341 Meeting Meeting of Creditors with your attorney, trustee, and creditors.

Abatement Permission from the Court to skip a plan payment.

Abuse A disregard of financial capability. For example, purchasing luxury items on pre-bankruptcy shopping sprees with no reasonable or probable means of repayment.

Adversary Proceeding A separate lawsuit filed in the Bankruptcy Court that arises in or is related to the bankruptcy case and involves opposing parties.

Appeal A request to the U.S. District Court or the Bankruptcy Appellate Panel, if there is one in the circuit, to review a decision of the Bankruptcy Court. A request to the Circuit Court of Appeals to review a decision of the U.S. District Court.

Arrearage The amount of money or number of payments behind on a debt.

Asset Any property belonging to the debtor, or to which the debtor is entitled at the time of filing.

Automatic Stay An automatic injunction requiring the suspension of collection activity on any debts listed in bankruptcy. The automatic stay goes into effect upon the filing of the bankruptcy, not when the creditor receives the notice of bankruptcy.

Bankruptcy Estate All assets, whether real or personal, belonging to the bankrupt debtor at the time the petition is filed. (Co-debtors’ or spouse’s income or property may be part of the bankruptcy estate.)

Bar Date Last date for a creditor to timely file a Complain to Determine Dischargeability of a debt. For non-governmental creditors, this date is 90 days after the first date set for the Meeting of Creditors (341 Meeting). Governmental units, such as the IRS, have 180 days from the date the petition was filed to file a claim.

Chapter 7 The chapter of the Bankruptcy Code that sets forth the provisions relating to liquidation of a debtor’s assets. In a Chapter 7 filing, a trustee is appointed to collect and liquidate non-exempt assets and distribute the proceeds to creditors in accordance with set priorities.

Chapter 9 This chapter is a reorganization of debts but exclusively available to municipalities and public agencies.

Chapter 11 This chapter is a reorganization chapter where a debtor seeks to rehabilitate and reorganize its financial structure. This plan is normally used by businesses but can be filed by an individual debtor.

Chapter 12 This chapter was developed for family farmers exclusively. This chapter seeks to reorganize and rehabilitate the financial structure of the debtor. Normally it allows a debtor to propose a plan to pay creditors.

Chapter 13 Chapter 13 has long been referred to as the “Wage Earners’ plan.” It allows a debtor with disposable income to propose a plan in order to pay the creditors in full or in part. The plan is three or five years and the percentage of pay back could range from 0% to 100%. A Chapter 13 cannot be filed if debtor has unsecured debts of more than $269,250 or secured debts of more than $807,750 (these limits will adjust again on April 1, 2001; see Section 104(b) Title II, U.S.C.).

Co-Debtor Stay There is an automatic stay that protest persons who did not file bankruptcy but are liable on the same debt along with the person or entity who did file. Joint cardholders or co-signers of the debt would be protected by the automatic stay. This co-debtor protection is available only in Chapter 13 cases.

Collateral Property pledged for the payment of a loan or line of credit.

Community Property Only applicable in community property states; this consists of all property acquired by either spouse during the term of marriage. For example, during marriage the wages of either spouse would be considered community property.

Complaint to Determine Dischargeability The official complaint a creditor’s attorney files with the court to decide the dischargeability of a particular debt. This action must be commenced prior to the Bar Date.

Confirmation The official act of the court in approving a Chapter 13 repayment plan.

Co-Debtor An individual who signs a contract for credit with another debtor.

Co-Signed Debt Debt for which more than one person is legally responsible.

Conversion Converting a bankruptcy case from one chapter to another.

Cram Down Also known as lien stripping. This is the process where a creditor’s secured claim is split into secured and unsecured amounts based on the market value of the collateral. The creditor ends up with two separate claims.

Credit Grantor Business or individual who gives a loan or line of credit; also referred to as the creditor.

Creditor A person or business to whom money is owed.

Cure Defaults bring accounts up-to-date that were past due at the time of filing.

Debt Something that is owed to another: normally money or property.

Debtor The person or entity who owes the debt.

Deficiency The amount left owing on a debt following repossession of the collateral.

Delinquent Overdue, not paid on the agreed due date.

Deposition The testimony of a witness taken down in writing under oath. This is normally taken outside of the courtroom in an informal setting.

Discharge Discharge of debts is the goal in a bankruptcy filing. Unless a specific debt is determined to be non-dischargeable or a debt has been reaffirmed, all of the debtor’s debts become non-collectable by any creditors.

Discharge Order An order that relieves the legal obligation to repay a debt.

Dischargeability The extent to which a debt may be legally eliminated.

Discovery The disclosure of pertinent facts of documents by either party prior to trial. This includes such things as interrogatories, requests to produce documents, and depositions.

Dismissal An order terminating the bankruptcy. After approval by the bankruptcy court, this order allows creditors to begin collecting on the debt involved in the bankruptcy.

Disposable Income Funds the debtor has available that are not required for reasonable living expenses.

Equity The difference between what is owed on a debt and the value of the collateral securing the debt.

Exemptions Certain property belonging to the debtor is allowed to be excluded from the bankruptcy. The Bankruptcy Code sets forth guidelines where property can be exempted. This means the debtor is allowed to keep certain property in order to have a “fresh start.” The Bankruptcy Code also sets forth provisions allowing each state to create their own exempts. The debtor usually has the option to choose which exemptions will be followed: the exemptions designed by the state in which he or she resides or the federal exemptions set forth in the Bankruptcy Code.

Fair Mark Value The liquidation value of property (that is, the amount of money that might be received from the sale of the item or items). This is NOT the original cost of the item(s) or the replacement value.

Feasibility Likelihood of being successfully completed.

Filing Fee The fee charged by the Court for filing a bankruptcy case. The filing for a Chapter 7 bankruptcy is $299.00. The filing fee for a Chapter 13 bankruptcy is $274.00.

Foreclosure To take back legal title to and possession of property.

Fraud Intentional misrepresentation or deceit by the debtor. For example, false information given in bankruptcy schedules, an inaccurate income statement, or a false Social Security Number on a credit card application. Proof of fraud usually involves proving the debtor’s intent at the time.

Guarantor Person who promises to repay a debt incurred by another (also referred to as co-maker or co-signer).

Individual Filing A bankruptcy case filed by an individual, whether married or not. A married individual may file a bankruptcy case as an individual.

Insolvent The inability to pay debts as they fall due in the usual course of business or the inability of the debtor to pay current obligations as they become due. There is no requirement of insolvency in the Bankruptcy Code.

Interrogatories A formal quest or a series of questions that are proposed in writing by one party of an action to another. The answers can be used later in court for various reasons. This is a form of discovery used by attorneys when investigating a case. Sanctions can be levied for willfully refusing to respond timely to interrogatories.

Involuntary Chapter 7 Liquidation bankruptcy that is forced by creditors.

Joint Bankruptcy A debtor filing bankruptcy together with a spouse.

Jurisdiction Geographical region over which a court has power.

Last Day to File Complaint to Determine Dischargeability (also known as Bar Date) This is the last day a Complaint to Determine Dischargeability can be filed against the debtor.

Liability Debt.

Liquidation A conversion of assets to cash in order to pay creditors all or a portion of the debt owed.

Luxuries Purchases made that provide pleasure or comfort but are not absolutely necessary.

Matrix List of names and addresses of each creditor.

Meeting of Creditors (also known as the Section 341(a) Meeting or First Meeting of Creditors) This is an opportunity for the Trustee and the creditors to question the debtor, with the debtor’s attorney present, about assets, statements made by the debtor in the bankruptcy schedules, etc. All questions are answered under oath.

Modification of Plan A repayment plan, normally filed in a Chapter 13 or Chapter 11 bankruptcy, can be modified to change the amount paid to classes within the plan. This can only be done with the Court’s approval.

Motion A formal request to a court to allow or require a specific legal action.

Motion to Dismiss A formal request filed in Court by the Trustee as a result of some sort of non-compliance with the bankruptcy case. Typically, these tend to be a result of the debtor’s failure to provide requested documentation, to file tax returns, or to make timely plan payments. In the event that the motion is granted by the bankruptcy judge, an Order for Dismissal is filed and the case is closed, thereby removing the protection offered by the Automatic Stay.

Motion to Lift A process by which a creditor holding a secured note may petition the Court to be excluded from a Chapter 7 bankruptcy. An order allowing a Lift of Stay will allow the creditor to repossess the collateral prior to the discharge of the bankruptcy.

Necessities Purchases that are required for the sustenance of life without being excessive. For example, food, clothing, shelter, etc.

Net Disposable Income The amount of income left over after all expenses are paid.

Net Disposable Income Test A review of the bankrupt debtor’s income and expenses with the goal of ascertaining whether or not the debtor could pay all or part of his scheduled debts. The resulting issues are whether or not there is substantial abuse under Section 707(b).

Non-Dischargeability The extent to which a debt may NOT be legally erased (typically child support, taxes, student loans, and certain judgments).

Non-Dischargeable Debt Certain debts not included in the debtor’s discharge. Some are automatically excluded (for example, taxes, alimony, and debts incurred due to any drunk driving violations) and some require action by the creditor in the case. If your debt is declared non-dischargeable, collection activity can resume regarding the debt.

Non-Exempt Equity The portion of equity that exceeds the maximum allowed by law.

Offset Using a debt to cancel another debt. For example, the IRS keeping all or part of a tax refund to apply to debt owed to the IRS.

Order A formal ruling by a judge allowing or requiring a specific legal action.

Over-Secured A secured loan wherein the collateral is worth more than what is owed.

Periodic Occurring at regular intervals, usually semi-annually or annually.

Petition A document used to begin a bankruptcy case. It can also be referred to as the facesheet of the bankruptcy schedules. The petition must be filed in order to begin bankruptcy proceedings, while other bankruptcy documents (such as schedules, statement of financial affairs, statement of intention, etc.) can be filed within 15 days after the filing of the petition document.

Petition Date The date that a bankruptcy petition is filed with the Court.

Plan Payment The monthly payment required to keep a Chapter 13 bankruptcy active. The plan payments may be made directly by the debtor to the Trustee or by payroll deduction. Failure to make timely plan payments will result in the dismissal of your bankruptcy case.

Post-Petition Anything that occurs after the filing of a bankruptcy case with the Court. Debt incurred following the filing of a bankruptcy is NOT included in the bankruptcy case.

Post-Petition Indebtedness Any debt incurred after the filing of the bankruptcy. Post petition charges are not under the jurisdiction of the bankruptcy and the post petition dollar amount can be collected without violation of the automatic stay.

Preference Period A ninety-day window before the bankruptcy was filed. The trustee may recover any payments made to creditors in that time frame.

Pre-Petition Anything that occurs before the date a bankruptcy case is filed with the Court.

Pre-Petition Arrearage The amount of money or total payments that are behind before filing a bankruptcy petition.

Presiding Officer The trustee or a representative of the Trustee at a 341 meeting.

Presumption Period According to Section 523(a)(2)(C), purchases incurred over $1,000 for “luxury goods or services” within 60 days of the date of the bankruptcy filing or cash advanced over $1,000 made within 60 days of the bankruptcy filing are presumed to be non-dischargeable.

Priority Debts Debts that are paid ahead of others. Generally administrative costs are paid first, followed by secured debts, and then unsecured debts.

Pro Per A debtor filing bankruptcy without representation by legal counsel. Also known as Pro Se.

Pro Rata Basis Divided proportionately.

Pro Se A debtor filing bankruptcy without representation by legal counsel. Also known as Pro Per.

Proof of Claim A form used to file a claim in order to receive payment from the bankruptcy estate.

Post-Petition Arrearage The amount of money or total payments that are behind after filing a bankruptcy petition.

Post-Petition Mortgage Payments Mortgage payments that come due after a bankruptcy is filed with the Court. In a typical Chapter 13 case, these payments are to be made by the debtor directly to the mortgage holder.

Projected Filing Date The date assigned during the initial consultation with the attorney by which all fees must be paid and a completed worksheet must be submitted. This is also the target date for filing your case with the Court.

Purchase Money Security Interest The lien that allows a creditor the right to repossess items purchased with a credit card.

Reaffirmation Agreement You can voluntarily agree to pay back any of your debts. If you sign a reaffirmation agreement, it binds you to repaying the debt despite the bankruptcy. In some cases, the Bankruptcy Court Judge must approve the reaffirmation agreement. Reaffirmed debt is not affected by the discharge. If the debtor defaults on the reaffirmation agreement, the creditor may pursue all avenues of collection activity available.

Recission Period The debtor may rescind (cancel) a reaffirmation agreement at any time before discharge, or within 60 days after filing the agreement with the court, whichever occurs later.

Redemption A lump sum payment to redeem collateral in lieu of a reaffirmation of the debt or surrender of the collateral.

Relief From Stay In certain situations, a creditor may obtain an Order for Relief from Stay to allow them to enforce their claims, pursue collections on a co-debtor, or any other activity that would otherwise violate the automatic stay. When an order for relief of stay is granted by the court, the automatic stay is canceled.

Restitution In the context of bankruptcy recovery, the act of repaying debt incurred as a result of fraud or abuse. The Court usually imposes this. The Court will order the debtor to pay back all or a part of the debt usually as a result of a conviction or a plea bargain.

Sanction A monetary penalty placed upon a party or its attorney in response to a violation of the Bankruptcy Code or rules. The penalty ranges in dollar amount depending on the violation, the intent of the party, and the district in which the violation occurred.

Schedules Written information given by the debtor filed with the Bankruptcy Court on the day of filing or by the 15th day after. These forms give the Bankruptcy Court and trustee a financial picture of the debtor and are required to be filled out truthfully and accurately under penalty of perjury. These schedules include items such as the petition, the Schedule of Income and Expenses, the Statement of Financial Affairs, etc.

Section 341 Meeting This meeting is held at the Federal Courthouse by the Trustee assigned to your case. The meeting, which lasts approximately 30 to 45 minutes, is mandatory and is conducted in every bankruptcy case, regardless of chapter. During the meeting, the Trustee has the opportunity to clarify any issues in your particular case. It is also an opportunity for creditors to appear on their own behalf. Your attorney will be with you at your meeting.

Secured Creditor A creditor holding a lien on property (that is, judgment) or a debt that is secured with collateral.

Secured Debt Debt incurred in order to purchase a specific item over a period of time (typically automobile and home loans).

Sole Proprietorship A business owned by an individual; not incorporated.

Special Classification Legally allowed to be treated differently.

Stay Protection (or Automatic Stay) The Federal Order that protects the debtor from creditor harassment, foreclosure, repossession, and/or garnishment during the course of a bankruptcy.

Stipulation for Judgment An agreement between the bankrupt debtor and creditor that ends in lawsuit. The document is filed with the court usually requiring repayment of a debt. In the event of default, a judgment may be immediately entered in favor of the creditor.

Substantial Abuse The court may dismiss a bankruptcy case on the motion of a U.S. Trustee if the debts are primarily consumer debts and if the Trustee believes that the Chapter 7 petition represents substantial abuse under the Bankruptcy Code. (See Section 707(b) of the Bankruptcy Code.)

Subpoena A formal notice usually issued by a court, commanding specific action be taken under penalty of contempt of court.

Summons An order to answer a lawsuit within a specified time.

To File To take a set of prepared and signed documents to the Court where they are stamped with the date, time, and a case number. It is not necessary for debtors to be present at the filing.

Trustee (Chapter 7) A person appointed to collect the non-exempt assets of the debtor and liquidate them to pay creditors.

Trustee (Chapter 13) A person appointed to collect funds from the debtor and pay the funds over to creditors over a three- or five-year period pursuant to a court approved plan.

U.S. Trustee The Office of the United States Trustee monitors the financial reporting in bankruptcy cases. The Chapter 13 and Chapter 7 trustees report to the U.S. Trustee. The U.S. Trustee oversees the operation of the trustee offices and appoints and removes trustees from office.

Under-Secured A secured loan wherein the collateral is worth less than what is owed.

Unsecured Creditor A creditor whose debt is not secured by property or collateral. This would include credit card debts.

Unsecured Debt Any debt not secured by collateral (typically medical and credit card debt).

Voluntary Surrender The return of collateral to a creditor in lieu of a redemption or reaffirmation agreement.

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