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Glossary of Common Bankruptcy Terms
341 meeting
The First Meeting of Creditors in which the debtor is questioned under oath by the creditors, the examiner and/or the United States Trustee about his or her financial affairs.
Automatic stay
An injunction that automatically stops lawsuits, foreclosure, garnishments and all collection activity against the debtor once a bankruptcy petition has been filed.
Bankruptcy
A legal procedure for dealing with the financial problems of individuals and companies. It refers to a case filed under the Bankruptcy Code or Title 11 of the United States Code.
Chapter 7
The chapter of the Bankruptcy Code that allows for ‘liquidation’ of all assets of the individual or company to clear debts. It is also known as straight bankruptcy.
Chapter 11
This is a reorganization bankruptcy. It is filed by companies or partnerships. A debtor filing for bankruptcy under Chapter 11 generally proposes a reorganization plan to keep the business alive and make it profitable and pay creditors over a period of time.
Chapter 12
The chapter of Bankruptcy Code providing relief for debts of a ‘family farmer’.
CHAPTER 13
A government sponsored debt consolidation plan.
Claim
A creditors assertion of right to money from the debtor or debtor’s property.
Consumer debts
Debts incurred for personal reasons and not corporate requirements.
Creditor
The person/s or company/s to whom money is owed by the debtor.
Debtor
The person/s or company filing for bankruptcy.
Discharge
A release issued by the court relieving the debtor from personal liability of all dischargeable debts.
Dischargeable debt
A debt from which the debtor can be released based on the Bankruptcy Code.
Exemptions
This refers to assets or properties owned by the debtor that cannot be recovered by creditors.
Homestead
The principle place of residence of a debtor whether a house, apartment, condo or any other.
Joint Petition
A bankruptcy petition filed jointly by husband and wife.
Liquidation
The process of sale of a debtor’s property and assets for cash to help repay creditors.
Nondischargeable debt
A debt that cannot be discharged by filing for bankruptcy. It must be repayed in full.
Plan
A debtor’s detailed report on how he plans to pay the creditors over a period of time.
Secured creditor
An individual or a business holding a claim against the debtor that is secured by collateral or a lien.
Secured debt
Debt backed by mortgage, collateral or other lien.
Stalking horse
This is the name given to the party submitting the first bid to purchase assets. The stalking horse bid can be used to solicit interest from other bidders and also acts as an indicator for what will be realized on the auction floor.
Trustee
A court appointed official who acts as a liaison officer between the debtor and the creditor. Their primary function is to act as a disbursement officer. He/She collects payments from the debtor and distributes the money amongst creditors. In some cases he may even help in valuing assets or creating repayment schedules.
Unsecured claim
A debt secured by property that is worth less than the amount of debt.
