In Plain English Glossary of Bankruptcy Terms

341 meeting (see also Meeting of Creditors):  A meeting attended by the debtor and the trustee assigned to the debtor’s case.  Although they rarely attend, creditors can appear at the meeting.  At this meeting, the trustee (and any creditors) can ask the debtor questions about their assets, debts, income, expenses, or other questions relating to the debtor’s financial affairs.  Typically, the meeting lasts about 5 or 10 minutes.

Adequate protection:  A secured creditor’s right to have their interest in the debtor’s property protected while the bankruptcy is pending.  Usually, adequate protection refers to a secured creditor’s right to keep receiving their contractual payments which come due while the bankruptcy case is proceeding.

Adversary proceeding:  A lawsuit initiated in a bankruptcy case.  Adversary proceedings are not typical and are not filed in an average Chapter 7 or Chapter 13 case.  Often, they are lawsuits filed by creditors to have a debt declared nondischargeable in the bankruptcy.

Asset:  Anything owned by a debtor.  It can be real estate, a car, furniture, electronics, jewelry, money, stock or bonds, etc.  It can also be the right to sue somebody, or the right to receive money owed, such as the right to receive a tax refund.  Generally, with some exceptions, assets are included if they are owned on the filing date.

Automatic stay:  When a bankruptcy case is filed, all collection efforts pending against the debtor, including foreclosures and other lawsuits, are temporarily suspended.  The automatic stay is in effect until it is either removed by the bankruptcy judge at the request of the creditor, or until it is replaced by the Order of Discharge at the conclusion of the bankruptcy case.

Claim:  In all Chapter 13 cases, and in Chapter 7 cases where there is a recovery of assets, creditors file claims with the bankruptcy court stating how much money they are owed.  Creditors are paid based on the claims they file.  See also Proof of Claim.

Confirmation:  A bankruptcy judge’s approval of a Chapter 13 bankruptcy case.  Confirmation takes place at a hearing which is usually about 45 days after the 341 meeting.  In many cases, the confirmation hearing is continued, or rescheduled while the debtor’s attorney and the trustee share information and negotiate.

Discharge (see also Order of Discharge):  Debts which are discharged are not required to be paid back.  Any further collection activity on a discharged debt is unlawful.

Dismissal:  For various reasons, bankruptcy cases can be terminated before the Order of Discharge is entered.  Usually this happens in Chapter 13 cases where the debtor fails to make the payments required under the terms of the Order Confirming Plan.

Disposable income:  Money left over after a debtor has paid all of their reasonable and necessary living expenses which can be used to pay back debt.

Filing date:  The date on which the bankruptcy petition is filed.

Filing fees:  The fee which must be paid to the bankruptcy court in order to initiate a bankruptcy case.  Rarely, the fee can be waived or paid in installments.  In a Chapter 7 case, the filing fee is $299.00.  In a Chapter 13 case, the filing fee is $274.00.

Foreclosure:  When a debtor does not pay a real estate loan back as agreed, the creditor can file a lawsuit called a foreclosure to take possession of the real estate so it can be sold at auction.

Fraudulent transfer:  The transfer of an asset from a debtor to somebody else with an intent to keep the asset away from the reach of creditors.  Transfers of money or assets to friends or family members within a year before the filing of a bankruptcy are generally presumed to be fraudulent.

Motion to value:  In some Chapter 13 cases, debtors are allowed to have cars valued at their fair market value.  The debtor then pays the value of the car over the life of the bankruptcy, rather than the full amount owed on the loan.  Generally, cars can’t be “valued” if they are purchased within 910 days (about 2 ½ years) of the filing of the bankruptcy.

Order Confirming Plan:  In Chapter 13 cases, the written order signed by the bankruptcy judge stating the payment which must be made by the Debtor, how many months the payment must be made, and other terms of the bankruptcy.  This Order is entered following the confirmation hearing.

Petition:  The document filed with the bankruptcy court to start the bankruptcy case. 

Preferential payment:  A payment of over $600.00 to a creditor prior to the filing of a bankruptcy.

Priority claims:  Certain expenses, such as salaries, wages, taxes and domestic support obligations, which are paid first, ahead of other unsecured creditors.

Proof of Claim:  A form filed by a creditor stating how much money they are to be paid in Chapter 13 cases or Chapter 7 cases where there is a recovery of assets.

Recovery of assets:  In Chapter 7 cases in which the debtor has non-exempt assets, those assets are recovered by the bankruptcy trustee, who sells the assets and pays the money to the creditors.

Repossession:  When a debtor does not pay a secured debt on a car or other personal property as agreed, the creditor can take the back the car or the personal property securing the loan.  Once the property is taken back, it is typically sold.  The difference between what is owed and what the creditor receives at the sale is called a deficiency.

Secured creditor:  A creditor who has a lien on property of the debtor.  Usually, creditors loaning money for the purchase of houses and cars are secured creditors.  Secured debt is not discharged in bankruptcy.

Secured debt:  A debt where there is collateral or security which can be taken back from a debtor if the debtor fails to repay the debt.

Trustee:  The person appointed by the U.S. Department of Justice to help administer a bankruptcy case.  In Chapter 7 cases, trustees are especially concerned with the recovery of assets for the benefit of creditors.  In Chapter 13 cases, trustees are especially concerned with making sure all of the debtor’s disposable income is dedicated to paying back debts.

Unsecured creditor:  A creditor who has no security interest or lien on property of the debtor.  Usually credit cards and medical debts and deficiencies are unsecured debts.

Unsecured debt:  A debt where there is no collateral or security which can be taken back from a debtor if the debtor fails to repay the debt.