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Glossary of Bankruptcy Terms
To help you better understand the bankruptcy process, we have provided the following glossary.
Common Bankruptcy Terms

341 Meeting – also called Section 341 Meeting or Meeting of Creditors or Creditors Meeting – The mandatory meeting with the debtor who filed for bankruptcy, the creditors to whom the debtor owes money, and the trustee assigned to the bankruptcy case.  This meeting is usually scheduled to occur approximately 30 days after filing of the bankruptcy petition.  Your attorney will accompany you to this meeting.

Adversary Proceeding – A lawsuit or claim that is filed by a party against another party within a bankruptcy proceeding.

To Assume – To agree to continue performing obligations under a loan, a contract or a lease.

Automatic Stay – A stop placed on all legal proceedings against the Debtor that occurs automatically upon the filing of the bankruptcy petition.  This stay prohibits Creditors from foreclosing on the Debtor’s property, from filing suit in civil court for debts owed, and from calling the Debtor asking to be paid.   Filing multiple petitions in a 12 month period of time, however, will negatively affect the duration and existence of the stay.

Bankruptcy – A legal proceeding, either voluntary or involuntary, whereby (1) a person or business is declared to be unable to repay outstanding debts, and (2) the court is asked to assist in resolving the outstanding debt obligations.  Depending on the chapter of the bankruptcy code under which the bankruptcy petition is filed, the court may require liquidation of the Debtor’s assets, reorganization of assets under a plan that provides for realistic monthly payments, or a combination of both.

Bankruptcy Code – That section of the laws of the United States found at Title 11 of the United States Code that provide for bankruptcy.  Title 11 is broken down into chapters, each dealing with a different aspect of bankruptcy law.

Bankruptcy Court -The court that hears bankruptcy cases.  In the Northern District of California, there are 4 Bankruptcy Courts. One each in San Francisco, Santa Rosa, San Jose and Oakland.

Bankruptcy Estate – The combination of all property that the Debtor owns or has an interest in, at the time of a bankruptcy filing.
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  Glossary of Bankruptcy Terms
Bankruptcy Judge – The judicial officer of the United States district court who presides over federal bankruptcy cases.

Bankruptcy Petition – The official form and all related documentation that are required by the bankruptcy court to be filed in order to initiate a bankruptcy proceeding.

Chapter 7 - The chapter of the Bankruptcy Code that provides for resolving a person’s debt obligations through a process called "liquidation," which involves the sale of the debtor's nonexempt property and the distribution of the proceeds to creditors.

Chapter 9  - The chapter of the Bankruptcy Code that provides for reorganization of municipalities, including cities, towns, villages, counties, taxing districts, municipal utilities, and school districts.

Chapter 11 – The chapter of the Bankruptcy Code that provides for reorganization, usually involving a corporation or partnership, although it is also available to individuals.  It usually requires the debtor to provide a plan of reorganization to keep its business operations and to pay creditors over a specified period of time.

Chapter 12 – The chapter of the Bankruptcy Code that provides for reorganization of the debts of a "family farmer" or a "family fisherman" as these terms are defined in the Bankruptcy Code.

Chapter 13 – The chapter of the Bankruptcy Code that provides for the reorganization of the debts of an individual with regular income.  This chapter permits the debtor to keep his/her property and to pay his/her debts over a specific period of time, usually three to five years.

Claim – An assertion by a creditor that they have a right to payment by the debtor or to the debtor’s property.

Confirmation – The approval by the Bankruptcy judge of a plan of reorganization or liquidation in a chapter 11 bankruptcy case, or payment plan in a chapter 12 or 13 bankruptcy case.

Consumer Debtor – A bankruptcy debtor whose debts are primarily consumer debts.

Consumer Debts – Debts incurred for personal use rather than business use.

Contested Matter – Any matter, other than an objection to a claim, that is disputed among the parties of a bankruptcy case but does not fall within the definition of adversary proceeding contained in Bankruptcy Rule 7001.

Contingent Claim – A claim that is contingent on the occurrence of an event, e.g., where the debtor is a cosigner on another person's loan and that person fails to pay.

Convert/Conversion – The act of changing a bankruptcy case from one chapter type to another, e.g. changing from a Chapter 7 bankruptcy to a Chapter 13 bankruptcy.

Cramdown - Court approval of a reorganization plan against the objections of one of more creditors.

Credit Counseling – The "instructional course in personal financial management" that an individual must complete prior to filing a petition under Chapter 7 or Chapter 13.   At the time of filing the petition, the debtor must submit a declaration attesting to having completed the course.  Generally speaking, the failure to complete the course prior to filing the petition will result in dismissal of the bankruptcy case, but it will stay on the record as a bankruptcy filing and possibly affect future filings.

Creditor – A person or entity to whom the debtor owes money or who claims to be owed money by the debtor.

Creditors Meeting  – See 341 Meeting.

Current Monthly Income - A debtor’s monthly gross income, determined by averaging the total income for the six months prior to filing the bankruptcy petition, including regular contributions to household expenses from nondebtors and income from the debtor's spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A).

Debtor - A person who has filed a petition for relief under the Bankruptcy Code.

Debtor Education - see Credit Counseling

Defendant - An individual (or business) against whom a lawsuit is filed.

Discharge – The release of a debtor from personal liability for the repayment of debt. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.)

Dischargeable Debt - A debt for which the personal liability of the debtor may be eliminated, under the Bankruptcy Code.

Dismissal – The discontinuation of a bankruptcy case, generally because the petition filed the case incorrectly, or the court determined that the filing was unnecessary or improper, or the court determined that the debtor cannot formulate a workable plan.

Equity – The monetary value of property (real or personal) above any mortgage or liabilities against it, e.g. the equity in your home is calculated by estimating the fair market value of your home and subtracting all mortgage debts and liens against the property.

Exemption – In a bankruptcy proceeding, that value of property that a debtor may legally keep from creditors, e.g. a certain dollar amount of your car, clothing, etc.  The exemption amounts vary by jurisdiction.

Fraudulent Transfer – The improper transfer of property by the debtor in a bankruptcy case done in order to protect the property from creditors.

Involuntary Bankruptcy – A bankruptcy petition that is not filed by the debtor, but is filed by a minimum of three of that debtor’s creditors to whom the debtor owes at least $5,000 in unsecured debt.

Joint Petition – A single bankruptcy petition filed jointly by a husband and wife.

Lien - A legal claim against property as security for repayment of a debt.  A lien grants the right to the lien holder to take, hold or sell the property, under certain circumstances.

Liquidation – The sale of the debtor’s non-exempt property, where the proceeds are distributed to the debtor’s creditors.  In Chapter 7 bankruptcy, where the debtor has non-exempt assets, liquidation is utilized as part of the process in getting the debtor’s debt obligation discharged.

Liquidated Claim - A creditor's claim for a fixed amount of money.

Liquidation Value – The total estimated sale value of a debtor’s non-exempt assets in a Chapter 7 bankruptcy.

Meeting of Creditors – See 341 Meeting.

Means Test – The test, under Section 707(b)(2) of the Bankruptcy Code, that is used to determine whether an individual debtor is eligible for a Chapter 7 bankruptcy filing or for determining whether a debtor's Chapter 7 bankruptcy filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13).

Motion to Lift the Automatic Stay - A request filed with the bankruptcy court by a creditor to allow that creditor to take action against the debtor or the debtor's property that would otherwise be prohibited by the automatic stay.

No-Asset Case – A Chapter 7 bankruptcy case where the debtor has no assets that can be liquidated.

Non-Dischargeable Debt - Debt that cannot be eliminated through bankruptcy. Such debts include back taxes, alimony, child support, and several other categories of debts.

Objection to Dischargeability – An objection from the trustee or a creditor to the release of debtor from personal liability for certain dischargeable debts.  Possible reasons include allegations that the debt to be discharged was incurred by fraud or false pretenses.

Objection to Exemptions - An objection from the trustee or a creditor to the debtor's attempt to claim certain property as exempt from liquidation.

Party in Interest - A party who has the legal right to be heard by the court in a matter to be decided in a bankruptcy case. The debtor, the creditors, the U.S. trustee or bankruptcy administrator, and the case trustee are parties in interest for most matters.

Personal Bankruptcy – A bankruptcy case where the debtor is an individual rather than a business.

Petition Preparer - A person or business that is not authorized to practice law but prepares bankruptcy petitions.

Plan - A bankruptcy debtor's detailed description of how he/she proposes to pay the creditors' claims over a fixed period of time, usually 3 or 5 years.

Plaintiff - A person or business who files a formal complaint with the court initiating a case.

Postpetition Transfer - A transfer of any of debtor's property after the commencement of the bankruptcy case.

Pre-Bankruptcy Planning – Arranging or rearranging debtor's property in order to take maximum advantage of exemptions, e.g. converting nonexempt assets into exempt assets.)

Preference or Preferential Debt Payment - A payment made by a bankruptcy debtor to a creditor in the 90-day period before that debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor's chapter 7 case.  Such payments are often undone by the bankruptcy court.

Presumption of Abuse – In determining whether a debtor qualifies for Chapter 7 bankruptcy, the court will assume abuse of the bankruptcy process if the debtor's aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $6,575. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

Priority - The Bankruptcy Code's ranking of unsecured claims that identifies the order in which these claims will be paid, in the event there is not enough money to pay all unsecured claims in full, e.g. pre-petition alimony and/or child support must be paid in full before any credit card debt is paid.

Priority Claim - An unsecured claim in a bankruptcy case that is granted a special status entitling it to be paid before other unsecured claims that are not granted the same priority status.

Proof of Claim - A creditor’s written statement and supporting documentation that intends to establish the validity of a debt owed to the creditor by the debtor.

Property of the Estate - All of debtor’s interests in real and personal property, as of the date the case commences.

Reaffirmation Agreement  - In a Chapter 7 bankruptcy case, an agreement by a debtor to continue payments on a debt that is otherwise dischargeable (such as a car loan) after the bankruptcy discharge, generally done for the purpose of keeping the collateral for the debt (such as the car) that otherwise would be subject to repossession.

Reorganization – In bankruptcy, under Chapter 13, the restructuring of debtor’s assets and debt obligations into a realistic payment plan, subject to court approval, that provides the debtor time to catch up on debt obligations, and, depending on the structure, provides for the discharge of certain unsecured, non-priority debts.

Restructuring An attempt to rearrange finances and settle debts out of court.

Section 341 Meeting – See 341 Meeting.

Secured Debt - A secured debt is a debt which is secured by some type of collateral (property),where you have pledged in writing some property as collateral or security for a loan; examples are a home mortgage or a car loan.

Skeleton Filing - A bankruptcy case in which not all paperwork has been filed, but that may be allowed to continue if certain forms have been filed and others will be returned in the future.

Substantial Abuse - A debtor takes advantage of the privilege of filing bankruptcy, usually in cases of fraud.

Trustee - A court-appointed third party in a bankruptcy case who holds and manages the assets of the debtor for his or her creditors. Not to be confused with a United States Trustee.

United States Trustee - A professional appointed by the Department of Justice to assist in a number of different duties in a bankruptcy case. Not to be confused with a “trustee”.

Unsecured Claim - A secured debt in which the attached property is of insufficient value to cover the cost of the debt.

Unsecured Debt - An unsecured debt is one in which no security or collateral is pledged for a debt; examples are most credit cards, medical bills, legal bills and other debts which are not secured debts nor defined as non dischargeable under the Bankruptcy Code

Voluntary Bankruptcy
- A bankruptcy that is filed by the debtor(s).

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