Dallas Texas Attorneys
Bankruptcy Law Definitions
DEMARCO•MITCHELL PLLC the preferred bankruptcy lawyers in Plano, Texas have compiled a list of terms commonly used throughout the bankruptcy process. For a free bankruptcy consultation, contact us online or call us at (972) 578-1400
The trustee’s relinquishment of estate property that is burdensome or of inconsequential value to the bankruptcy estate.
The court’s dismissal or suspension of a bankruptcy case, or its refusal to entertain related proceedings, on grounds of fairness or in deference to another court.
The termination of the debtor’s right to pay a debt in installments or at a future maturity date. If a debt is accelerated, the debt becomes immediately due and payable. Many contracts have acceleration clauses entitling the creditor to allow for acceleration of payments upon default.
An obligation to pay for goods sold or services rendered.
A right to payment for goods sold or services rendered.
A right which protects an entity’s (usually a secured creditor) interest in the debtor’s property from diminishment in value. In other words, such interest must have the same value at the end of the bankruptcy process as it had when the bankruptcy petition was filed.
A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court.
Allowed Claim (or allowed interest):
A claim of a creditor (or an equity holder) that is approved by the court. Only allowed claims (or allowed interests) receive distributions from the bankruptcy estate.
A provision found in all ERISA qualified plans which restricts transfers of plan assets and effectively prevents such plans from becoming property of the bankruptcy estate.
An agreement between the debtor and the other party to an executory contract to continue performing duties under that contract. A lease is a common example of an executory contract.
An injunction that automatically issues against all of the debtor’s creditors upon the filing of a bankruptcy petition thereby stopping all lawsuits, foreclosures, garnishments, and collection activities against the debtor and the debtor’s property.
Rights given to the bankruptcy trustee or the debtor-in-possession to recover certain transfers of property such as preferences or fraudulent transfers or to void liens created before the commencement of a bankruptcy case.
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 common name given to title 11 of the United States Code. The Bankruptcy Code is a set of federal statutes that governs any and all bankruptcy matters, with the exception of property exemptions (property exemptions are determined by State law).
A federal court where cases under the Bankruptcy Code are litigated. The Bankruptcy Court is a unit of the United States District Court.
All legal and equitable interests of the debtor as of the commencement of a bankruptcy case.
A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.
A formal request for the protection afforded by the Bankruptcy Code.
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.
Cash and cash equivalents (including proceeds) subject to the lien of creditors. Issues respecting cash collateral play a significant role in business reorganizations under chapter 11 of the Bankruptcy Code.
A liquidation proceeding available to individuals, married couples, partnerships and corporations wherein a debtor’s nonexempt assets are sold and the proceeds of which are distributed to the creditors.
A reorganization proceeding in which the debtor may continue in business or in possession of its property as a fiduciary.
A simplified reorganization plan for family farmers whose debts fall within certain limits.
A repayment plan for individuals with debts falling below statutory levels which provides for repayment of some or all of the debts out of future income over 3 to 5 years.
A right to payment.
Property pledged as security for the satisfaction of a debt. Collateral may also refer to property that has become subject to the lien of one or more creditors through judicial process. Such creditors are often referred to as secured creditors.
The original or initial pleading filed with a court which sets forth a claim for relief against the defendants.
The process by which a plan of reorganization is approved by a Bankruptcy Judge.
The order issued by a Bankruptcy Judge, which order authorizes the implementation of the plan of reorganization thereby making the terms of the plan (under chapter 11, 12 or 13) binding upon the debtor and all creditors. The terms of the confirmed plan of reorganization effectively replace the pre-petition rights of the debtor and the creditors.
A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.
A debt incurred by an individual primarily for personal, family or household purposes.
A disputed matter arising in the bankruptcy case that is brought before the Bankruptcy Court by motion.
A against a debtor that will only result in liability upon the occurrence of some future event, which event may never arise.
Contract for Deed:
An agreement by a seller of real property to deliver a deed after certain conditions are satisfied (i.e. payment).
(1) A change in the type of bankruptcy a debtor wishes to proceed under. For example, a debtor may convert a chapter 13 bankruptcy case into one under chapter 7. (2) The prepetition sale of nonexempt assets coupled with the prepetition purchase of exempt assets in anticipation of filing for bankruptcy. (3) The unauthorized exercise of ownership rights over property belonging to another.
Those proceedings which are unique to bankruptcy and fundamental to the administration of the bankruptcy case. See 28 U.S.C. § 157(b).
An entity that has a claim against the debtor that arose before the petition date.
A committee of creditors appointed by the Office of the United States Trustee in chapter 11 cases, and sometimes in chapter 7 cases, to specifically represent the interests of the creditors.
See Section 341(a) Meeting infra.
A liability on a claim.
A debtor that has filed for relief under chapter 11 of the Bankruptcy Code.
The debtor’s material breach of a contract. The most common default is non-payment of interest or principal. Note that while some contracts provide that insolvency or bankruptcy constitute a default, such provisions are not valid in bankruptcy and do not thereby constitute a default.
The difference between the amount due on a secured loan when combined with the value of the collateral where the collateral value is less than the loan balance.
An order from the Bankruptcy Court releasing the debtor from any and all dischargeable debts which arose prior to the petition date.
The termination of a bankruptcy case prior to the issuance of a discharge. Dismissals may either be voluntary or involuntary. If a bankruptcy case is dismissed, all things revert to their status as of the time immediately preceding the filing of the bankruptcy petition.
That portion of the debtor’s income not reasonably necessary for the maintenance and support of the debtor or a dependent of the debtor and not necessary for the operation and preservation of any business in which the debtor is engaged.
An official record of all documents filed with and all proceedings that take place before a court.
A general term encompassing a wide variety of legal persons, including individuals, corporations and governmental units.
The debtor’s unencumbered interest in property.
To carry out according to its terms.
A contract in which some or all of the obligations of each party have not yet been completed. A typical example is a lease agreement.
A state or federal statute which shields certain property from the claims of unsecured creditors.
Property or value in such property that is removed from the bankruptcy estate after having been properly declared as exempt in the bankruptcy schedules without any objection thereto.
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.
Real property in which the owner is entitled to the entire property and subject to no conditions.
A termination of the mortgagor’s rights in real property a trustee at the request of the mortgagee by virtue of a default.
The rehabilitation of a debtor through the process of bankruptcy and the discharge of prepetition debt.
Going Concern Value:
The value of a business based upon its continued operation as opposed to the liquidation value of its assets.
The dwelling and adjoining land where the debtor resides.
An exemption under state or federal law which protects all or a portion of the homestead.
The modification of the prepetition contractual rights of a claim pursuant to the terms of a plan of reorganization.
Latin for an action against the person.
Latin for an action against property or thing.
Insider (of an individual debtor):
Includes: (1) a relative of a debtor or of a general partner of the debtor; (2) a partnership in which the debtor is a general partner; (3) a general partner of the debtor; or (4) a corporation of which the debtor is a director, officer, or person in control.
Insider (of a corporate debtor):
Includes: (1) a director, officer, or person in control of the debtor; (2) a partnership in which the debtor is a general partner; (3) a general partner of the debtor; or (4) a relative of a general partner, director, officer, or person in control of the debtor.
(1) The inability to pay ones debts as they come due. (2) When one’s liabilities exceed the value of one’s assets.An exemption under state or federal law which protects all or a portion of the homestead.
A mechanism, subject to court approval, under which two or more cases can be administered together.
One bankruptcy petition filed by a husband and a wife. From a practical standpoint it is identical to the joint administration of each spouse’s bankruptcy case, the only difference being there is only one filing fee.
Real property owned by two or more persons each of which has an undivided interest in the whole as well as a right of survivorship.
A lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.
A custodian, manager, or superintendent who has care, custody or management of thing or place.
(1) The legal process of seizing and liquidating the assets of a debtor in satisfaction of a judgment. (2) The assessment or collection of a tax.
A charge against or interest in property to secure payment of a debt or performance of an obligation.
The holder of a lien (a secured creditor).
In the consumer bankruptcy context, a strategy often employed by chapter 13 debtors to reduce the amount of a secured claim to the actual value of the collateral where the secured claim is undersecured (the debt is greater than the value of the collateral).
The sale of a debtor’s executable (non-exempt) property, the proceeds of which are used to pay the creditors.
A statutory lien afforded to persons who furnish materials for the construction, improvement or alteration of a structure.
Meeting of Creditors:
See Section 341(a) Meeting.
No Asset Case:
A chapter 7 bankruptcy case in which there are no assets available for distribution.
A debt that is excluded from the Debtor’s discharge on one or more of the grounds enumerated in the Bankruptcy Code. See 11 U.S.C. § 523.
Objection to Discharge:
A formal request asking the Bankruptcy Court to deny the debtor a discharge.
Objection to Exemptions:
A formal request asking the Bankruptcy Court to deny the debtor certain exemptions claimed on the bankruptcy schedules.
Latin phrase meaning ratably or without preference.
The pleading which initiates the bankruptcy process.
The date a bankruptcy petition is filed with the Bankruptcy Court.
The terms and conditions under which the debtor will pay creditors’ claims.
That period which transpires after the commencement of a bankruptcy case and typically ends with the closing of the bankruptcy case.
The transmutation of a debtor’s property in an effort to maximize the benefits afforded by the exemption statutes. Prebankruptcy planning typically includes converting nonexempt assets into exempt assets.
A voidable transfer of an asset (including money) to a creditor made prior (90 days or one year, depending) to the petition date such that the creditor receiving the asset receives more than it otherwise would if the transfer had not been made and the case were one under chapter 7.
That period which arises prior to the petition date.
An unsecured claim that is paid ahead of other unsecured claims based upon the priority scheme established by the Bankruptcy Code.
Proof of Claim:
A formal request by a creditor to share in the distribution of any assets derived from the bankruptcy estate accompanied by documentation supporting the amount and nature of the claim.
Latin phrase meaning proportionately.
Latin phrase meaning for so much or as far as it will go.
Property of the Estate:
All legal and equitable interests of the debtor in property as of the petition date.
Latin word meaning in the character or capacity of.
Quid Pro Quo:
Latin phrase meaning something for something.
To leave or remove from. Commonly used in the context of leases when a tenant is served with a notice to “quit or pay rent.”
A deed of conveyance that conveys title no assurance the title is valid and without any warranties or covenants.
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.
A person appointed by a court to manage property in litigation.
The repudiation by the debtor (or trustee) of a prepetition executory contract. Rejection relieves the estate of any performance obligations leaving the other party to the contract with a prepetition unsecured claim for damages.
Relief from the Automatic Stay:
A Bankruptcy Court order authorizing a creditor to proceed with certain collection efforts.
To recover goods sold on credit when a person fails to pay for those goods. Rules respecting repossession vary from state to state.
A Latin word meaning a thing or an object.
Lists of a debtor’s assets, liabilities, income and expenses, which are required to be filed with the Bankruptcy Court.
Section 341(a) 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.
A loan or debt for which some form of property has been pledged or mortgaged.
An entity 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.
An agreement that creates or provides for a security interest.
A lien created by an agreement.
A trust with restrictions on alienation designed to protect the fund from dissipation by the beneficiary or seizure by the beneficiary’s creditors.
Statement of Financial Affairs:
A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc.
Statement of Intentions:
A declaration required of all chapter 7 debtors concerning plans for dealing with consumer debts that are secured by property of the estate.
Every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property.
See Bankruptcy Trustee supra.
The process by which any entity in possession of property of the estate is surrenders such property to the bankruptcy trustee.
A secured claim where the collateral value is less than the amount due and owing the secured creditor.
United States Trustee:
An agent of the United States Department of Justice responsible for supervising the administration of the bankruptcy process.
Unlawful Detainer Action:
A lawsuit brought by a landlord against a tenant to evict the tenant from rental property.
A claim for which the debtor is liable but the amount of which remains unknown.
A prepetition claim that, regardless of reason, was omitted from the bankruptcy schedules.
An abbreviation for the United States Code. The Bankruptcy Code is set forth in title 11 of the United States Code (i.e. 11 U.S.C.).
To give an immediate fixed right in an asset.
To have no legal force or effect.
Void ab Initio:
A Latin phrase meaning a contract or agreement is void from the outset. Compare this to a contract that may subsequently be declared void by one of the parties.
That which may be avoided.
Wage Earner’s Plan:
A chapter 13 plan of reorganization.
A statutory process which permits the satisfaction of a judgment from a person’s wages.
The voluntary relinquishment of a right.
A statutory lien which affords a warehouseman the right to retain possession of goods stored until storage charges are paid in full.
A deed in which the grantor warrants good title (warranties of siezin; quiet enjoyment; right to convey; and free of encumbrances and defenses of title).