Dictionary

These  definitions are designed to provide a broad understanding which can be used when talking to an attorney or someone else about bankruptcy. The definitions are NOT complete and should NOT be used to decide specific legal issues. Some  definitions include links to the Bankruptcy Code or other laws. Some of the definitions are different for bankruptcy law than they would be for normal conversation.
  • 341a Meeting

    See meeting of creditors.
  • Accountant

    Someone authorized to practice public accounting. This may include a professional association, corporation, or partnership. See Bankruptcy Code §101(1).
  • Administration of the Estate

    A general phrase used to mean the bankruptcy process.
  • Administrative Claim

    A fee, expense or debt which arises as a result of the bankruptcy process itself or during the bankruptcy process. See Bankruptcy Code §503. The fees and expenses of attorneys, accountants and other professionals employed to represent a trustee or debtor-in-possession must be approved by the Bankruptcy Court. See Bankruptcy Code §330.
  • Adversary Action

    : One of several types of legal proceedings in which the Bankruptcy Court resolves disputes. The others are Motion, Contested Matter and Application. This is the most formal, expensive and time consuming way to resolve disputes. Adversary Actions are reserved for the most serious of issues to be decided by the Court such as whether a debt is dischargeable or whether the debtor gets a discharge. Adversary Actions are started when someone files a formal Complaint.
  • Affiliate

    People or companies which are closely related where one controls the other. For corporations, “control” is defined as 20% of the voting stock. Control can be legal or practical. See Bankruptcy Code §101(2).
  • After Notice and Hearing

    Gives the Bankruptcy Judge flexibility to do things quickly. Many times a motion or application can be resolved by the Judge without an actual hearing if a notice is given and no one objects or requests a hearing within the allowed time. This “no objection” process is sometimes also called “scream or die”. See Bankruptcy Code §102(1).
  • Application

    : One of several types of legal proceedings in which the Bankruptcy Court resolves disputes. The others are Motion, Contested Matter and Adversary Action. This is the least formal, least expensive and quickest way to resolve disputes. Applications are usually reserved for housekeeping or procedural matters.
  • Asset

    Every type of property owned by a debtor. Assets can be land, buildings, cars, stock, bank accounts, patents, lawsuits, business goodwill, inventory, receivables, furniture, equipment, clothing, jewelry, cash, retirement accounts, silverware, dishes, books, sports equipment, time shares, frequent flyer miles, basically anything which a debtor owns, controls or uses. In every bankruptcy case, a debtor must disclose all assets on the Schedules. Bankruptcy laws allow debtors to keep some assets as exempt property. For help in identifying your assets, see More About Assets. For more information about exempt property, see About Exempt Property.
  • Assisted Person

    Someone with “primarily” consumer debt and who has property which is not exempt property worth less than $150,000. We think “primarily” means more than 50%, but this legal issue remains undecided. We think property to be counted includes property which is subject to a loan, like a mortgage, but this legal issue also remains undecided. Anyone who owns a house in California (where values are very high) is probably NOT an assisted person. See Bankruptcy Code §101(3).
  • Attorney

    Someone authorized to practice law. This may include a professional association, corporation, or partnership and may, in certain cases, include someone training to become a lawyer. See Bankruptcy Code §101(4).
  • Automatic Stay

    A law which prevents creditors from taking any more steps to collect their debts. This protection begins immediately when the bankruptcy case is filed. The automatic stay is temporary. It temporarily protects the debtor, property of the estate, and the debtor’s property. See also relief from stay. See Bankruptcy Code §362.
  • Avoidance Action

    An adversary action which allows the trustee to undo (avoid) some property transfers. This can also be used to recover some property taken pre-petition by a creditor which may be exempt property.
  • Avoidance Powers

    The rights given to a trustee (or the debtor-in-possession in a Chapter 11) to undo (avoid) some property transfers. The most common avoidance powers are for Preferences, Fraudulent Transfers and Post-Petition Transfers.
  • Bankruptcy Assistance

    Goods or services sold or provided to an assisted person which give information, advice or counsel about bankruptcy, or which help an assisted person prepare or file documents to be used in a bankruptcy case, or which consist of representing or appearing on behalf of someone in Bankruptcy Court. See Bankruptcy Code §101(4A).
  • Bankruptcy Code

    The Federal bankruptcy laws which govern bankruptcy cases. Sometimes bankruptcy cases also involve State law, particularly in the area of exempt property, but if there is any conflict, the Federal law wins. You can read these laws at Title 11 of the United States Code. This has been updated to include the new laws which became effective in October, 2005.
  • Bankruptcy Court

    A Court established by Congress to hear bankruptcy cases. Click to go to the Bankruptcy Court website.
  • Bankruptcy Estate

    This definition changes depending on the type of bankruptcy case. The definition of bankruptcy estate is very complicated and often leads to litigation. Remember that these definitions are general in nature.
  • Bankruptcy Estate – Chapter 7

    All interests held by the debtor in property when the case is filed. All interests held by the debtor’s spouse in community property when the case is filed. All interests in property which a trustee recovers in litigation after the case is filed. All interests in property which the debtor gets within 180 days after the case is filed through inheritance, divorce or life insurance. The bankruptcy estate in Chapter 7 does not include money earned by the debtor for work done after the bankruptcy case is filed or property held in government approved retirement accounts. Remember that this definition is general in nature. The technical definition of what is in a Chapter 7 bankruptcy estate is very complicated and often leads to litigation. See Bankruptcy Code §541.
  • Bankruptcy Estate – Chapter 11

    Start with the definition of Bankruptcy Estate – Chapter 7 and add all of the property which the debtor acquires AFTER the case is filed (including money earned by the debtor for work done after the bankruptcy case is filed). Remember that this definition is general in nature. The technical definition of what is in a Chapter 11 bankruptcy estate is very complicated and often leads to litigation. See Bankruptcy Code §1115.
  • Bankruptcy Estate – Chapter 12

    Start with the definition of Bankruptcy Estate – Chapter 7 and add all of the property which the debtor acquires AFTER the case is filed (including money earned by the debtor for work done after the bankruptcy case is filed). Remember that this definition is general in nature. The technical definition of what is in a Chapter 12 bankruptcy estate is very complicated and often leads to litigation. See Bankruptcy Code §1207.
  • Bankruptcy Estate – Chapter 13

    Start with the definition of Bankruptcy Estate – Chapter 7 and add all of the property which the debtor acquires AFTER the case is filed (including money earned by the debtor for work done after the bankruptcy case is filed). Remember that this definition is general in nature. The technical definition of what is in a Chapter 13 bankruptcy estate is very complicated and often leads to litigation. See Bankruptcy Code §1306.
  • Bankruptcy Judge

    Someone appointed to a 14 year term to be the Judge in a Bankruptcy Court.
  • Briefing

    Part of the credit counseling requirement created under the October 2005 amendments to the bankruptcy laws.
  • Chapter 7

    The most common type of bankruptcy case in which individuals try to get a financial fresh start by giving all non-exempt property to creditors in exchange for a discharge from some (but not all) types of debt. Businesses may also use Chapter 7 to liquidate and go out of business, but they do not receive a discharge. For a more complete description of Chapter 7 and examples of debts not discharged in Chapter 7, see the Summary of Chapter 7.
  • Chapter 7 Trustee

    One of about 50 people, usually an attorney or accountant, assigned by the United States Trustee to represent the interests of creditors in a Chapter 7 case. A Chapter 7 Trustee takes control over the Chapter 7 Estate. The Chapter 7 Trustee is responsible for many things including collecting property and money which is not exempt property, recovering property which has been improperly transferred by the debtor, making sure the debtor complies with all duties in Chapter 7 case, investigating the debtor’s financial affairs, making sure that claims are legitimate, opposing the debtor’s right to receive a discharge when appropriate, and closing the case as quickly and efficiently as possible. See Bankruptcy Code §704.
  • Chapter 11

    A type of bankruptcy case in which individuals and businesses try to reorganize and pay back some or all of their debts under a Plan of Reorganization. Generally during this process the debtor remains in control of the situation acting as a Debtor-in-Possession. Sometimes the Bankruptcy Court will appoint a Chapter 11 Trustee. The process sometimes leads to liquidation (going out of business). Other times the debtor is trying to stay in business. Most Plans do provide for some type of discharge. For a more complete description of Chapter 11, see the Summary of Chapter 11.
  • Chapter 11 Trustee

    A private panel trustee, usually an attorney or accountant, assigned by the United States Trustee to represent the interests of creditors in a Chapter 11 case. A Chapter 11 Trustee takes control over the Bankruptcy Estate. The Chapter 11 Trustee is responsible for many (but not all) of the same things as a Chapter 7 Trustee and more. See Bankruptcy Code §1106.
  • Chapter 12

    A type of bankruptcy case in which a family farmer or family fisherman with regular annual income can try to reorganize and pay back some or all of their debts under a plan. During this process, the debtor remains in control of the Bankruptcy Estate and makes payments to the Chapter 12 Trustee while trying to stay in business. Chapter 12 plans do provide for a discharge of some (but not all) types of debts. For a more complete description of Chapter 12 and examples of debts not discharged in Chapter 12, see the Summary of Chapter 12. Only certain types of people can be a debtor under Chapter 12 See Bankruptcy Code §109(f).
  • Chapter 12 Trustee

    One of about 5 people assigned by the United States Trustee to handle Chapter 12 cases. By comparison with a Chapter 7 Trustee or a Chapter 11 Trustee, a Chapter 12 Trustee has very limited duties. Their primary duties have to do with making sure that the Chapter 12 repayment plan meets the requirements of the Bankruptcy Code and that the debtor follows through by making the payments required under that plan. Payments under the plan are paid to the Chapter 12 Trustee who distributes them to creditors. See Bankruptcy Code §1202(b).
  • Chapter 13

    A type of bankruptcy case in which individuals with regular income can try to reorganize and pay back some or all of their debts under a plan. During this process, the debtor remains in control of the Bankruptcy Estate and makes payments to the Chapter 13 Trustee while trying to stay in business. Chapter 13 plans do provide for a discharge of some (but not all) types of debts. For a more complete description of Chapter 13 and examples of debts not discharged in Chapter 13, see the Summary of Chapter 13. Only certain types of people can be a debtor under Chapter 13 See Bankruptcy Code §109(e).
  • Chapter 13 Trustee

    One of about 5 people assigned by the United States Trustee to handle Chapter 13 cases. By comparison with a Chapter 7 Trustee or a Chapter 11 Trustee, a Chapter 13 Trustee has very limited duties. Their primary duties have to do with making sure that the Chapter 13 repayment plan meets the requirements of the Bankruptcy Code and that the debtor follows through by making the payments required under that plan. Payments under the plan are paid to the Chapter 13 Trustee who distributes them to creditors. See Bankruptcy Code §1202(b).
  • Charge Off

    This is an accounting term. It means that the creditor does not expect to collect on the debt. It relates to the creditor’s taxes. It starts time periods under the Fair Credit Reporting Act. The debt can still be enforced.
  • Claim

    A right to demand money (even if the right is not for a precise amount, or is disputed) or to demand some other remedy under the law if that other remedy can be reduced to a demand for money. See Bankruptcy Code §101(5). A claim against the debtor includes a claim against property belonging to the debtor. See Bankruptcy Code §102(2).
  • CMI

    Refers to Current Monthly Income.
  • Collateral

    Property related to a specific debt or obligation which is held hostage and may be forfeited if that debt is not paid or the obligation is not performed. The creditor who has a debt with collateral is a secured creditor and the creditor is said to have a lien on the collateral. It is possible to have more than one debt related to collateral such as when a single house has a first mortgage and a second mortgage. For more information, see Is This Debt Secured?
  • Community Claim

    A pre-bankruptcy claim which State law says can be paid with community property even if there is no community property when the bankruptcy case is filed. See Bankruptcy Code §101(7).
  • Community Property

    Property defined by the law of each State. Not all States have community property. In California, it includes any property acquired by a person after marriage (and before separation or divorce) unless that property was acquired by inheritance, by gift, or from other non-community property (like rental income from a house acquired before marriage). See Calif.Family Code §760 and §770. This also includes property acquired by the spouses before they moved to California. See Calif.Family Code §125. Under California law, domestic partners (same gender couples and couples where at least one partner is entitled to receive social security old age benefits) can also have community property. See Calif.Family Code §297.5. Federal bankruptcy law does NOT recognize domestic partnerships. See Title 1, United States Code §7.
  • Commercial Fishing Operation

    Raising, catching or harvesting aquatic species or products of such species for market. See Bankruptcy Code §101(7A).
  • Commercial Fishing Vessel

    A vessel used by a family fisherman to carry out a commercial fishing operation. See Bankruptcy Code §101(7B).
  • Compromise

    Most settlements which resolve disputes before the Bankruptcy Court must be approved by the Bankruptcy Court. This usually takes about 30 days. Federal Rule of Bankruptcy Procedure 9019.
  • Confirmation

    The legal process of approving a debt repayment plan in Chapter 11, Chapter 12 or Chapter 13. After the plan is approved it is “confirmed”.
  • Consolidation

    The complete merging of two separate bankruptcy cases. Creditors from both cases are combined and claims which might have existed between the two debtors are eliminated. Federal Rule of Bankruptcy Procedure 1015(a). When this can be done is often the subject of significant litigation.
  • Consumer Bankruptcy Case

    A bankruptcy case which involves individuals and their personal financial affairs rather than a business and the financial affairs of the business.
  • Consumer Debt

    A debt incurred by an individual primarily for a personal, family, or household purpose so business loans are not consumer debt. Taxes are not considered consumer debts. The Means Test only applies to debtors with primarily consumer debt. See Bankruptcy Code §101(8).
  • Contested Matter

    : One of several types of legal proceedings in which the Bankruptcy Court resolves disputes. The others are Motion, Adversary Action and Application. This is a hybrid form of legal proceeding between a Motion and an Adversary Action. Contested Matters are started when someone files a Motion and someone else files a formal opposition. In these situations, the Court may require the participants to use the formal rules which apply to an Adversary Action, or may fashion some less formal rules to try to help resolve the dispute quickly and efficiently. See Federal Rule of Bankruptcy Procedure 9014.
  • Contingent

    Refers to debt which becomes due only if some other event occurs. In other words, contingent debt may never become due if the contingency does not occur. The classic law school example of this is a promise of a reward upon graduation. If there is no graduation, then the debt never becomes due. Just because a debt is due in the future does not make it contingent.
  • Conversion

    Cases filed under one Chapter can be converted to a case under a different Chapter. This is the process of changing a case from one Chapter to another. If converting from Chapter 7, see Bankruptcy Code §706. If converting from Chapter 11, see Bankruptcy Code §1112. If converting from Chapter 12, see Bankruptcy Code §1208. If converting from Chapter 13, see Bankruptcy Code §1307. Regardless of how many times a case is converted from one Chapter to another, the Filing Date remains the same.
  • Credit Counseling

    Since the bankruptcy laws were changed in October 2005, all people who file bankruptcy must take two classes. The first is called a “Briefing”. See Bankruptcy Code §109(h). The briefing can be received in person, over the phone or over the internet. It usually lasts about 60 minutes. The Briefing MUST BE COMPLETED before a bankruptcy case can be filed. The second is called a Financial Management Course which must be completed before a debtor receives a discharge. The Financial Management Course takes several hours. See Bankruptcy Code §727(a)(11).
  • Credit Report

    A record of financial transactions maintained by a private company. These records are sold to potential creditors to help them make credit decisions. The major credit reporting companies are TransUnion, Experian and Equifax.
  • Creditor

    Someone with a claim against the debtor, or a mortgage or lien against property owned by the debtor that arose before the order for relief in a bankruptcy case is filed. This includes a community claim. See Bankruptcy Code §101(10).
  • Creditor Committee

    A representative body of creditors appointed by the United States Trustee to represent the interests of creditors in a bankruptcy case. Sometimes more than one creditor committee will be appointed if there are distinct groups of creditors which have conflicting interests. Creditor committees can hire attorneys, accountants and other professionals to help them and the fees for these professionals are paid, if possible, as administrative claims from the bankruptcy estate. Creditor committees are almost never appointed in Chapter 7 cases and are rarely appointed in Chapter 11 cases. Larger cases are more likely to have a Creditor Committee.
  • Current Monthly Income

    Sometimes referred to as CMI. The average monthly “income” (taxable or non-taxable) from all sources that the debtor (and the debtor’s spouse in a joint case) received during the 6-month period ending the month before a bankruptcy case is filed. CMI includes any amount paid by someone else on a “regular basis” for household expenses, but excludes Social Security Act benefits, war crimes victim payments, crimes against humanity victim payments and international or domestic terrorism victim payments. The legal definitions of “income” and “regular basis” remains undecided. See Bankruptcy Code §101(10A).
  • Debt

    Money which is owed or which may be owed. See Bankruptcy Code §101(12).
  • Debt Relief Agency

    Sometimes referred to as DRA. Any person who provides bankruptcy assistance to an assisted person for money or gain unless: (A) that person is an employee of someone else who provides bankruptcy assistance; (B) that person is a nonprofit organization exempt from taxation; (C) a creditor; (D) a bank, credit union, or their affiliates; or (E) an author, publisher, distributor, or seller of works subject to copyright protection under title 17, when acting in such capacity. See Bankruptcy Code §101(12A).
  • Debtor

    Person who is the subject of a bankruptcy case. See Bankruptcy Code §101(13).
  • Debtor-in-Possession

    Sometimes referred to as a DIP. A debtor in a Chapter 11 case who is allowed to remain in control of, and manage the assets in the bankruptcy estate. See Bankruptcy Code §1101(1). The debtor-in-possession is a fiduciary for the creditors, and owes them the highest duty of care and loyalty.
  • Denial of Discharge

    A penalty for debtor misconduct with respect to the bankruptcy case or creditors. Anyone who believes this penalty should apply must file an appropriate adversary action. The legal arguments for why a debtor should be penalized in this way are found in Bankruptcy Code §727(a). If the debtor loses the discharge, creditors can resume collecting their debts after the bankruptcy case is over and the debts cannot be discharged in a later bankruptcy case. The rest of the bankruptcy process continues forward for the benefit of the creditors.
  • DIP

    Refers to Debtor-in-Possession.
  • Discharge

    An Order from the Bankruptcy Court which prevents creditors from trying to collect their debts. Even if a debt is discharged, a lien will survive the bankruptcy case and continue to affect the collateral. For more information, see About Dischargeable Debts.
  • Dischargeable

    Debts that can be discharged in bankruptcy. Some debts automatically survive bankruptcy. Other debts survive bankruptcy only if the creditor files an appropriate adversary action under Bankruptcy Code §523(a). For a list of debts which are not dischargeable, see About Dischargeable Debts.
  • Dismissal

    An administrative act by the Bankruptcy Court which means that the bankruptcy case has ended without being fully completed. The consequences of a dismissal depend on the status of the bankruptcy case at the time of the dismissal. See Bankruptcy Code §349. Creditors can usually then resume their efforts to collect on their debts. Dismissal is sometimes used as a penalty against the debtor for not following the rules or for other reasons.
  • Domestic Support Obligation

    Sometimes referred to as DSO. A debt established (or which may be established) by a Court for child support, spousal support, family support, alimony or maintenance which is owed to or recoverable by a spouse, former spouse, child or a child’s parent, legal guardian, or responsible relative. To be a DSO, the debt does not need to be labeled as a support debt as long as it serves a support function. See Bankruptcy Code §101(14A).
  • DRA

    Refers to Debt Relief Agency.
  • Encumbered

    Assets with a lien are said to be encumbered by that lien.
  • Entity

    Includes person, probate estate, trust, governmental unit, and United States trustee. See Bankruptcy Code §101(15).
  • Estate

    See Bankruptcy Estate.
  • Executory Contract

    A legal term used in Bankruptcy Code §365 to describe certain contracts. The precise definition is always being adjusted by various Courts, but there are some general definitions which have wide acceptance. The best known and most widely accepted is the Countryman Definition which is written in legalese: contracts on which performance remains due to some extent on both sides. Another definition is the Functional Definition, again written in legalese: whether the debtor has unperformed duties that the trustee may elect to perform or breach, depending upon which will result in the best value for the estate. This is a very complicated topic and you should consult with the attorney if you have further questions.
  • Exempt Property

    Certain property which a debtor gets to keep away from creditors during the bankruptcy process. Debtors select which property to claim exempt as part of their Schedules by using either the Bankruptcy Code or State law. To learn more about this subject, see About Exempt Property.
  • Family Farmer

    This is a very complicated, multi-part definition which qualifies someone to be a debtor in a Chapter 12 case. First, they have to be engaged in a farming operation. Second, the total debt cannot exceed a specified amount which is adjusted from time to time. Third, after deducing any debt secured by the principal residence, more than half of the total debt has to arise out of the farming operation. Fourth, more than half of the income must be related to the farming operation over the last year or several years. See Bankruptcy Code §101(18).
  • Family Farmer With Regular Annual Income

    A family farmer whose annual income is sufficiently stable and regular to enable the family farmer to make payments under a Chapter 12 plan. See Bankruptcy Code §101(19).
  • Family Fisherman

    This is a very complicated, multi-part definition which qualifies someone to be a debtor in a Chapter 12 case. First, they have to be engaged in a commercial fishing operation. Second, the total debt cannot exceed a specified amount which is adjusted from time to time. Third, after deducing any debt secured by the principal residence, more than 80% of the total debt has to arise out of the commercial fishing operation. Fourth, more than half of the income must be related to the commercial fishing operation over the last year or several years. See Bankruptcy Code §101(19A).
  • Family Fisherman With Regular Annual Income

    A family fisherman whose annual income is sufficiently stable and regular to enable the family fisherman to make payments under a Chapter 12 plan. See Bankruptcy Code §101(19B).
  • Farmer

    Person that received more than 80% of gross income from a farming operation during the tax year immediately before the year in which the bankruptcy case is filed from a farming operation owned or operated by that person. See Bankruptcy Code §101(20).
  • Farming Operation

    Includes farming, tillage of the soil, dairy farming, ranching, production or raising of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state. See Bankruptcy Code §101(21).
  • Fiduciary

    Someone entrusted with duties or responsibilities on behalf of another. The law requires a fiduciary to undertake those duties or responsibilities with the highest level of good faith, loyalty and diligence. A debtor-in-possession in a Chapter 11 case is a fiduciary for the creditors so the officers and Directors of a corporation in Chapter 11 owe their loyalty to creditors and not shareholders.
  • Filing Date

    The date on which the bankruptcy case is started. See Petition.
  • Financial Management Course

    Part of the credit counseling requirement created under the October 2005 amendments to the bankruptcy laws. This course must be completed before an individual debtor can receive a discharge.
  • First Meeeting of Creditors

    See meeting of creditors.
  • Foreclosure

    A legal process used by lenders to take property if a secured debt is not paid. Usually relates to land or buildings and then the debt is usually called a mortgage.
  • Fraudulent Transfer

    A transfer is fraudulent if: (1) the transfer was made with the intent to hinder, delay or defraud a creditors; or (2) if the item is transferred for less than its real value which makes the debtor either insolvent or unable to pay anticipated debts. See Bankruptcy Code §548.
  • Governmental Unit

    The United States of America, any State, Commonwealth, District, Territory, City, department, instrumentality of the United States, a foreign government or any sub-division of a foreign or domestic government. See Bankruptcy Code §101(27).
  • Health Care Business

    Any public or private entity (for profit or not for profit) that is primarily engaged in offering medical services or facilities to the general public. This includes psychiatric care, hospice care, home health agency care, long term care, skilled nursing care, assisted living care, home for the aged, and any institution primarily engaged in offering room, board, laundry, or personal assistance with activities of daily living and incidentals to activities of daily living. See Bankruptcy Code §101(27A).
  • Hold Harmless Agreement

    See Indemnity
  • IMC

    Refers to Meeting of Creditors.
  • Incidental Property

    When related to a debtor’s principal residence means items commonly included in any sale of the principal residence in the area where the real property is located. This includes easements, rights, appurtenances, fixtures, rents, royalties, mineral rights, oil or gas rights or profits, water rights, escrow funds, or insurance proceeds; and all replacements or additions. See Bankruptcy Code §101(27B).
  • Includes/Including

    Means including, but not limited to. See Bankruptcy Code §102(3).
  • Indemnify/Indemnity

    Agreement to repay someone for any loss or damage which might be suffered. Generally used in connection with a divorce where one spouse agrees to indemnity the other if one of them has to pay debts which are assigned to the other.
  • Individual With Regular Income

    Individual whose income is sufficiently stable and regular to enable that individual to make payments under a Chapter 13 plan. See Bankruptcy Code §101(30).
  • Insider

    A term which is the subject of much litigation. Generally it means someone close to the debtor who knows enough about the debtor’s true financial condition to take advantage of it. Examples of insiders for individuals: relatives, partners and partnerships in which the debtor is a partner, affiliates, and corporations in which the debtor is an officer, director or person in control. Examples of insiders for corporations: directors, officers, or persons in control, partners, partnerships in which the corporation is a general partner, affiliates and any of their relatives. Examples of insiders for partnerships: general partners, persons in control, related partners, affiliates and any of their relatives. See Bankruptcy Code §101(31).
  • Insolvent

    When debts are greater than the fair value of assets. The assets to be considered do not include exempt property and property which has been transferred, concealed, or removed. For partnership debtors, assets must include any value in the property of the individual partners over the amount of any debts of the individual partners. See Bankruptcy Code §101(32).
  • Intellectual Property

    Includes patents and patent applications, copyrights, trade marks, trade secrets, plant varieties, mask works. See Bankruptcy Code §101(35A).
  • Involuntary Petition or Involuntary Bankruptcy

    In some situations, creditors or general partners of a partnership can force someone into a Chapter 7 or Chapter 11 bankruptcy case. See Bankruptcy Code §303.
  • Joint Administration

    The Bankruptcy Court can order two bankruptcy cases to be coordinated for administrative purposes only with combined hearings and proceedings. This does not mean that the cases are merged. Federal Rule of Bankruptcy Procedure 1015(b). For the actual merging of cases, see consolidation.
  • Joint Petition or Joint Bankruptcy

    A bankruptcy case which can only be filed voluntarily by a married couple. See Bankruptcy Code §302.
  • Judicial Lien

    A lien obtained through an act or decision by a Judge in a legal or equitable process or proceeding such as a judgment, levy or sequestration. See Bankruptcy Code §101(36).
  • Lien

    An interest in, or charge against one or more specifically identified assets such that the assets are held hostage to make sure that a debt is paid or some obligation is met. Liens create a security interest. The asset involved is called collateral. Some liens are voluntary, such as a mortgage because the debtor has agreed to create them. Others are involuntary such as judicial liens, statutory liens and tax liens. See Bankruptcy Code §101(37). For more information, see Is This Debt Secured? Lien Stripping A process used in consumer bankruptcy cases 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.” For more, see Lien Avoidance and Lien Stripping.
  • Liquidated

    Liquidated assets have been sold. Liquidated debts have been quantified or, in other words, the exact amount of the debt is known. These are usually contract debts. Personal injury and other debts become liquidated after a trial or settlement.
  • Means Test

    A complicated analysis added to the Bankruptcy Code in 2005 which is intended to prevent individuals who have some ability to repay their debts from filing Chapter 7. The analysis is performed on an official Court form. There is a different test for each different type of bankruptcy case. Debtors who do not pass the means test will have to consider using a different Chapter bankruptcy case. For more about the Means Test, see About the Means Test.
  • Median Family Income

    The median family income both calculated and reported by the Census Bureau. If this is not reported, then use the most recently reported number and adjust it according to changes in the Consumer Price Index for All Urban Consumers. See Bankruptcy Code §101(39A).
  • Meeting of Creditors

    A meeting which must be attended by every debtor (unless excused for medical hardship) where the debtor is sworn to tell the truth and asked questions about his or her financial affairs. Creditors are allowed to attend and ask questions, but they rarely do. In most consumer bankruptcy cases, the meeting of creditors is very short (only a few minutes), but they can be very long and last for several sessions in more complicated consumer and business bankruptcy cases. The Bankruptcy Judge is not allowed to go to the meeting of creditors so the person in charge and asking most of the questions is the trustee assigned to the case or someone appointed by the trustee assigned to the case. See Bankruptcy Code §341(a).
  • Mortgage

    A debt which, if not paid, will cause certain property to be lost. Mortgages are usually related to land or buildings and the process of losing the property is called foreclosure.
  • Motion

    One of several types of legal proceedings in which the Bankruptcy Court resolves disputes. The others are Adversary Action, Contested Matter and Application. This is a relatively informal, inexpensive and speedy way to resolve disputes. If a Motion is opposed, the Bankruptcy Court may choose to treat the dispute as a Contested Matter. Motions are started when someone files a written request asking the Bankruptcy Court to decide a dispute. Motions can be followed by Oppositions and Replies.
  • Municipality

    Political subdivision or public agency or instrumentality of a State. See Bankruptcy Code §101(40).
  • Noncontingent

    See contingent.
  • Non Dischargeable

    A debt which is not eliminated in a bankruptcy case and which can continue to be enforced after the bankruptcy case is over. The list of non-dischargeable debts is different for Chapter 7, Chapter 11, Chapter 12 and Chapter 13. The most general list is found at Bankruptcy Code §523(a). For a more complete discussion on this subject see About Dischargeable Debts,
  • Offer in Compromise

    A formal settlement proposal made to a tax agency, generally the IRS or the California Franchise Tax Board.
  • Office of the United States Trustee

    Refers to the United States Trustee.
  • Or

    Means “and/or”. See Bankruptcy Code §102(5).
  • Order For Relief

    The beginning of the bankruptcy process which usually happens when a debtor wants to be in bankruptcy and files a voluntary petition to start a bankruptcy case. Sometimes a bankruptcy case can be started by creditors or by general partners of a partnership. This is called an involuntary petition. See Bankruptcy Code §303. When this happens, the Bankruptcy Court must decide whether bankruptcy is appropriate before the case can begin. There is no order for relief until the Bankruptcy Court decides that the case is appropriate.
  • OUST

    Refers to the United States Trustee.
  • Patient

    Any individual who obtains or receives services from a health care business. See Bankruptcy Code §101(40A).
  • Patient Records

    Any written document relating to a patient or a record recorded in a magnetic, optical, or other form of electronic medium. See Bankruptcy Code §101(40B).
  • Perfection/Perfecting

    A legal process which applies only to a secured debt which gives public knowledge about the secured debt. Perfection is important to help determine which lien gets paid first, second and third if the collateral is liquidated (sold). Mortgages and debts secured by land and buildings are perfected when the legal documents involved are given to the County Recorder’s office for recording in the title records. Other liens are perfected when a legal notice is given to the Secretary of State’s office for recording. In California, most liens on cars are perfected by giving the notice to the DMV for recording. A lien does not need to be perfected to be enforceable between the original lender and the original borrower. There are many other rules and this is an advanced subject which you should discuss with the attorney if it applies to your situation.
  • Person

    Individual, partnership, and corporation, but does not include, in most situations, governmental unit. See Bankruptcy Code §101(41).
  • Personal Property

    Assets other than land or buildings.
  • Personally Identifiable Information

    Information about people other than the debtor which includes name, residence address, email address, home telephone number, social security number, any credit card account number, date of birth, place of birth, other similar contact or identification information. See Bankruptcy Code §101(41A).
  • Petition

    The first paper filed with the Bankruptcy Court which starts a bankruptcy case. Filing the petition starts the automatic stay. If the petition was filed voluntarily by the debtor, it also constitutes the order for relief. Most events in a bankruptcy case are measured with reference to the petition filing date as either pre-petition or post-petition. See Bankruptcy Code §101(42).
  • Plan of Reorganization

    A plan proposed in a Chapter 11, Chapter 12 or Chapter 13 case to pay creditor claims in full or in part.
  • Post-Petition

    : Refers to events which occur after the bankruptcy case is filed.
  • Preference

    : A transfer to a creditor in partial or full payment of an existing debt made within certain time periods before the commencement of the bankruptcy case. Trustees and debtors-in-possession can file avoidance actions to undo the transfer so that whatever was transferred to one creditor can be shared among all creditors. See Bankruptcy Code §547.
  • Pre-Petition

    : Refers to events which occurred before the bankruptcy case is filed.
  • Principal Residence

    A residential structure which may include a condominium, cooperative unit, mobile or manufactured home or trailer, including any incidental property. See Bankruptcy Code §101(13A).
  • Priority

    See priority claim.
  • Priority Claims

    Certain unsecured debts which, in a bankruptcy case, are entitled to be paid ahead of other unsecured debts. Those with the same level of priority must be paid the same percentage (pro-rata). Unsecured debts with a higher level of priority must be paid in full before unsecured debts of a lower level can be paid anything. Examples of unsecured debts with a very high priority are administrative claims, domestic support obligations and most tax debts. See Bankruptcy Code §507. For more information, see About Priority Claims.
  • Private Panel Trustees

    A group of individuals, usually attorneys or accountants, selected by the United States Trustee who are eligible to serve as Chapter 7 trustees and Chapter 11 trustees. Private panel trustees must undergo security and background checks. When not working in Chapter 7 or Chapter 11 cases, they are free to take on other cases.
  • Proof of Claim

    : A document filed by a creditor with the Bankruptcy Court to formally state its claim in the bankruptcy case.
  • Purchaser

    Transferee of a voluntary transfer, and includes immediate or mediate transferee of such a transferee. See Bankruptcy Code §101(43).
  • Reaffirmation

    Legal process where a debtor agrees to continue being responsible for a debt which 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. See Bankruptcy Code §524(c). More about Reaffirmation and Alternatives.
  • Regular Annual Income

    An income stream sufficiently consistent to enable a debtor in a Chapter 12 case to comply with the terms of a plan of reorganization.
  • Regular Income

    An income stream sufficiently consistent to enable a debtor in a Chapter 13 case to comply with the terms of a plan of reorganization.
  • Relative

    Individual related by affinity (marriage or adoption) or consanguinity (blood) within 3 degrees. This usually includes parents, grandparents and great-grandparents, children, grandchildren and great-grandchildren, siblings, spouses of siblings, nieces, nephews, uncles, aunts, parents-in-law and others. See Bankruptcy Code §101(45).
  • Relief From Stay

    The process of asking the Bankruptcy Court for permission to do something which would otherwise be prohibited by the automatic stay. Usually this request is made by a creditor, but there are occasions when debtors will make the same request. This process usually takes about 30 days but can happen in one day if there is a real emergency. In consumer bankruptcy cases, creditors are usually asking the Bankruptcy Court for permission to continue a foreclosure against land or buildings or to repossess a car. See Bankruptcy Code §362(d).
  • Rule 2004 Examination

    A type of deposition which must be approved in advance by the Bankruptcy Court. This type of deposition cannot be used when the parties are involved in an adversary action or a contested matter. See Federal Rule of Bankruptcy Procedure 2004.
  • Schedules

    : Lists of information which every debtor must file with the Court. Schedule A is for land and buildings. Schedule B is for all other property and assets. Schedule C is to identify exempt property. Schedule D is for secured debts. Schedule E is for priority debts. Schedule F is for unsecured debts. Schedule G is for leases and executory contracts. Schedule H is for listing other people who are also responsible with you for your debts. Schedule I is for disclosing your average monthly income. Schedule J is for disclosing your average monthly expenses. If these lists are not filed within 15 days after the case is filed, the case will be dismissed by the Court.
  • Scream or Die

    See after notice and hearing.
  • Secured Debt

    Debt which is attached to a lien on collateral. If the debt is not paid, then the creditor has the legal right to take the collateral. See lien. If the amount of the debt is more than the value of the collateral then the claim may have to be divided into two parts: the secured debt with the amount of the secured debt equal to the value of the collateral and the unsecured debt equal to everything owed which is over the value of the collateral. Generally to be considered a secured debt in a bankruptcy case, the lien must be perfected. Secured creditors get extra protection under the Bankruptcy Code. For more information, see Is This Debt Secured?
  • Security Agreement

    Agreement that creates a lien. See Bankruptcy Code §101(50). For more information, see Is This Debt Secured?
  • Security Interest

    Lien created by an agreement. See Bankruptcy Code §101(51). For more information, see Is This Debt Secured?
  • Single Asset Real Estate Case

    Type of bankruptcy case where the bankruptcy estate has only piece of land which generates substantially all of the gross income of the debtor solely through the use of the land (i.e. rental income) unless: (1) the land has less than 4 residential units; (2) the debtor is a family farmer; or (3) the debtor is operating some other substantial business on the property. See Bankruptcy Code §101(51B). A single asset real estate case has special rules and requirements. For more about this, see About Single Asset Real Estate Cases.
  • Small Business Case

    Case filed under Chapter 11 in which the debtor is a small business debtor and the United States Trustee has not appointed a Creditor Committee. See Bankruptcy Code §101(51C). See also Bankruptcy Code §101(51D).
  • Small Business Debtor

    Person engaged in commercial or business activities that has $2 million or less in noncontingent and liquidated existing debt on the date of the order for relief which is not owed to an affiliate or insider. See Bankruptcy Code §101(51D).
  • State

    Includes the District of Columbia and Puerto Rico. See Bankruptcy Code §101(52).
  • Statutory Lien

    Any lien arising solely due to a law on specific circumstances or conditions, or a lien for non-payment of rent, whether or not based on a law. Does not include security interest or judicial lien. See Bankruptcy Code §101(53).
  • Tax Lien

    A statutory lien which is created to secure the payment of taxes. Usually tax liens encumber all assets of the taxpayer.
  • Tax Transcript

    A document prepared by a taxing agency such as the IRS or California Franchise Tax Board which contains information, on a year by year basis about your tax return, when the return was filed, how much tax is owed, any penalties or interest which have been added, offers in compromise, tax liens and much more important information.
  • Timeshare Interest

    The interest purchased in a timeshare plan. See Bankruptcy Code §101(53D).
  • Timeshare Plan

    Any purchased right to use accommodations, facilities, or recreational sites, whether improved or unimproved, for a specific period of time which is less than full time and which extends for a period of more than three years. See Bankruptcy Code §101(53D).
  • Transfer

    The creation of a lien; the retention of title as a security interest, the foreclosure of a debtor’s equity of redemption (not applicable in California), or any method, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or any interest in property. See Bankruptcy Code §101(54).
  • Trustee

    A general term sometimes used to mean United States Trustee, Private Panel Trustee, Chapter 7 Trustee, Chapter 12 Trustee, Chapter 13 Trustee, or Chapter 11 Trustee
  • United States Trustee

    Also referred to as the Office of the United States Trustee, OUST, or USTE. Part of the United States Department of Justice which supervises the administration of bankruptcy cases. There are different regions around the Country. Los Angeles is in Region 16. As reported on their website, the United States Trustee seeks to promote the efficiency and protect the integrity of the Federal bankruptcy system. To further the public interest in the just, speedy and economical resolution of cases filed under the Bankruptcy Code , the Program monitors the conduct of bankruptcy parties and private estate trustees, oversees related administrative functions, and acts to ensure compliance with applicable laws and procedures. It also identifies and helps investigate bankruptcy fraud and abuse in coordination with the United States Attorneys, the Federal Bureau of Investigation and other law enforcement agencies. The Region 16 website
  • Unliquidated Debt

    Unliquidated means the precise amount owed is unknown. Personal injury debts are usually unliquidated until a trial or settlement determines the amount to be paid.
  • Unsecured Debt

    Debt which is not secured. Put another way, it is a debt without collateral. Most consumer debts, such as credit cards, medical bills, legal bills, are unsecured. For more information, see Is This Debt Secured?
  • USTE

    Refers to United States Trustee.

This page was last updated: March 29, 2011