Creditor’s assertion of a right to payment from the debtor’s estate.

Confirmation– In a Chapter 13 case, this is the Judge’s approval of the payment plan.

Consumer Debtor– A debtor whose debts are primarily consumer in nature.

Consumer Debts– Debts that are incurred for personal needs.

Creditor– an entity to whom a debtor may owe money or that may claim that a debtor owes money.

Credit Counseling – refers to two events in a bankruptcy case:

• Credit Counseling required before filing for bankruptcy
• A Personal Financial Management that is required before a debtor can obtain a discharge in bankruptcy.

Current Monthly Income– A calculation that in fact does not use current monthly income to determine whether or not a debtor must be in a Chapter 13 bankruptcy.  The calculation uses the average monthly income received by a debtor over the six calendar months before commencement of the bankruptcy.

Debtor– A person who files for bankruptcy relief.

Debtor Education – see credit counseling.

Discharge– A release of the debtor from further personal liability for certain dischargeable debts.  The discharge also prevents creditors from continuing lawsuits, foreclosures, garnishments, letters, telephone calls or any other type of collection activity regarding the debts that have been discharged.

Equity– The value of a debtor’s interest in property.

Exempt Property– property of a debtor that is not available to be used (sold) to pay his unsecured creditors.

Fresh Start– A term used to describe a Chapter 7 bankruptcy.   Generally it means that the debtor is free of most if not all of the debts that he had before filing for bankruptcy.

Joint Petition – a bankruptcy petition that is filed by a husband and wife together.

Lien – the right of a secured creditor to hold or sell property of a debtor.

Liquidation – the sale of a debtor’s property where the proceeds of the sale are used for the benefit of his creditors.

Means Test – A procedure used to determine whether a person must be in a Chapter 13 bankruptcy.  If a person “has the means” to pay some of his debt to unsecured creditors but tries to file a Chapter 7 bankruptcy, then their is a presumption under the bankruptcy law that the debtor is attempting to “abuse” the bankrutpcy system.  If the “over means” debtor wants to still file a Chapter 7 bankruptcy, he must show that there is a justifiable reason (known as “special circumstances”) why the debtor should be permitted to file under Chapter 7.

Motion To Life The Automatic Stay– Also known as a “Lift Stay” or a “Motion for Relief”, this is a request by a creditor to allow it to take action against a debtor that would otherwise be prohibited by the Automatic Stay.

No-Asset Case– A Chapter 7 case where the debtor has no assets available to pay his unsecured creditors.   Sometimes this is described as the debtors assets being “exempt from seizure”.

Plan– A Chapter 13 Debtor’s proposal as to how he will pay back his creditors.

Pay Advices – A pay advice is any document that provides written evidence of your income.

Proof Of Claim – A written statement by a creditor that describes the amount owed to it by a debtor.

Property Of The Estate– All property of the debtor that is not exempt.

Reaffirmation Agreement– An agreement by a Chapter 7 debtor to continue paying a dischargeable secured debt.

Secured Creditor– A creditor holding a claim or lien on an asset of a debtor.

Secured Debt– Debt that is generally secured by a mortgage, a pledge of collateral or a lien on property of a debtor, where the creditor has a right to sell the property if payment is not made on the debt.

Schedules– The documents attached to the Petition that set forth the details regarding the assets, debts and other financial information of the debtor.

Statement of Financial Affairs– Also sometimes referred to as a “SOFA”, it consists of a series of questions that the debtor must answer regarding, among other things, his income, transfers of property, lawsuits, business interests.

Trustee – The person appointed to represent the bankruptcy estate.  In a Chapter 7 case, it is his job is to determine if there are any assets of the debtor that may be used to pay ceditors.  In a Chapter 13 case, the trustee oversees the debtor’s plan, receives payments for the benefit of creditors, and disburses those payments to the creditors.

U.S. Trustee– A officer of the U.S. Justice Department responsible for supervising bankruptcy cases.

Unsecured Claim – A debt where there is  no lien on a debt of a debtor.