Bankruptcy Legal Terms & Definitions

341 Meeting: (See First Meeting of Creditors)
363 Sale: A court-approved sale of a company's assets during bankruptcy. Section 363 of the Bankruptcy Code allows these assets to be sold "free and clear" of any existing debts or claims, meaning the buyer gets them without any prior obligations attached.

Absolute Priority: The strict order in which different groups of creditors get paid in a bankruptcy case. Higher-priority creditors must be paid in full before lower-priority ones receive anything. Generally, the order is: administrative costs, specific priority claims (like taxes and wages), secured creditors (those with collateral), unsecured creditors (those without collateral), and finally, shareholders (equity).
Adequate Protection: The right of a creditor with a secured interest in the debtor's property (like a loan backed by collateral) to be protected against the loss of their investment's value during the bankruptcy process.
Administrative Claim (or Administrative Expense Claim): Debts a company incurs *after* filing for bankruptcy, with court approval, to cover necessary expenses like legal fees, court costs, and wages needed to keep the business running during the bankruptcy.
Adversary Proceeding: A separate lawsuit filed within a bankruptcy case to resolve a specific dispute between the parties involved.
Allowed Claim (or Allowed Interest): A creditor's claim for payment, or a shareholder's ownership interest, that the bankruptcy court has officially recognized as valid.
Arrangement: A general term for agreements between a bankrupt company and its creditors about how and when debts will be paid. This often involves extending payment deadlines. (This term is less common under current bankruptcy laws.)
Assume: In the context of a contract or lease, this means agreeing to continue fulfilling the obligations of that agreement, even during bankruptcy.
Automatic Stay: An immediate halt to most collection efforts against a debtor (like lawsuits, foreclosures, and repossessions) that goes into effect automatically when a bankruptcy petition is filed. It provides protection for the debtor and ensures fair treatment for all creditors.
Avoidance Power: The bankruptcy court's ability to undo certain payments or property transfers made by the debtor before filing for bankruptcy, particularly if those actions unfairly favored one creditor over others.

Ballot Date: The deadline for creditors to vote on whether to accept or reject a proposed plan to reorganize a company's debts.
Bankrupt: A non-technical term for the individual or company that has filed for bankruptcy. The legal term is "debtor."
Bankruptcy: A legal process for individuals and businesses that can't pay their debts, allowing them to either get a fresh start by eliminating debts or reorganize their finances under court supervision.
Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005: A federal law that made it more difficult for individuals to file for Chapter 7 bankruptcy (liquidation) and also placed new requirements on businesses, especially smaller ones, filing for bankruptcy.
Bankruptcy Act of 1898: The original federal law governing bankruptcy in the United States, primarily focused on liquidating companies (selling off assets). It was replaced by the Bankruptcy Reform Act of 1978.
Bankruptcy Acts of 1933 and 1934: Laws that expanded the ability of companies to reorganize, rather than just liquidate, during bankruptcy. These were later incorporated into the Chandler Act of 1938.
Bankruptcy Administrator: A court official, specifically in Alabama and North Carolina, who oversees the administrative aspects of bankruptcy cases, similar to a U.S. Trustee.
Bankruptcy Amendments of 1984: A change in the bankrupcy law of 1978.
Bankruptcy Code: The current set of federal laws governing bankruptcy procedures in the United States.
Bankruptcy Court: The specialized federal court that handles all bankruptcy cases.
Bankruptcy Estate: All of the debtor's property and legal rights to property at the time the bankruptcy case begins. This includes property possessed by others but in which the debtor has an interest.
Bankruptcy Judge: A federal judge who presides over bankruptcy cases and makes decisions on related legal matters.
Bankruptcy Mill: A business that provides bankruptcy advice and prepares paperwork but is *not* legally authorized to practice law. These should be avoided.
Bankruptcy Petition: The formal document filed with the bankruptcy court to officially begin a bankruptcy case.
Bankruptcy Reform Act of 1994: A law that updated bankruptcy procedures, including provisions to speed up cases, standardize fees, and encourage individuals to use debt repayment plans (Chapter 13) instead of liquidation (Chapter 7).
Bankruptcy Reform Act of 1978: A major overhaul of U.S. bankruptcy law, replacing the previous system with the modern structure, including Chapter 11 for business reorganization.
Bankruptcy Rule 2004: A rule that allows parties in a bankruptcy case to request information and documents from other parties, similar to "discovery" in other types of lawsuits.
Bankruptcy Tax Act of 1980: How the tax issues are treated in bankruptcy.
Bar Date: The deadline for creditors to file their claims against the debtor in a bankruptcy case.
Business Bankruptcy: A bankruptcy case filed by a business entity or an individual with debts primarily related to a business.
Business Failure: A general term for a company that is struggling financially, meaning it's not earning enough profit or can't pay its bills. It's not necessarily the same as bankruptcy, which is a formal legal process.

Cash Collateral: Cash and easily convertible assets that are held by the debtor but also subject to a lien.
Chandler Act of 1938: Made major updates to the Bankruptcy Act of 1898.
Chapter: A specific section of the Bankruptcy Code. Each chapter deals with a different type of bankruptcy (e.g., Chapter 7 is for liquidation, Chapter 11 is for business reorganization).
Chapter 7: Liquidation bankruptcy. A trustee sells the debtor's assets to pay creditors, and the business typically stops operating. Individuals can also file Chapter 7.
Chapter 7 Trustee: A person appointed by the court in a Chapter 7 case to represent the interests of the unsecured creditors by collecting and selling the debtor's assets.
Chapter 9: Bankruptcy for municipalities, such as cities, towns, and school districts.
Chapters X, XI, and XII: These chapters were replaced by Chapter 11.
Chapter 11: Reorganization bankruptcy, most commonly used by businesses. The debtor usually stays in control of its operations and proposes a plan to repay its debts over time.
Chapter 12: Bankruptcy specifically designed for family farmers with regular income.
Chapter 13: Bankruptcy for individuals with regular income who want to create a plan to repay their debts over a period of three to five years. It's often called "wage earner bankruptcy."
Chapter 15: The section of the Bankruptcy Code that deals with bankruptcy cases involving parties or assets in more than one country (cross-border insolvency).
"Chapter 20": An informal term for a situation where someone files for Chapter 7 bankruptcy to eliminate unsecured debts, and then files for Chapter 13 to manage any remaining secured debts (like a mortgage).
"Chapter 22": An informal term for a company that has filed for Chapter 11 bankruptcy twice.
"Chapter 33": An informal term for a company that has filed for Chapter 11 bankruptcy three times.
Claims: A creditor's right to receive payment from a debtor.
Class: A grouping of similar claims against a debtor in a bankruptcy case (e.g., all unsecured creditors might be one class).
Complaint: The initial document that starts a lawsuit, outlining the plaintiff's claims against the defendant.
Confirmation: The bankruptcy court's final approval of a plan of reorganization, which occurs after creditors have voted to accept the plan.
Contested Matter: A dispute within a bankruptcy case that is brought before the judge for a decision.
Contingent Claim: A claim that the debtor *might* owe in the future, depending on whether a specific event happens (for example, if the debtor co-signed a loan and the primary borrower defaults).
Convenience Claims: (See small claims)
Conversion: Switching from one chapter of bankruptcy to another (for example, changing from a Chapter 11 reorganization to a Chapter 7 liquidation).
Core Proceedings: Proceedings that are crucial to the administration of a bankruptcy case.
Cramdown: When the bankruptcy court approves a plan of reorganization even if some groups of creditors object to it.
Creditor: A person or business to whom the debtor owes money.
Creditors' Committee: A group of representatives appointed by the U.S. Trustee to represent the interests of all unsecured creditors in a Chapter 11 bankruptcy case. They negotiate the plan of reorganization and other important matters.

Debtor: The individual or business that files for bankruptcy protection.
Debtor in Possession: In a Chapter 11 case, this is when the existing management of the company remains in control of operations, rather than a court-appointed trustee.
Default: When you fail to meet the conditions of a debt obligation.
Discharge (of Indebtedness): The legal elimination of a debtor's responsibility to pay certain debts, granted by the bankruptcy court.
Dischargeable Debt: Debt that the court may eliminate.
Disclosure Statement: A detailed document provided to creditors in a Chapter 11 case that explains the proposed plan of reorganization and provides information they need to vote on the plan.
Discovery Procedures: Used to help get evidence before a trial.
Dismissal: The termination of a bankruptcy case by the court, often because the debtor didn't follow procedures or a plan couldn't be developed.
Distressed: Does not have a strict definition and refers to companies near bankruptcy.
Docket: The official record of all filings and events in a court case.

Effective Date: When the reorganization is implemented.
ECF or Electronic Case Filing: Maintain records and case files through the internet.
Equitable Subordination: Lowering the priority of a claim because the holder did something wrong.
Equity: The value of an owner's interest in property, calculated by subtracting any debts secured by that property (like a mortgage) from the property's value.
Examiner: A professional appointed by the bankruptcy court to investigate specific issues related to the debtor or the bankruptcy case. Unlike a trustee, an examiner doesn't run the business.
Exchange Offer: An offer to exchange new debt securities that have less strict rules.
Exclusivity (Period of): In a Chapter 11 case, the initial 120-day period during which only the debtor can propose a plan of reorganization. The court can extend this period.
Executory Contract: A contract where both parties still have significant obligations to fulfill. In bankruptcy, the debtor can often choose to reject these contracts.
Exemptions: Refers to the property or assets the debtor can keep that cannot be taken.

Failure: A company is not doing well economically.
Fee Examiner: Appointed by the court to monitor the fees in the cases.
Filing Fees: The amount of money it costs, based on the chapter filed.
First Meeting of Creditors (341 Meeting): Mandatory meeting held between the creditors and debtor.
Fraudulent Conveyance: Transfer of property that makes the company insolvent.
Fresh Start: New accounting rules for companies that are bankrupt.

Gap Period: The period between the filing of an involuntary petition and other actions.
Going Concern Value: What a company is worth as an operating business.

Impairment: When the rights of the claim holders are altered.
Insolvency: When a company's debts are bigger than their assets.
Insider (of Corporate Debtor): Someone who is an officer or person in control of the business.
Interests: Equity interests of the stockholders.
Interim Order: Temporary order from the court.
Involuntary Bankruptcy: A bankruptcy case initiated by creditors, rather than by the debtor. This is relatively rare.

Joinder: Claims and parties.
Joint Administration: Multiple cases handled together.

Lien: A legal claim against a specific piece of property, giving a creditor the right to take that property if a debt isn't repaid.
Liquidated Claim: A creditor's claim for a specific, known amount of money.
Liquidating Reorganization: An informal term for a Chapter 11 bankruptcy where the primary goal is to sell off the company's assets rather than to continue operating the business as a going concern.
Liquidation: The process of selling a company's assets to pay off its debts, typically in a Chapter 7 bankruptcy. The business usually ceases operations.
Liquidation Value: The total amount of money a company's assets would be worth if they were sold off individually, rather than as part of a continuing business.

Matrix: A mailing list of all the creditors of the debtor, used for official notices in the bankruptcy case.
Motion to Lift Automatic Stay: A formal request by a creditor to the bankruptcy court, asking for permission to take action against the debtor or the debtor's property (such as starting a foreclosure), despite the automatic stay that normally prevents such actions.

NOL (Net Operating Loss): (See Tax Loss Carry-Forward)
Non-Business Bankruptcy: A bankruptcy case for an individual or a family farm that is not a business.
Nondischargeable Debt: A type of debt that cannot be eliminated through bankruptcy (e.g., certain taxes, student loans, child support).
Nunc Pro Tunc: A Latin term meaning "now for then." In a legal context, it refers to a court order that makes something effective retroactively, as if it had been done earlier.

Omnibus Hearing: A court hearing where the judge may address a variety of different issues related to a single bankruptcy case.

PACER (Public Access to Court Electronic Records): An online service that provides access to case information and documents from federal courts, including bankruptcy courts.
Party in Interest: Anyone who has a legal right to be heard by the court in a bankruptcy case. This typically includes the debtor, the U.S. Trustee, any appointed trustee, and creditors.
Period of Exclusivity: (See exclusivity)
Personal Bankruptcy: A bankruptcy case filed by an individual, also known as consumer bankruptcy or wage-earner bankruptcy (see Chapter 13 and Chapter 7).
Petition: The formal document filed with the bankruptcy court to officially start a bankruptcy case. Also called a "bankruptcy petition" or "petition for relief."
Petition Preparer: A business or individual that prepares bankruptcy petitions for a fee but is *not* authorized to practice law. It's important to be cautious when using these services.
Plan of Reorganization: The detailed document in a Chapter 11 bankruptcy that outlines how a company plans to restructure its debts, operations, and finances to emerge from bankruptcy.
Plaintiff: Files a complaint with the court.
Post-Petition: Referring to events or transactions that occur *after* the bankruptcy petition is filed.
Preference: A payment made by the debtor to a creditor shortly before filing for bankruptcy that unfairly favors that creditor over others. The bankruptcy court can often recover these payments.
Prepackaged Bankruptcy: A situation where a company and its creditors negotiate and agree on a plan of reorganization *before* the company officially files for bankruptcy. This can significantly speed up the bankruptcy process.
Pre-Petition: Referring to events or transactions that occurred *before* the bankruptcy petition was filed.
Priority Claims: Certain types of unsecured claims that are given higher priority for payment in bankruptcy, such as administrative expenses, certain wages, and taxes.
Pro Rata: Proportionally.
Proof of Claim: A form that a creditor must file with the bankruptcy court to officially state the amount they are owed by the debtor.

Receiver: Someone who takes custody of property.
Reorganization: The process in a Chapter 11 bankruptcy where a company restructures its debts and operations to become financially viable again. This usually involves negotiating with creditors and creating a plan of reorganization.
Restructuring: Attempt to satisfy debt out of court.
Retired Benefits Bankruptcy Protection Act: Allows companies to keep paying insurance premiums for their employees.
Reverse Leveraged Buyout: When a company that was previously taken private through a leveraged buyout (using borrowed money) issues new stock to the public to reduce its debt.
Rule 2004: (See Bankruptcy Rule 2004)

Schedules: Detailed lists of the debtor's assets, liabilities, income, expenses, and other financial information that must be filed with the bankruptcy court.
Section 77 (of 1933 Act): Provided for the reorganization of railroads.
Section 77B: Reorganization of companies that were not railroads.
Section 304: The section that formerly dealt with bankruptcy across multiple countries.
Secured Creditors: Creditors who hold a lien on specific property of the debtor as collateral for a debt. If the debtor defaults, the secured creditor can seize that property.
Secured Debt: A debt that is backed by collateral, such as a mortgage on a house or a lien on a car. If the borrower defaults, the lender can seize the collateral.
Set-Off: The ability of a creditor to reduce the amount they owe to a debtor by applying a debt the debtor owes them. For example, a bank might seize funds from a debtor's account to offset a loan.
Skeleton Filing: An incomplete bankruptcy filing where only the most essential forms are submitted initially, with the remaining required forms to follow within a specific timeframe. Allowed by some courts to get the automatic stay in place quickly.
Small Claims: Claims that are very small and grouped together.
Stalking Horse: First bidder to purchase assets.
Straight Bankruptcy: An older, informal term for a Chapter 7 liquidation bankruptcy.
Substantial Abuse: A term used to describe situations, usually in personal bankruptcy cases, where someone is trying to misuse the bankruptcy system, often by hiding assets or misrepresenting their financial situation.
Substantive Consolidation: Combining the assets and liabilities of multiple related debtors (like a parent company and its subsidiaries) into a single bankruptcy estate. This is done when the entities are highly intertwined.
Super-Priority Claim: A type of administrative claim that has the highest priority for payment, even above other administrative claims.

Tax Loss Carry-Forward: Business losses that can be used to reduce taxable income in future years, potentially lowering the company's tax burden. The rules for using these are complex.
Tranches: Different portions or segments of a financial deal or structured financing, each with varying levels of risk, reward, and maturity dates.
Trustee: A person appointed by the court to manage the debtor's property and represent the interests of creditors. A trustee is usually appointed in Chapter 7 cases and in Chapter 11 cases where the court decides the existing management shouldn't remain in control.

United States Trustee: An official of the U.S. Department of Justice who oversees the administrative aspects of bankruptcy cases in most federal judicial districts. They appoint trustees, review documents, and monitor the progress of cases.
Unsecured Claim: A debt that is not backed by any specific collateral. If the debtor files for bankruptcy, unsecured creditors are paid only after secured creditors.
Unsecured Creditor: A creditor who does not have a lien on any of the debtor's property as collateral for a debt.
Unliquidated Claim: A claim where the exact amount owed is still uncertain or disputed.

VCIS (Voice Case Information System): A telephone service provided by the court system that gives basic information about bankruptcy cases.
Voluntary Bankruptcy: A bankruptcy case that is filed by the debtor themselves, as opposed to being forced into bankruptcy by creditors.
Vulture Funds: Investment groups that buy debt/equity of struggling companies.

Wage-Earner Bankruptcy: (See Chapter 13 and Personal Bankruptcy)
Workout: An agreement between a debtor (someone who owes money) and their creditors, reached *outside* of a formal bankruptcy proceeding. It's a plan to reschedule or adjust debt payments, often to avoid having to file for bankruptcy.

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