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meeting A meeting of creditors at which the
debtor is questioned under oath by creditors, a
trustee, examiner, or the United States trustee
about his/her financial affairs. Usually only
the debtor, the trustee and the debtor's attorney
are present. This meeting usually only
takes five to ten minutes of your time and requires
you to answer the trustees questions under oath.
Your name is not "Clinton", so there will
be no way around a charge of perjury should you not
answer all questions truthfully.
proceeding A lawsuit
arising in or related to a bankruptcy case that is
commenced by filing a complaint with the court to
determine such things as whether a particular debt
is dischargeable. For instance,
creditors may file such an action in the event they
feel you have defrauded them.
Transfers Transfers to insiders (i.e.,
relatives, general partners, and directors or
officers of the debtor) made up to a year prior to
filing can be avoided. 11 U.S.C. §§ 101(31),
101(54), 547, 548. In addition, under 11 U.S.C. §
544, the trustee is given the authority to avoid
transfers under applicable state law, which often
provides for longer time periods. Avoiding powers
are used, for example, to prevent unfair prepetition
payments to one creditor at the expense of all other
creditors. Should the trustee
decide to avoid a transfer, he will take steps to go
after the property transferred or the payment made.
stay An injunction that automatically stops
lawsuits, foreclosure, garnishments, and all
collection activity against the debtor the moment a
bankruptcy petition is filed.
A legal procedure for dealing with debt problems of
individuals and businesses; specifically, a case filed
under one of the chapters of title 11 of the United
States Code (the Bankruptcy Code).
The informal name for title 11 of the United States
Code (11 U.S.C. §§ 101 - 1330), the federal
The bankruptcy judges in regular active service in
each district; a unit of the district court.
estate All legal or equitable interests of the
debtor in property at the time of the bankruptcy
filing. (The estate includes all property in which the
debtor has an interest, even if it is owned or held by
another person.) The bankruptcy estate
also includes all property to which you are entitled
at the time of filing. It also
includes an inheritance, even if the decedent died
within six months after filing the bankruptcy.
A judicial officer of the United States district court
who is the court official with decision-making power
over federal bankruptcy cases.
A business not authorized to practice law that
provides bankruptcy counseling and prepares bankruptcy
petitions. Only an attorney is in a
position because of his education to give you legal
advice. Bankruptcy mills often get debtors
into serious trouble; if you file or file the
wrong bankruptcy you may find that you will lose some
petition A formal request for the protection of
the federal bankruptcy laws. (There is an official
form for bankruptcy petitions.)
trustee A private individual or corporation
appointed in all chapter 7, chapter 12, and chapter 13
cases to represent the interests of the bankruptcy
estate and the debtor's creditors.
bankruptcy A bankruptcy case in which the debtor
is a business or an individual involved in business
and the debts are primarily for business purposes.
cash collateral Section
363 defines "cash collateral" as cash,
negotiable instruments, documents of title,
securities, deposit accounts, or other cash
equivalents, whenever acquired, in which the estate
and an entity other than the estate have an interest.
It includes the proceeds, products, offspring, rents,
or profits of property and the fees, charges, accounts
or payments for the use or occupancy of rooms and
other public facilities in hotels, motels, or other
lodging properties subject to a creditor's security
Completion After you take either the
Financial Counseling Course or the Financial
Management Course a certificate will be given to you.
If you do not present the certificates to the court,
your bankruptcy will be dismissed or you will be
denied a discharge.
The chapter of the Bankruptcy Code providing for
"liquidation," i.e., the sale of a debtor's
nonexempt property and the distribution of the
proceeds to creditors. Top
chapter 7 trustee A person
appointed in a chapter 7 case to represent the
interests of the bankruptcy estate and the unsecured
creditors. (The trustee's responsibilities include
reviewing the debtor's petition and schedules,
liquidating the property of the estate, and making
distributions to creditors. The trustee may also bring
actions against creditors or the debtor to recover
property of the bankruptcy estate.)
chapter 11 A
reorganization bankruptcy, usually involving a
corporation or partnership. (A chapter 11 debtor
usually proposes a plan of reorganization to keep its
business alive and pay creditors over time. People in
business or individuals can also seek relief in
chapter 12 The
chapter of the Bankruptcy Code providing for
adjustment of debts of a "family farmer," as
that term is defined in the Code.
chapter 13 The
chapter of the Bankruptcy Code providing for
adjustment of debts of an individual with regular
income. (Chapter 13 allows a debtor to keep property
and pay debts over time, usually three to five years.)
trustee A person appointed to administer a chapter
13 case. (A chapter 13 trustee's responsibilities are
similar to those of a chapter 7 trustee; however, a
chapter 13 trustee has the additional responsibilities
of overseeing the debtor's plan, receiving payments
from debtors, and disbursing plan payments to
A creditor's assertion of a right to payment from
a debtor or the debtor's property.
The first or initiatory document in a lawsuit that
notifies the court and the defendant of the grounds
claimed by the plaintiff for an award of money or
other relief against the defendant.
Approval of a plan of reorganization by a bankruptcy
judge. No payments to creditors are made by the
trustee to creditors until the plan is
bankruptcy A bankruptcy case filed to reduce or
eliminate debts that are primarily consumer debts.
debts Debts incurred for personal, as opposed to
claim A claim that may be owed by the debtor under
certain circumstances, for example, where the debtor
is a cosigner on another person's loan and that person
fails to pay.
The action by which the
court may order a plan approved over the negative vote
of a class of dissenting creditors.
A person to whom or business to which the debtor owes
money or that claims to be owed money by the debtor.
Committees Creditors' committees can play a major
role in chapter 11 cases. The United States trustee, a
federal employee to be distinguished from a private
case trustee or panel trustee, appoints the committee,
which ordinarily consists of unsecured creditors who
hold the seven largest unsecured claims against the
debtor. 11 U.S.C. § 1102. The committee may consult
with the debtor in possession on the administration of
the case, investigate the conduct of the debtor and
the operation of the business, and participate in the
formulation of a plan. 11 U.S.C. § 1103. A creditors'
committee may, with the court's approval, hire an
attorney or other professionals to assist in the
performance of the committee's duties. A creditors'
committee can be an important safeguard to the proper
management of the business by the debtor in
Current Monthly Income (CMI) The
Current Monthly Income is used to calculate the Means
Test. It include all income that you
receive on a regular basis. It is
total gross income, whether or not subject to taxes,
received from all sources for the six-month period
ending on the last day of the month preceding the
month in which the petition is filed, divided by six.
A person who has filed a petition for relief under the
bankruptcy laws. Top
in possession The term refers to a debtor that
keeps possession and control of its assets while
undergoing a reorganization under chapter 11, without
the appointment of a case trustee. A debtor will
remain a debtor in possession until the debtor's plan
of reorganization is confirmed, the debtor's case is
dismissed or converted to chapter 7, or a chapter 11
trustee is appointed. The appointment or election of a
trustee occurs only in a small number of cases.
Generally, the debtor, as "debtor in
possession," operates the business and performs
many of the functions that a trustee performs in cases
under other chapters.
An individual (or business) against whom a lawsuit is
A release of a debtor from personal liability for
certain dischargeable debts. (A discharge releases a
debtor from personal liability for certain debts known
as dischargeable debts (defined below) and prevents
the creditors owed those debts from taking any action
against the debtor or the debtor's property to collect
the debts. The discharge also prohibits creditors from
communicating with the debtor regarding the debt,
including telephone calls, letters, and personal
debt A debt for which the Bankruptcy Code allows
the debtor's personal liability to be eliminated.
of a Chapter 13 The court will dismiss a Chapter
13 if a debtor stops paying the required payments to
statement A written document prepared by the
chapter 11 debtor or other plan proponent that is
designed to provide "adequate information"
to creditors to enable them to evaluate the chapter 11
plan of reorganization.
The value of a debtor's interest in property that
remains after liens and other creditors' interests are
considered. (Example: If a house valued at $60,000 is
subject to a $30,000 mortgage, there is $30,000 of
The appointment of an examiner in a chapter 11 case is
rare. The role of an examiner is generally more
limited than that of a trustee. The examiner is
authorized to perform the investigatory functions of
the trustee and is required to file a statement of any
investigation conducted. If ordered to do so by the
court, however, an examiner may carry out any other
duties of a trustee that the court orders the debtor
in possession not to perform. 11 U.S.C. § 1106. Each
court has the authority to determine the duties of an
examiner in each particular case. In some cases, the
examiner may file a plan of reorganization, negotiate
or help the parties negotiate, or review the debtor's
schedules to determine whether some of the claims are
improperly categorized. Sometimes, the examiner may be
directed to determine if objections to any proofs of
claim should be filed or whether causes of action have
sufficient merit so that further legal action should
be taken. An examiner may not serve as a trustee.
contract or lease Generally includes contracts or
leases under which both parties to the agreement have
duties remaining to be performed. (If a contract or
lease is executory, a debtor may assume it or reject
A description of any property that a debtor may
prevent creditors from recovering.
Property that the Bankruptcy Code or applicable state
law permits a debtor to keep from creditors.
property Property or value in property that a
debtor is allowed to retain, free from the claims of
creditors who do not have liens.
sheet filing A bankruptcy case filed either
without schedules or with incomplete schedules listing
few creditors and debts. (Face sheet filings are often
made for the purpose of delaying an eviction or
foreclosure.) family farmer An individual, individual
and spouse, corporation, or partnership engaged in a
farming operation who meet certain debt limits and
other statutory criteria for filing a petition under
Financial Counseling Course
This is a required session with an approved counselor
to determine whether you have the ability to pay your
debts without the need of bankruptcy. This
course must be done within 180 days before the filing
of your bankruptcy.
Financial Management Course
This is also a required session with an approved
provider to give you instructions on how to handle
your finances. You must attend this
session after the filing of your bankruptcy and before
the date of the discharge or the discharge will not be
transfer A transfer of a debtor's property made
with intent to defraud or for which the debtor
receives less than the transferred property's value.
start The characterization of a debtor's status
after bankruptcy, i.e., free of most debts. (Giving
debtors a fresh start is one purpose of the Bankruptcy
The way the various exemption acts refer to your
principal residence whether it be a house, apartment,
condo or other real property.Top
(of individual debtor) Any relative of the debtor
or of a general partner of the debtor; partnership in
which the debtor is a general partner; general partner
of the debtor; or corporation of which the debtor is a
director, officer, or person in control. Top
claims Claims which will have their contractual
rights modified or which will be paid less than the
full value under a Chapter 11 reorganization.
(of corporate debtor) A director, officer, or
person in control of the debtor; a partnership in
which the debtor is a general partner; a general
partner of the debtor; or a relative of a general
partner, director, officer, or person in control of
administration A court-approved mechanism under
which two or more cases can be administered together.
(Assuming no conflicts of interest, these separate
businesses or individuals can pool their resources,
hire the same professionals, etc.) Top
petition One bankruptcy petition filed by a
husband and wife together.
A charge upon specific property designed to secure
payment of a debt or performance of an obligation. Top
liquidation A sale
of a debtor's property with the proceeds to be used
for the benefit of creditors.
claim A creditor's claim for a fixed amount of
Means Test is designed to
determine an ability to pay debts and,
therefore, whether the filing of a petition under
Chapter 7 presumptively constitutes an
abuse. The process involves the
computation of Current Monthly Income, deducting
allowable monthly expenses to find a monthly net
Median Family Income The
median income in the state in which the debtor resides
for a family of the same or smaller size reported by
the Bureau of the Census for the most recent year.
to lift the automatic stay A request by a creditor
to allow the creditor to take an action against a
debtor or the debtor's property that would otherwise
be prohibited by the automatic stay. Top
The party in a lawsuit or other legal proceeding who
makes a motion (application for a court order or
case A chapter 7 case where there are no assets
available to satisfy any portion of the creditors'
unsecured claims. Top
debt A debt
that cannot be eliminated in bankruptcy.
to discharge A trustee's or creditor's objection
to the debtor's being released from personal liability
for certain dischargeable debts. Top
to exemptions A trustee's or creditor's objection
to a debtor's attempt to claim certain property as
exempt, i.e., not liable for any prepetition debt of
for relief An order issued by the court following
the filing of a Chapter 11 petition.
in interest A party who is actually and
substantially interested in the subject matter, as
distinguished from one who has only a nominal on
technical interest in it. Top
A debtor's detailed description of how the debtor
proposes to pay creditors' claims over a fixed period
A person or business that files a formal complaint
with the court.
transfer A transfer of a debtor's property made after
the commencement of the case.
planning The arrangement (or rearrangement) of a
debtor's property to allow the debtor to take maximum
advantage of exemptions. (Prebankruptcy planning
typically includes converting nonexempt assets into
debt payment A debt payment made to a creditor in
the 90-day period before a debtor files bankruptcy (or
within one year if the creditor was an insider) that
gives the creditor more than the creditor would
receive in the debtor's chapter 7 case.
The Bankruptcy Code's statutory ranking of
unsecured claims that determines the order in which
unsecured claims will be paid if there is not enough
money to pay all unsecured claims in full.
claim An unsecured claim that is entitled to be
paid ahead of other unsecured claims that are not
entitled to priority status. Priority refers to the
order in which these unsecured claims are to be paid.
of claim A written statement, filed by a creditor,
describing the reason a debtor owes the creditor
money. (There is an official form for this purpose.)
of the estate All legal or equitable interests of
the debtor in property as of the commencement of the
agreement An agreement by a chapter 7 debtor to
continue paying a dischargeable debt after the
bankruptcy, usually for the purpose of keeping
collateral or mortgaged property that would otherwise
be subject to repossession. Top
creditor An individual or business holding a claim
against the debtor that is secured by a lien on
property of the estate or that is subject to a right
of setoff. Top
debt Debt backed by a mortgage, pledge of
collateral, or other lien; debt for which the creditor
has the right to pursue specific pledged property upon
Lists submitted by the debtor along with the petition
(or shortly thereafter) showing the debtor's assets,
liabilities, and other financial information. (There
are official forms a debtor must use.)
horse 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 a floor for what will be realized at
of financial affairs A series of questions the
debtor must answer in writing concerning sources of
income, transfers of property, lawsuits by creditors,
etc. (There is an official form a debtor must use.)
of intention A declaration made by a chapter 7
debtor concerning plans for dealing with consumer
debts that are secured by property of the estate.
lien A lien
arising under a statute, not including a security
interest or judicial lien. A real estate tax lien is
an example of a statutory lien.
The writing down of a secured debt to the value of
the asset that secures it. For example, if a secured
debt on a vehicle is $4,000 but the vehicle is only
worth $2,500 the debt could be set at $2,500.
substantial abuse The characterization of a
bankruptcy case filed by an individual whose debts are
primarily consumer debts where the court finds that
the granting of relief would be an abuse of chapter 7
because, for example, the debtor can pay its debts.
consolidation Putting the assets and liabilities
of two or more related debtors into a single pool to
pay creditors. (Courts are reluctant to allow
substantive consolidation since the action must not
only justify the benefit that one set of creditors
receives, but also the harm that other creditors
suffer as a result.)
Any mode or means by which a debtor disposes of or
parts with his/her property. Top
The representative of the bankruptcy estate who
exercises statutory powers, principally for the
benefit of the unsecured creditors, under the general
supervision of the court and the direct supervision of
the United States trustee or Bankruptcy Administrator.
service A business not authorized to practice law
that prepares bankruptcy petitions.
States trustee An officer of the Justice
Department responsible for supervising the
administration of bankruptcy cases, estates, and
trustees, monitoring plans and disclosure statements,
monitoring creditors' committees, monitoring fee
applications, and performing other statutory duties. Top
claim A debt secured by property that is worth
less than the amount of the debt.
detainer action A lawsuit brought by a landlord
against a tenant to evict the tenant from rental
property--usually for nonpayment of rent.
claim A claim for which a specific value has not
debt A debt that should have been listed by a
debtor in the schedules filed with the court but was
not. (Depending on the circumstances, an unscheduled
debt may or may not be discharged.)
claim A claim or debt for which a creditor holds
no special assurance of payment, such as a mortgage or
lien; a debt for which credit was extended based
solely upon the creditor's assessment of the debtor's
future ability to pay.
transfer A transfer of a debtor's property with
the debtor's consent. Top