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Bankruptcy Glossary of Legal Terms

Common consumer bankruptcy law terms and definitions

Personal Bankruptcy Law can be filled with many confusing legal terms. Start Fresh Today’s bankruptcy dictionary helps define common consumer bankruptcy law terms in simple, plain English. So whether you’re filing for Chapter 7 or Chapter 13, use this glossary to know what your bankruptcy attorney is talking about.

# | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

Bankruptcy Glossary [#]

341 meeting – (see first meeting of creditors)

Absolute priority

341 Meeting – A notice sent to the debtor and the debtor’s creditors announcing the date, time, and place for the first meeting of creditors. The 341 notice is sent along with the notice of bankruptcy filing and information about important deadlines by which creditors have to take certain actions.

342 Notice – A notice that the court clerk is required to give to debtors pursuant to Section 342 of the Bankruptcy Code. It informs debtors of their obligations and the consequences of not being completely honest in their bankruptcy case.

707(b) Action – An action taken by the U.S. Trustee, the regular trustee, or any creditor ( under authority of Section 707(b) of the Bankruptcy Code) to dismiss a debtor’s Chapter 7 filing on the ground of abuse.

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Bankruptcy Glossary [A]

Absolute Priority – A rule that provides for the satisfaction in full of claims of senior creditors before any payments can be made to junior creditors under a chapter 11 bankruptcy plan.

Abuse – Misuse of the Chapter 7 bankruptcy remedy. Typically applies to Chapter 7 bankruptcy filings that should have been filed under Chapter 13 because the debtor appears to have enough disposable income to fund a Chapter 13 repayment plan.

Adequate Protection – A judicially-determined action to protect a secured creditor’s interest in property that is part of a bankrupt estate. The U.S. Bankruptcy Code contains a list of examples of actions that are predetermined to provide adequate protection. If a bankruptcy court finds that a secured creditor is not adequately protected, the creditor may obtain relief from the automatic stay from creditors’ collection attempts that is affected by the debtor’s filing for bankruptcy.

Administrative Expenses – Consists of costs involved in bringing a bankruptcy case that a debtor must pay in full in a Chapter 13 repayment plan. These include the trustee’s and debtor’s attorney fees. These expenses are usually 10% of the debtor’s total payments under the repayment plan.

Administrative Office of the United States Courts – The Federal agency that issues court rules and forms to be used by the bankruptcy courts.

Adversary Proceeding – In a bankruptcy case, adversary proceedings are brought to determine the dischargeability of a debt or to recover property that has been transferred by the debtor shortly before filing for bankruptcy.

Allowed Secured Claim – A debt that is secured by collateral or alien against the debtor’s property whereby the creditor has filed a proof of claim with the bankruptcy court.

Amendment – A document filed by the debtor in order to change documents previously filed with the court. An example is when the trustee requires changes to some of the debtor’s documents based on testimony at the meeting of creditors.

Arms-Length Creditor – A creditor who deals with the debtor in the normal course of business and not as an insider (friend, relative, or business partner).

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).

Automatic Stay – An injunction automatically issued by the bankruptcy court when a debtor files for bankruptcy. The injunction prohibits most collection activities by creditors such as filing a lawsuit against the debtor or notifying credit bureaus of any unpaid debt.

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Bankruptcy Glossary [B]

Bankruptcy Abuse Prevention and Reform Act of 2005 (BAPCPA) – The formal name of the bankruptcy law that went into effect on October 17, 2005.

Bankruptcy Administrator – The official responsible for supervising the administration of bankruptcy cases, estates and trustees in Alabama and North Carolina. Bankruptcy cases in Alabama and North Carolina are not under the jurisdiction of the United States Trustee Program.

Bankruptcy Appellate Panel – A special court that hears appeals of bankruptcy court decisions. It is not available in all regions.

Bankruptcy Code – The Federal law that governs the creation and operation of bankruptcy courts and bankruptcy procedures. The Code is found in Title 11 of the United States Code.

Bankruptcy Estate – All of the property owned by the debtor at the time of filing for bankruptcy (except most pensions and educational trusts). The trustee technically takes control of the estate for the duration of the bankruptcy case.

Bankruptcy Fee – A fee charged to a borrower by the lender as a result of a bankruptcy filing by the borrower. This is often a flat fee included in the amount owed as listed on a proof of claim filed by the lender in Chapter 13.

Bankruptcy Petition – The document filed by the debtor to officially begin a bankruptcy case in the bankruptcy court.

Business Bankruptcy – A bankruptcy in which the debts arise primarily from the operation of a business, including bankruptcies filed by corporations, LLCs, and partnerships.

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Bankruptcy Glossary [C]

Chapter 7 Bankruptcy – A liquidation bankruptcy. The trustee sells the debtor’s nonexempt property and distributes the proceeds to the debtor’s creditors. The debtor receives a discharge of all remaining debts (except those debts that cannot be legally discharged).

Chapter 9 Bankruptcy – A bankruptcy that is restricted to governmental units.

Chapter 11 Bankruptcy – A bankruptcy intended to help businesses reorganize their debt in order to remain in business.

Chapter 12 Bankruptcy – A bankruptcy intended to help small farmers reorganize their debts.

Chapter 13 Bankruptcy – A type of consumer bankruptcy designed to help individuals reorganize their debts and pay all or a portion of their debts over three to five years (called a Chapter 13 plan).

Confirmation – A bankruptcy judge’s ruling approving a Chapter 13 plan. At a confirmation hearing, the judge decides whether the proposed Chapter 13 plan is feasible and meets all legal requirements.

Conversion – When a debtor who has filed one type of bankruptcy switches to another type (e.g., converting from a Chapter 7 bankruptcy to a Chapter 13 bankruptcy or vice versa).

Cramdown – In a Chapter 13 bankruptcy, the act of reducing a secured debt to the replacement value of the collateral securing the debt.

Creditor – A person or entity to whom money is owed.

Creditor Matrix – A list of creditors that a debtor must file with the bankruptcy petition. This list is used by the bankruptcy court to notify creditors about the bankruptcy filing and the date of the first meeting of creditors.

Current Monthly Income – Under the current bankruptcy law, a bankruptcy petitioner’s total gross income averaged over a six-month period immediately preceding the month when the bankruptcy is filed.

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Bankruptcy Glossary [D]

Debtor – The party who files for bankruptcy.

Discharge – A court order issued at the conclusion of a Chapter 7 or Chapter 13 bankruptcy case. This order legally relieves the debtor from personal liability for debts.

Discharge Exceptions – Debts that are not discharged in a bankruptcy. The debtor will still owe these debts after the bankruptcy is concluded.

Dischargeability Action – An action brought by a party asking the court to determine if a particular debt qualifies for discharge.

Dischargeable Debts – Debts that are eliminated at the conclusion of a bankruptcy case.

Disposable Income – The difference between a debtor’s current monthly income and allowable expenses. This disposable income is used to pay into a Chapter 13 plan.

Doubling – The ability of married couples to double the amount of certain property exemptions when filing for bankruptcy together. While Federal bankruptcy exemptions allow doubling, not all states allow it.

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Bankruptcy Glossary [E]

Emergency Bankruptcy Filing – – An initial bankruptcy filing that consists of only the petition and the creditor matrix. This is usually sought when the debtor needs the protection of an automatic stay to prevent a creditor from taking an action such as foreclosure. Other required documents and forms will still need to be filed in a timely manner to avoid dismissal of the emergency filing.

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 – Property under state and Federal exemption laws that a debtor can keep in a Chapter 7 bankruptcy. This property cannot be taken and sold by the trustee in order to pay off the debtor’s unsecured creditors.

Exemptions – Property that creditors are not allowed to take in order to satisfy a debt nor can a bankruptcy trustee take and sell for the benefit of the creditors. Exemptions are listed under state and Federal laws. See our comprehensive State Exemptions section for complete current exemption information for your state.

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Bankruptcy Glossary [F]

Federal Exemptions – Exemptions contained in the Federal Bankruptcy Code.

First Meeting of Creditors (341 meeting) – A mandatory meeting between creditors and the debtor. At this meeting, the trustee and creditors can ask the debtor questions regarding the debtor’s property, debts, and information contained in documents and forms filed with the bankruptcy court. It is usually held within a month of the filing of bankruptcy.

Fraud – – In a bankruptcy case, any writing or representation intended to mislead creditors, the trustee, or the bankruptcy court.

Fraudulent Transfer – A transfer of property from the debtor to another person for less than the property’s value in order to hide the property from the trustee. This property can be recovered and sold by the trustee for the benefit of creditors.

Fraudulently Concealed Assets – Property that a bankruptcy debtor deliberately fails to disclose as required by bankruptcy law.

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Bankruptcy Glossary [G]

Good Faith – When a debtor files for Chapter 13 bankruptcy with the sincere purpose of paying off debts over a period of time required by law rather than for manipulative purposes, such as to prevent a foreclosure that should be legally allowed to proceed. Homestead: An exemption, under Federal or state law, which applies to property where the debtor is living at the time he or she files for bankruptcy.

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Bankruptcy Glossary [I]

Individual Debtor’s Statement of Intention – A bankruptcy form debtors with secured debts must file, indicating what they want to do with the property that secures the debt. For example, a debtor with a car loan must state whether he or she wants to keep the car and continue the debt, pay off the car note, or return the car to the creditor and cancel the debt.

Involuntary Bankruptcy – A bankruptcy initiated by at least three creditors holding unsecured claims (totaling at least $5000 against the debtor).

Involuntary Dismissal – When a bankruptcy judge dismisses a case because of the debtor’s failure to carry out his or her duties (e.g., filing papers in a timely manner, cooperating with the trustee, or filing bankruptcy in good faith).

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Bankruptcy Glossary [L]

Lien 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.

Lifting the Stay – A bankruptcy court allows a creditor to continue with debt collection or other actions that are otherwise banned by an automatic stay (landlord proceeds with an eviction, lender repossesses a car).

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Bankruptcy Glossary [M]

Means Test – A test to determine whether a debtor, whose income is more than the median family income for his or her state, should be permitted to file for a Chapter 7 bankruptcy. A formula of predefined income and expense categories is used.

Median Family Income – – This is used to determine whether a debtor must pass the means test in order to file a Chapter 7 bankruptcy. It is also used to determine whether a debtor filing a Chapter 13 bankruptcy must commit all of his or her projected disposable income to a five-year repayment plan. The median family income figure for each state and for different family sizes is published by the U.S. Census Bureau.

Motion to Avoid Judicial Lien on Real Estate – A motion by the bankruptcy debtor asking the bankruptcy court to remove a judicial lien on real estate because the lien impairs the debtor’s homestead exemption.

Motion to Lift Stay – A motion by a creditor requesting the bankruptcy court to allow it to continue a court action or collection activity despite the automatic stay.

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Bankruptcy Glossary [N]

Newly Discovered Creditors – Creditors discovered by the debtor after bankruptcy is filed. If the bankruptcy case is open, the debtor can amend the list of creditors to include the newly discovered creditors. If the bankruptcy case is closed, it may be reopened to allow the amendment to the creditor list.

Non-Bankruptcy Federal Exemptions – Exemptions a debtor can use in bankruptcy only if the debtor uses a state exemption system.

Non-Dischargeable Debt – A debt that survives bankruptcy.

Non-Exempt Property – Property of the bankruptcy estate that cannot be protected by the exemption system.

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Bankruptcy Glossary [O]

Order for Relief – Another name for an “Automatic Stay.”

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Bankruptcy Glossary [P]

PACER (Public Access to Court Electronic Records) – An online database that contains bankruptcy court dockets and Federal court documents such as court rules and recent appellate court decisions.

Party in Interest – Any person or entity with a financial interest in the outcome of a bankruptcy case. This includes the trustee, the debtor, and creditors.

Personal Property – All property not classified as real property. Includes items such as automobiles, jewelry, stocks, and pensions.

Pre-Petition – Any time prior to the filing of the bankruptcy petition.

Presumed Abuse – Occurs in a Chapter 7 bankruptcy when the filing debtor has a current monthly income in excess of the family median income for the state where the debtor lives. The debtor has sufficient income to propose a Chapter 13 plan under a “means test.”

Priority Creditor – A creditor who has filed a Proof of Claim showing that the debtor owes a priority debt to the creditor.

Priority Debt – A debt that is paid first when distributions are made from the bankruptcy estate. Priority debts include alimony, child support, fees owed to the trustee and attorneys, and wages owed to employees.

Proof of Claim – The document filed by creditors in a bankruptcy case, asserting their right to payments from the bankruptcy estate.

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Bankruptcy Glossary [R]

Reaffirmation – After a bankruptcy filing, an agreement entered into between the debtor and a creditor whereby the debtor agrees to repay all or part of a pre-petition debt after the bankruptcy is over. An example is when a debtor reaffirms with the holder of a car note so that the debtor can keep the car (provided he or she continues to make payments after bankruptcy).

Reasonable Investigation – Under the BAPCPA bankruptcy law of 2005, the bankruptcy attorneys’ obligation to look into the information that is provided to them by their clients.

Redemption – Occurs in a Chapter 7 bankruptcy when the debtor obtains legal title to collateral for a secured debt by paying the secured creditor the replacement value of the collateral in a lump sum.

Request to Lift the Stay – A request filed by a creditor in bankruptcy court seeking permission to engage in debt collection activity otherwise prohibited by an automatic stay.

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Bankruptcy Glossary [S]

Schedules – Official bankruptcy forms that must be filed by a debtor describing the debtor’s property, income, debts, and expenses.

Secured Creditor – A creditor who owns a secured claim (a debt secured by collateral under a written agreement or by operation of the law).

Secured Debt – A debt secured by collateral.

Secured Property – Property that is collateral for a secured debt.

Skeleton Petition – An incomplete bankruptcy filing, requiring a few forms to be initially filed, and the rest of the paperwork filed within fifteen days. The required forms are: the petition, a mailing list of creditors, a form showing the debtor’s Social Security number, and a certificate indicating the completion of credit counseling.

State Exemptions – State laws listing property that creditors cannot take to satisfy a debt and the bankruptcy trustees cannot take and sell for the benefit of unsecured creditors. See our comprehensive State Exemptions section for complete current exemption information for your state.

Surrendering Collateral – – In a Chapter 7 bankruptcy, the returning of collateral to a secured lender in order to discharge the debt. An example is returning a car to discharge the car note.

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Bankruptcy Glossary [T]

Trustee – An official appointed by the bankruptcy court to carry out the administrative tasks in a bankruptcy case and to take and sell nonexempt property for the benefit of unsecured creditors.

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Bankruptcy Glossary [U]

Undue Hardship – The conditions under which a debtor may be able to discharge a student loan. For example, the debtor has no income and has little chance of earning enough to repay the loan in the future.

United States Trustee – An official employed by Office of the U.S. Trustee (a division of the U.S. Department of Justice). The official is responsible for overseeing the bankruptcy trustees, auditing bankruptcy cases, ferreting out fraud, and making sure that the bankruptcy law are obeyed.

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Bankruptcy Glossary [V]

Voluntary Dismissal – When a debtor voluntarily dismisses his or her Chapter 7 or Chapter 13 bankruptcy case without coercion by the bankruptcy court.

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Bankruptcy Glossary [W]

Wildcard Exemption – A dollar value that a debtor can apply to any type of property to make it, or more of it, exempt.

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