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Glossary of Bankruptcy Terms

Having an understanding of the language involved in bankruptcy helps to avoid confusion during the process. Below are some commonly used terms. If there are any other legal terms that you would like clarification on, contact The Debt Doctors. We are happy to help you understand the laws and procedures that have been put in place to get you back on your feet.

341 Meeting:

Also called a meeting of creditors, where the debtor is questioned under oath about his/her financial affairs. Despite the name, creditors rarely attend these meetings, and the questioning is done by the trustee. This is something we prepare for you, then stand by your side to make the process less intimidating.

Assets:

Every form of property that the debtor owns. The debtor must disclose all of his or her assets in the bankruptcy schedules. However, in most cases, your assets are exempt from sale even though they must be disclosed.

Automatic Stay:

An order from the court of all collection activity, including lawsuits, foreclosures, sheriff sales, garnishments, repossessions, evictions and all collection activity against the debtor at the moment a bankruptcy petition is filed.

Avoidance:

The Bankruptcy Code permits the debtor to eliminate or avoid some liens that interfere with (or impair) an exemption claimed in the bankruptcy, or are filed within 90 days of your bankruptcy filing. Most judgment liens that have attached to the debtor’s home or possessions can be avoided if the total of the liens (mortgages, judgment liens, and statutory liens) is greater than the value of the property in which the exemption is claimed.

Bankruptcy Code:

The federal laws that govern bankruptcy proceedings.

Chapter 11:

This is bankruptcy for corporations or business owners and individuals not eligible for Chapter 7 or 13 relief. It is a reorganization proceeding in which the debtor may continue in business or in possession of its property as a fiduciary in order to reorganize their finances.

Chapter 12:

This section of the bankruptcy code deals with farmers. Chapter 12 is a reorganization plan with certain benefits for family farmers whose debts fall within certain parameters.

Chapter 13:

A debt repayment plan where debts are consolidated and payments are made over a three to five year period. Chapter 13 helps you cure deficiencies on your mortgage, pay off unsecured debt with no interest for a percentage of what you owe, pa tax liabilities, defer student loans, or allow you to keep property you would normally lose in a Chapter 7.

Chapter 7:

The most common form of bankruptcy, a Chapter 7 case is a liquidation proceeding where unexempt property is sold to raise money to pay off the majority of debts. However, in most Chapter 7 cases, The Debt Doctors can devise an exemption plan to protect the items that are important to you. More than 90 percent of our Chapter 7 cases do not included the sale of any property. It is available to individuals, married couples, partners, and corporations.

Confirmation:

Approval of a plan of reorganization by a bankruptcy judge.

Conversion:

Cases under the Code may be converted from one chapter to another chapter. For example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13, or vice versa.

Creditor:

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

Debtor:

The person who has filed a petition for bankruptcy or someone who owes a debt or legal obligation.

Dischargeable:

A term to describe debts that can be eliminated in bankruptcy.

Equity:

The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered.

Exemption:

Property that the Bankruptcy Code permits a debtor to keep. The debtor gets to keep a certain amount of property for use in making a fresh start after bankruptcy.

Fiduciary:

A person or organization that holds property for another subject to clearly defined responsibilities. A fiduciary in some bankruptcy cases (usually chapter 11) retains possession of all property in the debtor’s estate. A fiduciary is charged with the duty to protect the interests of creditors.

Joint Petition:

A single bankruptcy petition filed by a husband and wife together.

Lien:

An interest in real or personal property that secures a debt. Liens may be voluntary, such as a mortgage in real property or an automobile loan, or involuntary, such as a judgment lien or tax lien.

Liquidated Claim:

A creditor’s claim for a fixed and known amount of money.

Non-Dischargeable:

Debts that can’t be eliminated in bankruptcy due to certain exceptions in the bankruptcy code like student loans, certain tax liabilities or debts incurred by engaging in fraudulent or intentional conduct.

Personal property:

Items that are not real property or affixed to real property. These would include such things as cars, jewelry, stock, furniture, antiques, etc.

Petition:

The document that officially begins a bankruptcy case. The filing of the petition triggers the automatic stay, providing relief from creditors.

Priority 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, with debts like spousal and child support typically getting the highest priority.

Relief from Stay:

A motion made by a creditor asking a judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, that creditor—but no one else—is free to take whatever action the court permits.

Schedules:

The debtor must file the required lists of assets, recent financial transactions, income, and liabilities to initiate a bankruptcy case, collectively called the schedules.

Secured Debt:

A debt that entitles the lender to lien on a specified piece of property (the collateral) if the debtor cannot repay the secured debt. A second creditor may take possession of the property to pay more debt.

Statement of Intention:

A declaration made by a Chapter 7 debtor concerning their intention to keep or surrender secured property.

Trustee:

The representative for creditors by appointed the US Trustee Office in a bankruptcy case. The court appoints a trustee in every Chapter 7 and Chapter 13 case to review the debtor’s schedules and represent the interests of the creditors and verify the accuracy of debtor bankruptcy filings.

Undersecured Claim:

A debt secured by property that is worth less than the amount of the debt.

Unliquidated Claim:

A claim for which a specific value has not been determined.

Unscheduled Debt:

A debt that should have been listed by a debtor in the schedules filed with the court but was not.

Unsecured Debt:

A debt that has no collateral for security. Most consumer debts such as credit cards, medical bills, expired leases, repossessions, foreclosure, and judgments are unsecured.

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Pittsburgh, PA 15232

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