10-01-2007 10:58 AM
Automatic Stay: Immediately upon filing the bankruptcy petition there goes into effect a Court order that prohibits all collection and foreclosure efforts against a Debtor including lawsuits. Creditors are barred from calling or writing a Debtor for the duration of the bankruptcy unless the automatic stay is otherwise modified or terminated by Court order.
Bankruptcy: A legal procedure filed in federal Bankruptcy Court that allows an entity or individual that is unable to pay its debt when due to reduce, reorganize, or cancel those debts.
Bar Date: The last day the Court allows filing a proof of claim in a bankruptcy case. For Chapter 7 cases, this is 90 days after the 341 meeting. (No, this is not the last day to order beer.)
Chapter 7: Also known as "straight bankruptcy" or liquidation bankruptcy. This form of bankruptcy is the most common form of personal bankruptcy. It eliminates most debt completely. If you have property that is not protected by state or federal exemptions, the Trustee will sell those assets and distribute the proceeds to your Creditors in the order of priority of the debt. (see priority)
Confirmation: Approval by the Bankruptcy Court of a Chapter 13 plan of reorganization that has met the many requirements of Code section 1129. Once approval is given, all the Debtors’ pre-petition debts are discharged (eliminated) as provided by the plan.
Consumer Debt: Debt created primarily for household, personal or family purposes.
Creditor: A person or entity that has a claim against the Debtor at the time of or before the petition was filed. A Creditor may be secured or unsecured. (see secured and unsecured)
Creditor Meeting (341 hearing): The meeting that takes place 4-6 weeks after the bankruptcy petition is filed, at which the Debtor may be questioned about the information provided by the Debtor on the bankruptcy petition by the Court appointed Trustee and the Debtor’s Creditors.
Contingent Claim: A claim that only becomes a claim if a specified, predetermined event occurs.
Debtor: The person who owes money and who is the subject of the bankruptcy preceding.
Discharge: The official elimination of all debt (except debts exempt from discharge).
Disputed Claim: A dispute about the amount of a debt, or whether or not the debt is due at all.
Distribution: The act of distributing non-exempt assets among the Debtor’s Creditors.
Executory Contracts: Contracts where both parties have yet to fulfill the terms and obligations of the contract. For example: an unexpired lease.
Exemptions: Federal and state laws protecting property of the Debtor from being taken in a bankruptcy.
Exempt Property: Property of the Debtor that is protected by law from being taken in a bankruptcy.
Fraudulent Transfers (Conveyances): A transfer of property or an obligation made within one year before the filing date of the bankruptcy petition that was made with the intent to hinder, delay, or defraud Creditor(s).
Garnishment: An action where the Court orders a third person to turn over money or property of the Debtor that is in the third person’s possession as a means of satisfying the Debtor’s debt.
Insider: (As defined by Code section 101(31)) A person who is a close working associate of the Debtor or a relative. If the Debtor is a corporation, an insider is an officer, director, manager, or a relative of a director, officer of manager. If the Debtor is a partnership, an insider includes a general partner in the Debtor or a relative of such person.
Modification: Changes made in the terms of the bankruptcy plan of reorganization.
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Nonexempt Property: Property that is not protected from being taken to satisfy debts in a bankruptcy.
Nonpossessory Security Interest: A security interest in property where the property that is the subject of the security interest is in the possession of the Debtor.
Nonpurchase-money security interest: A security interest (collateral) given to secure a loan where the loan was not used to purchase the collateral.
Postpetition debt/liabilities: Debt or liabilities incurred after the filing date of the petition.
Preferential Transfer: (As defined in code section 547(b)) A transfer of property made for less than it’s value and made within 90 days before the filing date or within 1year if transfer is made to an insider and it causes the Creditor to receive more than he would have in a liquidation case. This kind of transfer is voidable by the Trustee (in other words, the person you gave the property to must return it).
Priority: Debt is classified into 3 levels. Priority debts are paid before secured debts and, after that, unsecured debt is paid. Priority Debts may not be able to be wiped out in bankruptcy. For example, all taxes are priority claims, but taxes over 3 years old can be discharged in a Chapter 7.
Proof of Claim: A document filed with the Bankruptcy Court by a Creditor stating the amount and nature of the claim that the Creditor believes that the Debtor owes to him. Creditors have a certain time period to file this claim after which they are barred. (see bar date).
Pro se: A non-lawyer who represents himself in a Court proceeding.
Purchase money security interest: A lien placed on the property being purchased by the seller who also finances the property. In other words, the collateral is the property being purchased. A very common example is a dryer sold by Sears, which finances it. Such liens do not have to be filed.
Reaffirmation agreement: An agreement between a Creditor and a Debtor where the Debtor agrees to continue making payments in return for keeping a piece of property. A common example is where a Debtor owes money to a car dealership for a car that the Debtor wants to keep. If the car dealer and the Debtor enter into a reaffirmation agreement, the Debtor may continue to make scheduled payments and thereby keep the car. The Court will not want to make sure that the agreement is fair to the Debtor before it approves it. The agreement requires the signature of the Debtor’s Attorney and must be signed before the case is discharged.
Redemption: A Debtor may keep exempt secured property even though they owe money on it by paying the Creditor the collateral value of the property, rather than the amount of the debt. Note that in some cases the “value” of the collateral may be less than the amount owed on it. In these cases, it may be advantageous for the Debtor to redeem the property. Redemptions must be filed before the case is discharged.
Reorganization Plan: A Chapter 13 or 11 plan describing the terms by which the Debtor intends to repay his debts, usually over a three to five year period.
Secured Debt (Creditor): A debt that is secured by a lien on the Debtor’s property, which may be taken by the Creditor in case of nonpayment by the Debtor. Common examples are a car or mortgage loan.
Trustee: An individual appointed by the Bankruptcy Court that is responsible for the distribution and liquidation of the estate’s assets. The Trustee usually plays a key role in many bankruptcies, including reviewing the plan of reorganization in a Chapter 13 and recommending approval or changes to the Bankruptcy Court. It is also the Trustee who conducts the Meeting of Creditors (341 hearing) and may ask the Debtor questions about his or her petition and schedules. Upon filing the Chapter 7, all the property that is not exempted belongs to him and is sold for the benefit of the Creditors.
Unsecured claim/Creditor: A claim that is not secured by collateral. It also includes a secured debt that is more than the value of the collateral.
Unliquidated claim/debt: A debt that exists, but the amount is still in question. For example, a judgment made in a lawsuit wherein the exact amount of damages has not yet been set.
Voidable Preference: A transfer of property that is voidable by the Trustee. Normally, a transfer of over $600 of the Debtor’s property to relatives within 1 year of filing. However, it may arise whenever the Debtor gives away property or property of the Debtor is taken away just before filing. This may include garnishments, seizures, and judicial liens on property.
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