Bankruptcy Terms
From Bankruptcy Overview: Issues, Law and Policy, Third  Edition
Published by the American Bankruptcy Institute and other legal publications

Further definitions can found in Section 101 of the Bankruptcy Code.

Abandonment	A  disclaimer of any interest by the trustee or debtor in  burdensome or inconsequential property. Once property has been "abandoned," it is no longer property of the  estate, and parties with a security interest in the  property may proceed against it.
Abstention	A  Bankruptcy Court may abstain from hearing a particular  civil proceeding on the finding that it is in the  interest of justice or in the interest of comity with  state courts or state law. A Bankruptcy Court must abstain from a hearing involving a non-core proceeding based on a cause created by state law, where such cause  is actually pending and can be timely adjudicated in a  forum of appropriate jurisdiction. The Bankruptcy Court may abstain from hearing an entire bankruptcy case on the finding that the interest of both creditors and the debtor will be served by dismissal of the petition.
Administrative Expense  Claim	A  priority claim including the cost and expenses of preserving the estate or operating the business after the petition, and all professional fees and charges that are allowed.
Adversary Proceeding	A  lawsuit within a bankruptcy case. Examples are complaints to  determine the dischargeability of a debt and complaints to determine the  extent and validity of liens.
Asset Case	A  case that consists of an estate with sufficient nonexempt, non-fully encumbered assets to potentially provide a distribution for unsecured creditors.
Automatic Stay	The filing under any chapter of the Bankruptcy Code automatically operates as  a stay against the commencement or continuation of most judicial, administrative or other proceedings against  the debtor or the debtor's estate. The purpose of the  stay is to give the Chapter 11 or Chapter 13 debtor  "breathing time" for rehabilitation, and to give the  Chapter 7 Trustee the protection necessary for  administering the assets of the estate, and to relieve the Chapter 7 debtor from the pressure of creditor collection efforts. The law provides a number of exceptions to this general rule. A party seeking relief from the automatic stay must file a motion to lift stay.
Avoidance	The Bankruptcy Code permits the debtor to eliminate (avoid) some kinds of liens that  interfere with (or impair) an exemption claimed in the bankruptcy.  Most judgment liens that have attached to the debtor's home 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.  This is sometimes called "lien stripping."
Avoidance Power	Rights given to the debtor in possession or the bankruptcy trustee to  recover certain transfers of property such as preferences or to avoid certain transactions or transfers occurring being the commencement of the bankruptcy case, including preferences and fraudulent conveyances. The commencement of a bankruptcy case.
Bankrupt	A  term formerly used under the Bankruptcy Act to describe a debtor who had been adjudicated a bankrupt under the Bankruptcy Act. This term is not used in the Bankruptcy Code.
Bankruptcy Code ("The  Code")	Legislation found at 11  U.S.C. §101 et. seq. ("Title 11") containing both substantive and procedural law for bankruptcy  liquidation and rehabilitation cases. The Code has been  amended several times since its passage in 1978. Bankruptcy is a matter of federal law and is, with the exception of exemptions, the same in every state.  When federal bankruptcy law conflicts with state law, federal law controls.
Bankruptcy Court Clerk	The Clerk at the Bankruptcy Court receives all documents that are placed in the court record in a bankruptcy case. In addition, the Clerk's office schedules hearings for the bankruptcy judges, usually upon written request by an attorney.
Bankruptcy Estate	The estate is all of the legal and equitable interests of the debtor as of the commencement of the case. From the estate, an individual debtor can claim certain property exempt; the balance of the estate, if any exists, is then liquidated in a Chapter 7 to pay the administrative costs of the proceeding and the claims of creditors according to their priority.
Bankruptcy Judge	The role of the  Bankruptcy Judge is to preside over the administration of a bankruptcy case, and to decide contested aspects of that case, which involve either the liquidation or reorganization of a debtor. A Bankruptcy Judge does not  become actively involved in the daily administration of the bankruptcy case, as that task has been delegated to the debtor, U.S. Trustee, appointed trustees, examiners  and creditors' committees.
Cash Collateral	Cash, negotiable instruments, documents of title, securities, deposit  accounts or other cash equivalents in which the debtor's  estate and an entity other than the estate have an interest. Cash collateral may not be used, sold or  leased in the ordinary course of business unless the  creditor with an interest in the collateral consents or  the court, after notice and a hearing, authorizes the transaction.
Chapters of the Bankruptcy Code:
Chapter 7	Chapter of the Code  addressing liquidation and available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of whatever nonexempt  property the debtor has and to give the individual debtor a fresh start through the discharge in bankruptcy.
Chapter 9	Chapter of the Code  addressing the adjustments of debts of a municipality.
Chapter 11	Chapter of the Code  addressing reorganization and available for both individual and business debtors. The purpose of Chapter  11 is to rehabilitate a business as a going concern or  reorganize an individual's finances. The Chapter 11  debtor is given a fresh start through the binding effect on all concerned of the order of confirmation of a  reorganization plan.
Chapter 12	Chapter of the Code  designed to give special relief to a family farmer with  regular income.
Chapter 13	Chapter of the Code used as a rehabilitation vehicle for an individual with  regular income whose debts do not exceed specified  amounts, typically used to budget some of the debtor's  future earnings under a plan through which creditors are paid in whole or in part.
Civil Proceeding	Any action that occurs within a bankruptcy case and includes contested matters, adversary proceedings and plenary actions, as well as  disputes related to administrative matters in a bankruptcy case.
Claim	Any right to payment, as well as any right to an equitable remedy for breach of  performance if that breach also gives right to payment.
Collateral	The property which is subject to a lien.. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral.  The measure of the secured claim is the value of the collateral available to secure the claim:  it is possible to have a lien on property that is subject to a senior lien or liens such that the security available to pay the claim is really without value to the junior  creditors.   The rule with respect to liens is "First in time, first  in right."
Confirmation	The process by which the Bankruptcy Judge approves a plan of reorganization of a  debtor resulting in a court order which makes the terms of the plan for repayment of debts in a Chapter 11, 12 or  13 binding. The terms of the confirmed plan replace the pre petition rights of the debtor and creditor.
Conversion	The process whereby 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.
Core Matters	Proceedings arising under  Title 11 or arising in a case under Title 11 in which  the Bankruptcy Judge may conduct the entire proceeding and may enter the final and dispositive order or judgment.
Cramdown	One of two methods by  which a debtor can confirm its Chapter 11 plan.  Creditors may consent to the debtor's plan, or the  debtor may "cram down" a plan over the objections of  creditors where at least one class of impaired claims or  interests have voted in the requisite number and amount  to accept the plan, and certain other requirements are met with respect to all non-consenting impaired classes  or claims or interests.
Creditor	Any entity that has a  monetary claim against the debtor that arose at the time  of or before the order for relief.
Creditors'	Committee A group of unsecured creditors appointed by the U.S. Trustee to represent the interests of all unsecured creditors before the court. The committee may retain counsel and  other professionals at the expense of the estate in  order to be heard in a wide range of matters.
Debtor	The person or entity who seeks voluntary relief under the Bankruptcy Code, or has  been forced involuntarily into a Chapter 7 or 11  bankruptcy case by petitioning creditors.
Debtor-in- Possession	A  Chapter 11 or Chapter 12 debtor that operates its own business and remains in possession of its assets and  property. For purposes of the Code, a  debtor-in-possession has substantially all the rights and powers of a trustee. The Bankruptcy Judge may order  that the debtor-in-possession be replaced by a trustee  appointed by the U.S. Trustee.
Discharge	An order that bars the debtor's in personal liability on claims within its  scope, and acts as a permanent injunction against judicial proceedings or non-judicial collection efforts with respect to such claims.
Dischargeability	Refers to a process or finding on whether each individual debt is eligible for discharge.
Disclosure Statement	A  pleading filed with the Bankruptcy Court Clerk and sent to creditors which contains information about the debtor  and the Plan of Reorganization.
Estate	Created by the filing of a voluntary, joint or involuntary petition and consisting of all of the debtor's legal and equitable  interest in property as of the commencement of the case. An individual debtor is able to exempt certain property from the estate. Property of the estate also does not include (1) any power that a debtor can exercise for someone else's benefit; and (2) traditional spendthrift  trust interests required by state law. The estate is administered by a debtor, a debtor-in-possession or a  trustee.
Examiner	An individual who may be appointed by the Bankruptcy Court with duties limited to  conducting an investigation of specified acts and business affairs of the debtor-in-possession. The  appointment of an examiner does not change the status of  a debtor as a debtor-in-possession who remains in  control of the property of the estate during the Chapter  11 bankruptcy case.
Executory Contract	A  contract under which the obligations of both the debtor and the other party are so far unperformed that the  failure of either to complete performance would constitute a material breach excusing the performance of the other. The Code grants the trustee the ability to assume, assign or reject executory contracts and unexpired leases for the benefit of the estate, subject  to Bankruptcy Court approval.
Exemptions	A  debtor's claims that remove certain property from the bankruptcy estate. The debtor retains exempt property free from the claims of its unsecured creditors.
Federal Rules of Bankruptcy Procedure	Provides the procedural  law of bankruptcy. Besides the Federal Rules of Bankruptcy Procedure, each district as well as each  individual Bankruptcy Judge may have its own local rules.
Fraudulent Conveyance	A  transfer that can be avoided by the trustee if the  transfer was made with (1) actual fraud evidenced by an intent to defraud, hinder or delay creditors; or (2) constructive fraud, evidenced by the debtor's receipt of  less than reasonably equivalent value in exchange for the transfer.
No Asset Case	A  case without sufficient nonexempt, non-fully encumbered assets to potentially provide a distribution to unsecured creditors.
Objection to Claim	The filing of an objection to a claim initiates a process that ultimately will result in the allowance or disallowance of that claim by the Bankruptcy Court.
Voluntary Petition	When a debtor voluntarily  seeks relief under one of the chapters of the Bankruptcy Code. The filing of the petition operates automatically  to invoke the stay.
Involuntary Petition	When creditors file a  petition seeking to place the debtor in either Chapter 7  or 11. If the debtor contests and prevails, the court shall dismiss the involuntary petition. If the debtor  does not contest, or contests and loses, the Bankruptcy Court shall enter an Order for Relief.
Plan of Reorganization	The document the debtor  submits for confirmation to restructure and perhaps  forgive certain pre-petition debt. The debtor proposes  plans in Chapter 11, Chapter 12 and Chapter 13.
Preference	A  transfer of the debtor's property to or for the benefit of a creditor, for or on account of an antecedent debt, made while the debtor was insolvent, within 90 days  before bankruptcy (or within one year before the petition was filed in an "insider" situation), and the effect of which was to give the creditor more than he would have otherwise received in a Chapter 7  distribution. The trustee's power to avoid preferences is designed to achieve the policy of fostering equality of distribution among the creditors of an insolvent  debtor.
Priority Claim	Unsecured claims entitled  to priority and distribution over other unsecured  claims, including administrative expenses, claims arising in the ordinary course of the debtor's business  after the filing of an involuntary petition and before the entry of the Order for Relief; certain wage, salary or commission claims; certain contributions to employee  benefit plan; certain claims of farmers and fishermen; certain consumer claims of up to $900; and certain unsecured tax claims.
Property of the Estate	Includes real and  personal property, tangible and intangible property, and  property in which the debtor has an interest held by  others. Property acquired after the petition generally is not property of the estate.
Proof of Claim	Document a creditor  files, together with all supporting evidence of such claim, including documentation reflecting perfection of  a security interest, if any. There is usually a deadline in which to file a Proof of Claim.
Redemption	When an individual debtor  reclaims property intended primarily for personal,  family or household use, from a lien securing a dischargeable consumer debt, if the property is exempt,  or has been abandoned, by paying the lien holder the  amount of the allowed secured claim of the lien holder that is secured by such lien. Redemption must be a cash  transaction, unless the creditor consents to a pay out  over time.
Reference	Device by which District Courts delegate bankruptcy jurisdiction to the  Bankruptcy Court, and Bankruptcy Judges act as trial  courts-in-fact in nearly all bankruptcy matters.
Related Matter	Proceeding related to  cases under Title 11 in which, unless the parties  consent otherwise, the Bankruptcy Judge submits proposed findings and conclusions and the District Court makes  the dispositive Orders.
Removal	Process by which either  the defendant or plaintiff may transfer a civil action in a non-bankruptcy forum involving the debtor to the  District Court (and by the standing order of reference to the Bankruptcy Court).
Schedules	Pleadings filed with the Bankruptcy Court Clerk containing the assets and liabilities of a debtor.
Secured Claim	Claim by a creditor that has collateral of equal or greater value than the amount of the claim. The claim may have been by reason of  the debtor's agreement  or an involuntary lien such as a judgment or tax lien. The creditor's claim may be divided into a secured claim, to the extent of the value of  the collateral, and an unsecured claim equal to the remainder of the total debt. Generally a secured  claim must be perfected under applicable state law to be treated as a secured claim in the bankruptcy. Secured claims can be “purchase money” or “non-purchase money” claims.
Statement of Affairs	Pleadings filed with the Bankruptcy Court Clerk containing information about the  financial transactions and affairs of a debtor.
Trustee	The court-appointed  representative of the estate who actually administers  the estate. A Chapter 7 Trustee is in charge of liquidating the estate. In some Chapter 11 cases, the  debtor-in-possession is replaced by a Chapter 11 Trustee who administers the estate. In Chapter 13, there ordinarily is at least one standing trustee in each district to whom all cases under Chapter 13 are assigned.
United States Trustee	Responsible for matters  of administration of a bankruptcy case. Employed by the  U.S. Department of Justice, the U.S. Trustee's  responsibilities include (1) appointing from the private sector the members of a panel of trustees who administer  bankruptcy cases; and (2) supervising the actions of the private trustees and the administration of all  bankruptcy cases.
Unsecured Claim	Claim by a creditor that has no collateral to secure its claim or that has  collateral of lesser value than the amount of the claim.  Most consumer debts are unsecured.
Withdrawal of Reference	District Court's power to  withdraw in whole or in part matters that have been  referred to the Bankruptcy Court, including both core and non-core proceedings as well as cases.