Adversary Proceeding: A lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with the court.
Automatic Stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
Bankruptcy: 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).
Bankruptcy Court: The bankruptcy judges in regular active service in each district; a unit of the district court. In South Carolina the Courts are located in Spartanburg, Columbia and Charleston. Visit the Bankruptcy Court Information page to learn more.
Bankruptcy Judge: A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.
Chapter 7: The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.) For more information see our Chapter 7 page.
Chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.) For more information see our Chapter 13 page.
Claim: A creditor’s assertion of a right to payment from the debtor or the debtor’s property.
Collateral: Property used to secure a loan. It could be a house, real property, vehicles, personal property, or furniture. If the loan is not paid, then the creditor will take the property.
Confirmation: Bankruptcy judges’s approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.
Co-signer: Someone who signs a loan agreement with another person. If the other co-signer does not pay, then the co-signer is fully responsible for the loan or debt.
Conversion: The act of moving from one bankruptcy chapter to another chapter. Commonly done as a chapter 13 to chapter 7.
Creditor: A person or entity to whom a debt is owed.
Credit Counseling: Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.
Debt: Liability on a claim, an amount owed to a creditor.
Debtor: A person who has filed a petition for relief under the Bankruptcy Code.
Debtor Education: A course that a debtor must complete before receiving a discharge in their case. See Credit Counseling for more information.
Discharge: A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.) Visit our Bankruptcy credit counseling page for a list of South Carolina approved counselors.
Disposable Income: The amount left over after all reasonable expenses have been deducted from your income. This amount determines whether you can file for a chapter 7 or chapter 13. In a chapter 13, it helps determine your monthly trustee payment.
Equity: The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $100,000 is subject to a $80,000 mortgage, there is $20,000 of equity.)
Exemptions: Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in.
Feasibility: Whether the debtor has enough income to support a chapter 13 plan, taking into account the amount owed on all debt, equity in the estate and income.
Foreclosure: The legal process started by the lien holder of real property to force a sale of the property in order to collect on lien.
Joint Petition: One bankruptcy petition filed by a husband and wife together.
Liability: A debt that is owed arising from past transactions or events.
Lien: The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.
Liquidation: When the trustee sells debtor assets and distributes the proceeds to creditors.
Means Test: Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,575. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.
Meeting of Creditors: (Also known as 341 hearing) It is a hearing in which creditors have an opportunity to ask debtors questions about their finances. It is an informal hearing that is recorded by the US Trustee and is under penalty of perjury. The trustee asks debtors questions relating to the schedules and statements that were filed with the court. The debtor must attend this hearing. For more information see our Meeting of Creditors page.
Motion to lift the automatic stay: A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.
No Asset Case: A chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims.
Non-Dischargeable Debt :A debt that cannot be eliminated in bankruptcy. Examples include a home mortgage, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud or defalcation while acting in a fiduciary capacity may be declared nondischargeable only if a creditor timely files and prevails in a nondischargeability action.
Plan: A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.
Post-Petition Debt: Debt incurred after a bankruptcy has been filed.
Pro Se: Someone who files a case without an attorney.
Proof of Claim: A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)
Priority Claim: A claim that must be paid back in full at 0% interest. Examples of priority claims are certain taxes (typically filed or assessed in the last three years) or child support arrears.
Reaffirmation Agreement: An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession.
Relief from Stay: A motion that a creditor files in order to commence or continue an action in state court. A creditor must file this motion in bankruptcy court before it can move forward with collecting on a debt. The most common relief from stay is on real property, when the debtor is not making their mortgage payments outside of the chapter 13 plan.
Schedules: Detailed lists filed by the debtor along with (or shortly after filing) the petition showing the debtor’s assets, liabilities, and other financial information.
Secured Creditor: A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.
Secured Debt: Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.
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.
Trustee: The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases and some chapter 11 cases. The trustee’s responsibilities include reviewing the debtor’s petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in chapter 12 and 13 have similar duties to a chapter 7 trustee and the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.
US Trustee: An officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties. Compare, bankruptcy administrator.
Unsecured Claim: A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
Source: U.S. Courts Website
This Bankruptcy Glossary of terms is provided as an informational resource. In no way should it be considered legal advice. If you are considering bankruptcy please call Brunson Law today and schedule your free consultation with Columbia Bankruptcy Attorney Colleen Brunson.