Bankruptcy Legal Terms Glossary
Essential bankruptcy and debt law terms explained - your guide to understanding bankruptcy and debt legal jargon
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- Adversary ProceedingA separate lawsuit filed within a bankruptcy case to resolve specific disputes or recover money or property.
- Automatic StayAn injunction that automatically stops creditors from pursuing collection actions against the debtor once the bankruptcy petition is filed.
- BankruptcyBankruptcy is a legal process for dealing with overwhelming debt and seeking relief.
- Bankruptcy CodeThe uniform federal law governing bankruptcy cases in the United States is codified as Title 11 of the United States Code.
- Bankruptcy-EstateThe legal entity created upon the filing of a bankruptcy case, consisting of all the debtor's non-exempt assets and interests.
- Bankruptcy-petitionIn bankruptcy, a petition is the legal document filed by a debtor to initiate bankruptcy proceedings.
- Chapter 11A form of bankruptcy that allows businesses to reorganize their debts and assets while continuing to operate.
- Chapter 13A type of bankruptcy that allows individuals with regular income to restructure their debts through a repayment plan also called wage earner's plan.
- Chapter 7A type of bankruptcy that provides for the liquidation of non-exempt assets to pay creditors and discharge eligible debts.
- CramdownA court-imposed debt reorganization plan in bankruptcy that allows repayment over time, despite creditors' objections, under specific conditions.
- CreditorAn entity with extended credit or loaned money, possessing a legal claim for repayment from a debtor.
- DebtorA person or entity legally liable and obligated to pay money owed to creditors or lenders.
- DischargeA court order that releases the debtor from personal liability for certain types of debts.
- Exempt PropertyAssets protected by law from seizure by creditors or from being sold in a bankruptcy proceeding to pay off debts.
- ExemptionsLegal provisions that protect certain assets or income from being seized or used to satisfy debts or liabilities.
- Fair Debt Collection Practices Act (FDCPA)A federal law that prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debts.
- Fraudulent TransferThe intentional transfer of assets to hinder, delay, or defraud creditors or to avoid payment of debts.
- GarnishmentA legal process by which a creditor can collect payment from a debtor's income or assets held by a third party.
- Involuntary-BankruptcyInvoluntary Bankruptcy: A type of bankruptcy case initiated by creditors against a debtor who has failed to pay their debts, without the debtor's consent.
- LienA legal claim or right against another person's property, typically to secure payment of a debt or obligation until discharged.
- Means TestMeans Test: A financial assessment used to determine eligibility for certain benefits, assistance, or legal processes based on income and assets.
- Non-Exempt PropertyAssets that are not protected by law and can be seized by creditors or sold in bankruptcy to pay off debts.
- PreferenceA payment or transfer of interest to a creditor shortly before the bankruptcy filing that can be undone by the trustee if it favors one creditor over others.
- Priority ClaimA debt, under bankruptcy law, must be paid before other unsecured claims in a bankruptcy proceeding due to its elevated status.
- Proof of ClaimA formal, written statement submitted by a creditor to assert their right to payment in a bankruptcy case.
- Reaffirmation AgreementA legally binding contract in which a debtor agrees to remain liable for a debt after bankruptcy discharge.
- Secured CreditorA lender who holds a claim against a debtor's property as collateral for a loan, granting them special rights in bankruptcy.
- Secured DebtA debt backed by collateral, giving the creditor the right to seize the asset if the borrower defaults on payments.
- TrusteeA person or entity appointed to manage assets or property for the benefit of another party or beneficiary.
- Unsecured DebtA financial obligation not backed by collateral, where the lender relies solely on the borrower's promise to repay.
- Voluntary-BankruptcyA type of bankruptcy case initiated by the debtor themselves, where they choose to file a petition with the court.