The Bankruptcy Dictionary - Explanations of Bankruptcy Terms
Tap to Call - (877) 250-8242

The Bankruptcy Dictionary

Bankruptcy can be a complex process, especially when it comes to the legal jargon of a case. However, if you're considering filing bankruptcy, it's important to know what to expect.

These common bankruptcy terms will help you understand some of the requirements and legal processes involved in bankruptcy. Connect with a local lawyer to learn how these terms may apply to you.

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


341 Meeting

This is the first meeting of the creditors. The debtor is required to attend the meeting where his or her debtors will likely attend. If the debtor doesn't show up, usually his or her bankruptcy case is dropped by the bankruptcy court. The meeting is usually held within a month of the official bankruptcy filing or after the debtor files his or her schedules of financial information.

Absolute Priority

This bankruptcy term refers to the order of payment to different creditors, which is determined by the U.S. Bankruptcy Code. Generally, claims with higher priority are paid in full before "lesser" claims, allowing senior creditors to be paid first and junior creditors and shareholders to be paid second.

Here's the general order of payment in order of priority: administrative claims; statutory priority claims (tax claims, rent claims, consumer deposits and unpaid wages from before the filing); secured creditors' claims; unsecured creditor claims; and, lastly, equity claims.

Abusive Overdraft Loan

Small amount, short-term, high-interest loans given by banks to those who overdraw their accounts.

Abusive overdraft loans have become the norm for most banks, and cost consumers billions of dollars each year.

Adequate Protection

This term refers to the right of a person or company that has interest in the debtor’s property to assurance that its interest won’t be devalued during the debtor’s bankruptcy filing.

Adjustable Rate Mortgage (ARM)

A mortgage loan with a monthly payment that "adjusts" or changes from month to month. Compare to a fixed rate mortgage, in which payments remain constant throughout the lifetime of the loan.

When the housing market was strong, mortgage "innovations" like ARMs were marketed aggressively, often to borrowers who didn't fully understand and/or couldn't afford the loans. As a result, many borrowers defaulted on payments, which touched off the foreclosure crisis.

Administrative Claim/Administrative Expense Claim

This is debt that the debtor accumulates after the bankruptcy filing. The debtor must have court approval to take on the additional debt. Some examples of administrative claims are: necessary costs of preserving a home, salaries, court-related costs, bankruptcy lawyer or accountant fees and trustee expenses.

Adversary Proceeding

This is a document in a lawsuit in U.S. bankruptcy court. These proceedings are initiated by a person or company filing a complaint. It may be filed by the bankruptcy trustee, other parties or the debtor himself if he wants to formally complain that a creditor violated the automatic stay.

Allowed Claim/Allowed Interest

This is the claim of a creditor that the bankruptcy court approves to satisfy the plan of reorganization.

Arrangement

This can be a formal or informal agreement between creditors and the debtor about how a bankrupt company or person is permitted to operate while filing bankruptcy.

Asset

Any item of value owned by a person or entity.

In Chapter 7 bankruptcy, the trustee can convert non-exempt assets to cash to repay creditors.

Automatic Stay

An injunction (provision) of bankruptcy law that protects those who file bankruptcy from most collection actions, including garnishment, lawsuits, repossession, debt collection and foreclosure.

In most cases, an automatic stay goes into effect as soon as a bankruptcy case is filed.

Avoidance Power

The bankruptcy court has the power to invalidate certain debtor obligations and transactions that he or she made before filing bankruptcy. It’s typically intended to reverse transfers of property that may have promoted one creditor over another.

» Back to Top

Ballot Date

This is the date and time during a company bankruptcy reorganization that the bankruptcy court sets where all votes for accepting or rejecting the plan of reorganization must be delivered.

Bankrupt

This is a non-technical term that describes the person or company that files for bankruptcy protection.

Bankruptcy

A legal declaration by an individual (or a company) stating an inability to pay creditors. United States Bankruptcy Code provides several versions of bankruptcy to offer individuals a "fresh start" financially after receiving a bankruptcy discharge.

Individuals can file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, depending on their financial situation and goals for bankruptcy.

Bankruptcy Act of 1898

This was the base of federal bankruptcy law until the Bankruptcy Reform Act of 1978. It focused on the liquidation of businesses. Under this act, company reorganization could be effected indirectly through equity receiverships that were used to keep creditors from seizing assets of troubled companies.

Bankruptcy Act of 1933

This was an expansion of reorganization statutes for companies filing bankruptcy during the Great Depression. Both this act and the Bankruptcy Act of 1934 were superseded by the Chandler Act of 1938.

Bankruptcy Act of 1934

This was another statutory expansion of reorganization for companies during the Great Depression, which was overridden by the Chandler Act of 1938.

Bankruptcy Amendments of 1984

These amendments to the Bankruptcy Reform Act of 1978 consisted of provisions that allowed the prevention of "substantial abuse," limited the jurisdiction of the bankruptcy court and limited the right of companies to automatically invalidate labor contracts when filing bankruptcy.

Bankruptcy Code

After the Bankruptcy Reform Act of 1978, this was the given name to the body of U.S. bankruptcy laws.

Bankruptcy Court

This is the federal tribunal where bankruptcy cases are reviewed and litigated under the U.S. Bankruptcy Code.

Bankruptcy Estate

This term refers to the debtor's property that is subject to authority of the bankruptcy court.

Bankruptcy Petition

The legal forms that must be filed at court for a bankruptcy case to officially begin.

Once your bankruptcy lawyer has filed your bankruptcy petition with the court, you can expect different events from Chapter 13 bankruptcy cases and Chapter 7 bankruptcy cases.

Bankruptcy Reform Act of 1978

This act took effect on October 1, 1979, and is considered to be the first substantive bankruptcy law revision since the Chandler Act of 1938.

In the 1978 act, some of the major changes to the U.S. Bankruptcy Code included:

  • Allowing husband and wife to file a single joint bankruptcy petition
  • introducing Chapter 13 bankruptcy reorganization for individuals
  • allowing direct appeal to the U.S. Courts of Appeal
  • reorganizing the chapters of bankruptcy protection, specifically for business bankruptcy filings as Chapters 5, 6 and 7 were replaced by Chapter 11 bankruptcy
  • giving the bankruptcy court authority to deal with cases handled by other courts
  • making more extensive exemption provisions and options for debtors

Bankruptcy Reform Act of 1994

This act took effect on October 22, 1994, and was the most significant bankruptcy law revision since the Bankruptcy Reform Act of 1978. Most of the provisions went into effect immediately after it passed.

In the 1994 act, some of the major changes to the U.S. Bankruptcy Code included:

  • allowances for expedited bankruptcy filings
  • standardization of certain bankruptcy fees
  • provisions that encouraged people to file Chapter 13 bankruptcy over Chapter 7 bankruptcy (restructuring debt over discharging debt)
  • ways for creditors to recover claims against bankruptcy people and companies
  • creation of the National Bankruptcy Commission to investigate future changes in bankruptcy law

Bankruptcy Rule 2004

This was an added provision to the U.S. Bankruptcy Code which allowed one party in a bankruptcy case to compel discovery (or investigate) against another party.

Bankruptcy Tax Act of 1980

Because the Bankruptcy Reform Act of 1978 didn't specify how certain tax matters should be handled in bankruptcy cases, this act spelled it out. It specified the dealings of (among other tax issues) tax loss carry-forward and exchanges of equity for debt.

Bankruptcy Trustee

An individual appointed by the U.S. Department of Justice or by the creditors in a bankruptcy case to oversee the proceedings of the bankruptcy case.

In Chapter 7 bankruptcy cases, the trustee is in charge of gathering and distributing any non-exempt property. In Chapter 13 bankruptcy cases, the trustee must distribute the debtor's monthly payments to the creditors, and makes sure everyone involved adheres to bankruptcy laws.

BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act)

The new bankruptcy laws passed in October, 2005. BAPCPA introduced a qualifying "means test" for potential Chapter 7 bankruptcy filers, made credit card debt more difficult to discharge in bankruptcy filings and added the Credit Counseling and Debtor Education requirements. Detailed government site on BAPCPA.

Bar Date

This date is set by the bankruptcy court and is the last date that creditors can file a claim against the debtor.

Business Bankruptcy

The U.S. Administrative Office of the Courts divides bankruptcies into either business bankruptcy or non-business bankruptcy. Business bankruptcies involve companies filing under Chapter 7 or Chapter 11.

Business Failure

This is the economic assessment of the capability of a company. When a business is determined to be a "failure," it means that the business is earning below the normal rate of return or it is not meeting its debt obligations. Note: A failing company is not necessarily considered a bankrupt company, and vice-versa.

» Back to Top

Cash Collateral

Refers to cash and equivalents held by the debtor in Chapter 11 bankruptcy that are subject to creditors' liens.

Chandler Act of 1938

This act went into effect toward the end of the Great Depression and modified the Bankruptcy Act of 1898. It provided for substantial provisions for reorganization of businesses. Specifically, it allowed the Federal Trade Commission to assist federal courts in business reorganization.

Chapter

The U.S. Bankruptcy Code is organized into different chapters. Chapters 1, 3 and 5 generally involve matters of general application. Chapter 7 bankruptcy, Chapter 9 bankruptcy, Chapter 11 bankruptcy, Chapter 12 bankruptcy and Chapter 13 bankruptcy cover liquidation matters for personal bankruptcy and business bankruptcy, city/town bankruptcy, business reorganization, debt adjustments and personal reorganization, respectively.

Chapter 7 Bankruptcy

A type of bankruptcy sometimes referred to as "liquidation" bankruptcy because a bankruptcy trustee can liquidate (convert to cash) any non-exempt assets to help pay off debts.

In order to qualify for personal Chapter 7 bankruptcy, you must pass the Chapter 7 means test. Those who don't qualify for Chapter 7 bankruptcy can file under Chapter 13.

Chapter 9 Bankruptcy

This bankruptcy chapter focuses on bankruptcies of municipalities, like cities and towns. These are rare and usually only a few are filed each year.

Chapter 11 Bankruptcy

This bankruptcy chapter focuses on reorganization proceeding for businesses. Under this chapter, the debtor typically maintains control of the business while it’s restructured.

Chapter 12 Bankruptcy

This bankruptcy chapter is for family farmer bankruptcies and was created in 1986. Only family-owned farming or fishing businesses can file for this protection and it must have less than $1.5 million dollars in debt.

Chapter 13 Bankruptcy

A type of personal bankruptcy sometimes referred to as a "reorganization of debts." In Chapter 13 bankruptcy cases, debtors work with the bankruptcy court to develop a three to five year repayment plan to eliminate their obligations to creditors.

Chapter 13 bankruptcy generally allows filers to keep their homes and cars, and offers a chance to get caught up on debts.

Chapter 20 Bankruptcy

This is a slang term used to describe a person or business filing Chapter 7 bankruptcy then, shortly thereafter, filing Chapter 13 bankruptcy.

Chapter 22 Bankruptcy

This is a slang term used to describe a company that has filed Chapter 11 bankruptcy twice.

Chapter 33 Bankruptcy

This is a slang term that describes a company that has filed for Chapter 11 bankruptcy protection three times.

Checkbook Loan

A term introduced in Illinois to rebrand loans offered by payday loan stores in efforts to skirt state regulations against payday loans..

Claims

Debtors can file these rights to repayment against a debtor. Claims can be secured, unsecured, liquidated, unliquidated, matured, unmatured, fixed, contingent, subordinated, legal or equitable.

Class

Creditor claims are given categories, or classes, and then are ranked by priority of payment.

Collateral

An asset given as security for a loan. In a mortgage loan, the house is considered collateral for a loan: if the borrower doesn't repay the loan as agreed, he will likely lose the house. The borrower has an incentive to keep up with payments: being able to live in the house.

Confirmation

This is the bankruptcy court's final approval for a plan of reorganization. Creditors must approve the plan before the court does so.

Contested Matter

Any dispute among the involved parties that is initiated by the filing of a motion to the bankruptcy court.

Convenience Claims

Often called small claims, convenience claims are around hundreds or low thousands of dollars and are usually grouped into a single class and settled for cash.

Conversion

This involves changing chapters in bankruptcy when you are already involved in a bankruptcy filing.

Core Proceedings

These are proceedings that are fundamental in a filing bankruptcy case. They are subject to the jurisdiction of the bankruptcy court.

Cosigner

One who literally co-signs loan papers with somebody else. Legally, a cosigner is responsible for making payments on a loan if the primary borrower is unable to do so.

People rebuilding after bankruptcy can sometimes qualify for more attractive loan terms by enlisting a cosigner with a strong credit history.

Cramdown

This refers to the bankruptcy court confirming a plan of reorganization over the objection of creditor(s).

Credit Counseling Briefing

Sometimes called the "ticket in" to the bankruptcy process. The Credit Counseling Briefing must be completed before you file your bankruptcy petition for a judge to accept your case. Credit Counseling Briefings can be completed on the Internet, over the phone or in person. Click here to purchase an approved Credit Counseling Briefing.

If your Credit Counseling Briefing is not completed in the allotted time, your bankruptcy judge is likely to throw out your bankruptcy case.

Creditors' Committee

This is a committee of representatives for the creditors that is appointed by the trustee. The committee works on behalf of all of the debtor's creditors to negotiate a plan of reorganization.

Credit Report

A record of your credit history which includes your payment actions on a variety of credit sources, including credit cards, mortgage loans, rent, car loans and more. The Fair Credit Reporting Act of 2003 mandated that all consumers have access to one free credit report per year from each of the big three credit reporting agencies (Equifax, Experian and TransUnion).

Checking your credit report regularly is essential to your credit health. Regular checks can help you avoid identity theft and make sure your information is being reported accurately. Identity theft and mistakes on your credit report could end up costing you thousands in stolen funds and unfavorable loan terms. Credit reports are becoming more important in the financial landscape of the United States.

Credit Reporting Agency (Credit Bureau)

An organization that collects, documents and reports consumer credit information. CRAs offer free credit reports to consumers, which are available at www.annualcreditreport.com.

The three major CRAs are TransUnion, Equifax and Experian. Note that the website listed above is the only site on the web that guarantees you a free credit report with no strings attached. Sites with similar names advertise free credit reports, but often charge you for products and services you don't need.

Credit Score

A number between 300 and 850 that measures the credit risk of an individual consumer. The number is calculated with a formula developed by the Fair Isaac Corporation, and is used by lenders to assess how much potential borrowers can afford.

Borrowers with low credit scores are considered "subprime," and are considered high lending risks. Those with high credit scores are considered "prime," and generally qualify for more favorable loan terms and larger loans.

Creditor

Someone to whom a debtor owes money.

In Chapter 13 bankruptcy cases, filers work within a repayment plan to satisfy most or all of their financial obligations to creditors.

» Back to Top

Debtor

Someone who owes money to a creditor.

Many people file for bankruptcy in order to clear debt by repaying the money they owe their creditors or by receiving a discharge from the bankruptcy court.

Debtor-In-Possession

This refers to the debtor who is in control of operations.

Debtor Education

A requirement of the BAPCPA, the Debtor Education course must be completed by every bankruptcy petitioner. You cannot receive your bankruptcy discharge until you have completed the Debtor Education course.

The course is designed to prepare bankruptcy filers for life after bankruptcy. The skills taught in the Debtor Education course include debt management and money-handling, and are intended to help filers take advantage of the fresh start bankruptcy provides.

Default

The failure to meet financial obligations. Also, the state of being behind on payments: if you miss a certain number of loan payments, you will have defaulted on your loan and your loan will be in default. Also when a person or business fails to abide by the provisions in a debt obligation or other financial agreement, like non-payment of interest or principal.

Once a loan has gone into default, the lender can take collection action, including repossession, foreclosure or garnishment, depending on the type of loan.

Discharge

1. Exit from bankruptcy. You will receive your discharge after cooperating with all the terms and conditions of the bankruptcy court.

2. The elimination of debt. In Chapter 7 bankruptcy filings, unsecured debts can be discharged, or excused by a bankruptcy judge. In a Chapter 13 bankruptcy, some debt will be repaid over time, at the end of which any remainder may be discharged.

Dischargeable

Legally excusable, as debts. In Chapter 7 bankruptcy cases, for example, most credit card debt, medical bills and most personal loans are dischargeable. Student loans, child support and most tax debt are usually considered non-dischargeable.

When a debt is discharged during bankruptcy, the debtor is cleared of his payment obligation.

Disclosure Statement

This is a comprehensive document detailing the plan of reorganization that is sent to creditors when they are asked to vote on the plan.

Dismissal

This refers to the termination of a bankruptcy filing. Cases can be dismissed if the bankruptcy court deems that the debtor or three creditors shouldn’t have filed bankruptcy or if a restructuring plan is unable to be worked out.

Distressed

This is a non-legal term used to describe securities, companies or people who are close to filing bankruptcy.

Docket

This is the schedule to which the bankruptcy court clerk records all court filings.

» Back to Top

Effective Date

This is the date when the plan of reorganization is put into effect. It typically happens when all the conditions of the plan have been met.

Equitable Subordination

This involves the lowering of a priority of a claim because the creditor who holds the claim took part in improper conduct.

Equity

An asset's value aside from anything owed on it (mortgages, liens, etc.).

If you've been paying off a mortgage loan for several years, you probably have some equity in your home. In other words, if you could sell something for more than it would cost you to pay off anything you owed on it (such as mortgages and liens), you have equity in that asset.

Examiner

This is a professional that the bankruptcy court appoints to oversee the debtor and his or her bankruptcy proceedings.

Exchange Offer

An issuer of debt securities makes this offer to exchange new securities with less arduous provisions for the current securities. Companies often do this to avoid filing bankruptcy.

Exclusivity

This is period where a Chapter 11 bankruptcy filer has the right to file a plan of reorganization, typically during the first 120 days of the company’s bankruptcy. After the 120 days, other parties can file reorganization plans.

Executory Contract

This is a contract where some or all obligations of all parties haven’t been completed. The debtor and trustee are allowed to reject certain contracts.

Exemptions

Assets that the bankruptcy court cannot liquidate during a Chapter 7 bankruptcy case.

Each state has unique bankruptcy laws that provide exemptions, but filers are commonly excused from having their homes, work tools and some personal property liquidated, among other items.

» Back to Top

Failure

This is the financial assessment of the viability of a business where it's determined that the company isn’t earning the rate of return or paying its bills. Note: Just because a business is considered a failure, doesn’t mean that it's bankrupt.

FICO Score

Your credit score, as calculated by the Fair Isaac Corporation. The FICO score is the most commonly used among lenders for determining borrowers' level of risk.

This is the number between 300 and 850. Scores on the higher end of this spectrum will qualify you for favorable loan terms, while lower scores will likely make it more difficult for you to get loans.

First Meeting of Creditors

Sometimes referred to as the 341 meeting, this is a meeting the debtor must attend. It’s where the creditors meet with the debtor and it usually occurs within a month of the official bankruptcy filing date or after the debtor files his or her schedules of financial information. If a debtor fails to show up to the meeting, the bankruptcy court will usually dismiss the case.

Fixed Rate Mortgage

The "traditional" home loan plan, fixed rate mortgages require borrowers to pay a constant payment over the life of the loan (usually about 30 years). Compare to "adjustable rate mortgage."

The nontraditional, non-fixed rate loans offered to many borrowers during the recent housing boom were referred to as "innovations" in the mortgage market. In reality, these "innovations" seriously contributed to the current credit crunch and foreclosure crisis.

Foreclosure (Mortgage Foreclosure)

The process followed by a bank or mortgage company to reclaim ownership of a house when a homeowner hasn't followed the terms of the mortgage agreement. In most cases, foreclosures result when homeowners can't make monthly mortgage payments.

The so-called foreclosure crisis and credit crunch gripping the United States can be attributed in part to vast speculation in the mortgage market and the marketing of non-traditional home loans to buyers who had no idea what they were getting into.

Fraudulent Conveyance

This term refers the transfer of significant assets from a company, which occurs when the company is considered technically insolvent or when the transfer is made for less than satisfactory consideration.

Free Examiner

The bankruptcy court appoints a fee examiner to monitor the fees paid to bankruptcy professionals.

Fresh Start

This is the casual term for new accounting policies that apply to bankruptcy. Assets are appreciated at market value rather than at a historical rate.

» Back to Top

Gap Period

This is the period after the filing of an involuntary petition and before the dismissal of the petition.

Garnishment

When money owed a debtor (like part of a paycheck) is ordered given to a creditor (like a credit card company) to cover some of the debt owed.

If you owe money and your wages are garnished, they will be given directly to your creditor. Bankruptcy's automatic stay will stop most garnishments.

Going Concern Value

This is the worth of a company if it were sold as a continuing business, rather than its liquidation value.

» Back to Top

Identity Theft

The crime of using someone's identification information (Social Security Number, bank account information, credit card numbers, etc.) to pose as that person. Once stolen, an identity can be used to open credit accounts, drain current accounts, run up debt and much more.

Checking your credit report on a regular basis is one of the best ways to make sure you aren't victimized by identity theft.

Impairment

This is when a plan of reorganization alters the contractual rights of creditors that are deemed to be impaired. An unimpaired creditor is reasoned to agree automatically to a plan of reorganization.

Insolvency

This is a term used to describe a failing debtor. It means that the debtor obligations exceed his or her assets and/or the debtor can’t pay his or her bills. Also see bankruptcy definition.

Interests

In bankruptcy documents, this usually refers to the equity interest of stockholders.

Involuntary Bankruptcy

This is when bankruptcy proceedings are started by three or more creditors against a debtor. In order for this to be accepted by the bankruptcy court, the debtor must have unsecured debt of at least $5,000.

» Back to Top

Joint Administration

This is when bankruptcy proceedings are combined for ease of administration. Oftentimes, this happens with affiliated companies. Note: This joint administration doesn't mean that both cases would automatically have the same outcomes.

» Back to Top

Lien

A claim or mortgage on property in exchange for debt owed.

Liens can be voluntary or involuntary; home mortgages and auto loans, for example, are voluntary liens. You agree that your creditor can have the house or car back if you can't make payments. Involuntary liens result when a judge rules that you must surrender property to a creditor (as in a lawsuit).

Liquidation

The act of converting an asset to cash.

In Chapter 7 bankruptcy, the trustee can liquidate a filer's non-exempt assets to pay off creditors. In many Chapter 7 cases, though, filers don't have any non-exempt assets, so liquidation rarely occurs in practice.

Liquidation Value

This term refers to the collective value of a business if its assets are gradually sold.

» Back to Top

Mass Layoffs

When a company or organization is forced to let go a large number of workers at the same time, usually because of financial difficulty or reorganization.

For updates on mass layoffs statistics, you can visit the Bureau of Labor Statistics.

Matrix

This is a mailing list of a debtor’s creditors.

Means Test

Part of the BACPA, the Chapter 7 means test is used to determine who qualifies for protection under Chapter 7 of the U.S. Bankruptcy Code. It's based on median income comparisons, disposable income available and unsecured debts owed.

You must "pass" the means test to file for Chapter 7 bankruptcy.

Medical Bankruptcy

Bankruptcy caused by debts incurred from medical expenses.

Studies have found that medical bankruptcy is the second most common causal factor of bankruptcy in the United States. As many as half of all bankruptcy filings could be attributed mainly to medical expenses. Follow this for more information on medical bankruptcy.

Mortgage

A pledge to pay (loan) backed by real estate. If you have a mortgage on your home, you risk losing the property if you don't comply with the terms of the pledge (loan).

Most people use mortgages to pay for houses because few people can afford to pay the full price of a home in cash.

» Back to Top

National Bankruptcy Review Commission

This is an independent commission that was established after the Bankruptcy Reform Act of 1994. Its purpose was to investigate issues relating to U.S. bankruptcy law. The committee stopped operating on November 19, 1997.

Net Operating Loss (NOL)

Also referred to as tax loss carry-forward, NOL is losses that can be carried forward and applied to reduce taxable income in the future. There is strict governmental regulation on the use of these tax loss carry-forwards.

Non-Business Bankruptcy

The U.S. Administrative Office of the Courts divides bankruptcies into either business bankruptcy or non-business bankruptcy. Non-business bankruptcies involve an individual debtor or a family farm.

Non-Dischargeable Debt

Debt that is legally unable to be excused in the bankruptcy court.

In Chapter 7 bankruptcy cases, child support, tax debt and student loans are usually non-dischargeable and must eventually be paid by the filer.

Non-Revolving Credit

A line of credit that requires monthly payments and does not allow repaid funds to be drawn down again from the credit limit.

Some credit cards are revolving credit charge cards, which means that there is no interest to be paid, but the entire balance has to be paid off at the end of each month. Also called closed account credit cards.

» Back to Top

PACER (Public Access to Court Electronic Records)

This service gives specific bankruptcy case filing information. For more information, visit PACER.

Payday Loan

Offered by payday lending stores, these short-term, small-dollar amount, high interest loans are marketed to those who need cash between paychecks. In reality, they can lead to a devastating cycle of debt that can be difficult to escape.

Many states have taken legislative action to restrict or eliminate payday lending action, and understandably so - annual interest rates on payday loans can be as high as 390%! Visit these links for a more detailed look at payday lending stores and the practices used by payday lenders.

Period of Exclusivity

See exclusivity

Personal Bankruptcy

This is a bankruptcy that is filed by an individual or household. It’s also called a consumer bankruptcy or wage-earner bankruptcy.

Petition

This document begins the bankruptcy proceeding.

Plan of Reorganization

This document lays out how a bankrupt entity will satisfy its creditors.

Post-Petition

As the name implies, this is a period that occurs after the filing of a petition.

Predatory Lending

Though no legal definition exists for predatory lending, it usually refers to tactics used by lenders to convince borrowers to agree to unfavorable (read "expensive") loan terms or to deceive the borrower in some way for profit. Examples of predatory lending include lying about the terms of a loan included on documents a borrower must sign and targeting specific groups of people with expensive loans.

Payday loans, some credit cards, some subprime mortgages and abusive overdraft loans have all been used as examples of predatory loans.

Preference

This occurs when a debtor pays a creditor during a specific period before filing bankruptcy and it favors one creditor over other creditors. These payments are often reversed by the bankruptcy court.

Prepackaged Bankruptcy

This is when a debtor and his or her creditors agree to a repayment plan or plan of reorganization before the debtor files bankruptcy.

Pre-Petition

As the name implies, this is a period that occurs before the bankruptcy petition is filed.

Priority Claims

These are claims that are related to administration expenses, employee benefits, salaries, wages, customer deposits and taxes that occur pre-bankruptcy petition.

Pro Rata

This is a Latin word that means "proportionately".

Proof of Claim

This is a form filed by a creditor that lays out its claims against a debtor filing bankruptcy.

» Back to Top

Receiver

This is another term for the person appointed by the bankruptcy court that takes guardianship of the debtor’s property.

Reorganization

This is when a Chapter 11 bankruptcy filer successfully fixes his or her business’ financial problems. Typically, the troubled business agrees to a payment plan with its creditors and gets out of Chapter 11 bankruptcy when the plan of reorganization is confirmed by the bankruptcy court.

Repossession

The reclamation of ownership of property when payments aren't made on time. If you default on your car loan, your lender might repossess your car. Bankruptcy's automatic stay is intended to stop repossession actions.

Restructuring

This term is used when the debtor and creditors agree to reorganize debts outside of bankruptcy court.

Retired Benefits Bankruptcy Protection Act

This act was passed on June 16, 1988 and allows a debtor to continue to pay employees’ insurance premiums during the bankruptcy proceedings.

Reverse Leveraged Buyout

This is when a leveraged buyout company streamlines its debt by issuing fresh equity in exchange for a portion (or all) of the debt it incurred during the initial leveraged buyout.

Revolving Credit

A line of credit that allows spending and repayment as desired with a variable minimum payment and a service charge.

Credit cards are the most popular form of revolving credit, but checking account cash reserves and pre-approved overdraft accounts also are standard revolving credit lines for consumers.

» Back to Top

Schedules

In bankruptcy, these are the documents filed with the court that contain information on your assets, debts and income.

Once your bankruptcy attorney has filed your bankruptcy petition, he or she will file schedules and other paperwork throughout your case.

Section 304

This section of the U.S. Bankruptcy Code deals with multinational bankruptcies.

Secured Creditors

These creditors have lien(s) on the property of the debtor.

Secured Debt

Any debt backed by collateral (material goods).

A mortgage loan is secured, backed by the house. Securitization of debts reduces the risk for lenders, since the collateral can be repossessed if the borrower fails to comply with the terms of the loan.

Set-Off

This occurs when debt is discharged or reduced when a counter claim is applied between the same parties.

Skeleton Filing

The bankruptcy court uses this term to describe a bankruptcy case where not all of the required forms have been filed.

Small Claims

This term refers to claims that are in the hundreds or low thousands of dollars range. They are often grouped together and settled for cash.

Straight Bankruptcy

This is an unofficial term for a Chapter 7 bankruptcy.

Subprime Loan

A loan given to someone with a low credit score or shaky credit history. Subprime loans have less favorable (more expensive) terms than prime loans because they pose a bigger risk for lenders.

During the recent housing market boom, subprime lending grew tremendously in popularity. Unfortunately, the strong market eventually weakened and the subprime loans were seen for the risky ventures they were. Now, lenders and investors lost billions, and millions of American families are struggling to save their homes from foreclosure.

Substantial Abuse

This term refers to a filer abusing the bankruptcy law or committing fraud in a bankruptcy case.

Substantive Consolidation

This occurs when one debtor combines his property with another debtor's property and the mixture results in that satisfaction of their combined liabilities. This is usually considered an option with parent/subsidiary debtors and other affiliated entities.

Super Priority Claim

This is an administrative claim that is paid ahead of the other claims.

» Back to Top

Tax Loss Carry-Forward

These are losses that can be advanced forward and applied to reduce taxable income in later years.

Trustee

This refers to the agent of the court who oversees the debtor’s property for the advantage of the creditors.

» Back to Top

United States Trustee

This is an employee of the U.S. Department of Justice that administers the duties of the bankruptcy court in most >Chapter 7 bankruptcy and Chapter 11 bankruptcy cases. The U.S. Trustee appoints committees, trustees and examiners and dissects court filings, among other tasks.

Unsecured Creditor

These creditors don't have liens on the property of the debtor.

Unsecured Debt

Any debt not backed by collateral. Credit card debt is unsecured, since creditors cannot repossess any property as a direct exchange for debt owed. A creditor could sue to get property in exchange from unsecured debt.

United States Bankruptcy Code

The collection of statutes and regulations that governs how bankruptcy courts in the United States run.

Click here to view the full U.S. Bankruptcy Code.

» Back to Top

VCIS (Voice Case Information System)

This is a telephone service provided by the bankruptcy court that gives specific case filing information.

Voluntary Bankruptcy

This is when a debtor files bankruptcy on his or her behalf.

» Back to Top

Wage-Earner Bankruptcy

Please see the Chapter 13 bankruptcy and personal bankruptcy terms.

Workout

This is an arrangement with a creditor that takes place outside of the bankruptcy court to reschedule a debtor's payment plan or reduce his or her debt.


Free Case Evaluation

Tap to Call - (877) 250-8242

Disclaimer: The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or should be formed by use of the site. The attorney listings on the site are paid attorney advertisements. Your access of/to and use of this site is subject to additional Supplemental Terms.