Glossary of Terms

Arrears
The amount a debtor is behind on a debt.

Asset case
A bankruptcy proceeding in which there are non-exempt assets that might be available to pay the claims of creditors.

Automatic stay
The injunction issued automatically upon the filing of a bankruptcy case. An automatic stay prohibits collection actions against the debtor, the debtor’s property or the property of the estate.

Bankruptcy code
Title 11 of the United States Code governs bankruptcy proceedings.

Bankruptcy estate
The estate is all of the legal and equitable interests in the assets of the debtor as of the commencement of the case. From the estate, an individual debtor can claim certain property exempt; the balance of the estate is liquidated in a Chapter 7 to pay the administrative costs of the proceeding and the claims of creditors according to their priority.

Chapter 7
The most common form of bankruptcy, a Chapter 7 case is a liquidation proceeding — available to individuals, married couples, partnerships and corporations.

Chapter 11
A reorganization proceeding in which the debtor may continue in business or in possession of his business’s property as a fiduciary. A confirmed Chapter 11 plan provides for the manner in which the claims of creditors will be paid in whole or in part by the debtor.

Chapter 12
A simplified reorganization plan for family farmers whose debts fall within certain limits.

Chapter 13
A repayment plan for individuals with debts falling below certain levels that provides for repayment of some or all of the debts out of future income over three to five years.

Collateral
The property which is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protection in the Bankruptcy Code for the claim secured by collateral.

Confirmation
The court order that establishes the terms of the plan for repayment of debts in a Chapter 11, 12 or 13. The terms of the confirmed plan replace the pre-petition rights of the debtor and creditor.

Creditor
The person or organization to whom the debtor owes money or has some other form of legal obligation.

Debtor
The debtor is the entity (person, partnership or corporation) that is liable for debt and that is the subject of a bankruptcy case.

Denial of discharge
A penalty imposed by the court for debtor misconduct with respect to the bankruptcy case or creditors.

Discharge
The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor. Liens that secure the debts may survive the bankruptcy case.

Dischargeable
Certain debts are not dischargeable — that is, they may not be discharged through bankruptcy or may only be discharged through Chapter 13. Family support and criminal restitution are examples of debts which cannot be discharged.

Dismissal
The termination of the case without either the entry of a discharge or a denial of discharge; the debtor and the creditors have the same rights as they had before the bankruptcy case was commenced.

Equity
The difference between what something is worth and the amount of debt owed on it.

Exempt
Property that is exempt is removed from the bankruptcy estate and is not available to pay the claim of creditors. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy.

Exemptions
Exemptions are the lists of the kinds and values of property that are legally beyond the reach of creditors or the bankruptcy trustee. What property may be exempted is determined by state and federal statutes, and varies from state to state.

Lien
An interest in real or personal property that secured a debt. The lien may be voluntary (such as a mortgage in real property) or involuntary (such as a judgment lien or tax lien).

Non-asset case
A bankruptcy proceeding in which there are no non-exempt assets.

Non-dischargeable
A debt that cannot be eliminated in bankruptcy. Non-dischargeable debts remain legally enforceable despite the bankruptcy discharge.

Non-exempt
Property that is part of the bankruptcy estate and may be available to pay the claims of creditors.

Personal property
Property that is not real property or affixed to real property, such as cars, furniture and appliances.

Petition
The documents that start a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay.

Property of the estate
The property that is not exempt and belongs to the bankruptcy estate. Property of the estate is usually liquidated by the trustee, and the claims of creditors are paid from the proceeds.

Reaffirm
The debtor can choose to reaffirm debts that 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 doesn¹t pay.

Relief from stay
A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits. For example, the court can permit a creditor to foreclose on the property.

Schedules
The debtor must file the required lists of assets and liabilities to commence a bankruptcy case, collectively called the schedules.

Secured debt
A claim secured by a lien on the debtor’s property by reason of the debtor’s agreement — or an involuntary lien such as a judgment or tax lien. The creditor’s claim may be divided into a secured claim (to the extent of the value of the collateral) and an unsecured claim (equal to the remainder of the total debt). Generally, a secured claim must be perfected under applicable state law to be treated as a secured claim in the bankruptcy.

Trustee
The court-appointed official who administers the debtor’s bankruptcy estate. A Chapter 7 trustee reviews the petition and administers a Chapter 7 estate. A Chapter 13 trustee reviews the debtor’s plan and collects and distributes payments made by the Chapter 13 debtor.

Unsecured debt
A claim or debt is unsecured if there is no collateral that is security for the debt. Most consumer debts are unsecured.