Our bankruptcy dictionary defines commonly used bankruptcy terms and definitions in plain English. Use the alphabetical menu to find a bankruptcy term or phrase.
Dictionary of Bankruptcy Terms and Definitions
Below is the dictionary of bankruptcy terms and definitions. The bankruptcy terms and definitions are all written our experienced San Diego bankruptcy attorney. If you have any questions or need clarification regarding the terms and definitions in our bankruptcy dictionary, contact Bankruptcy Legal Center.
341 hearing: See meeting of creditors.
Adversary lawsuit: See adversary proceeding.
Adversary proceeding: A lawsuit filed against you in bankruptcy court, usually by a creditor alleging that you incurred a debt through fraud.
Arrears: Past due payments that you owe on a secured debt, such as missed payments on your home loan or car loan.
Assets: Everything that you own, including all of your real property (real estate) and your personal property (everything other than your real estate).
Assume: When you agree to continue to perform under an executory contract or unexpired lease by way of an assumption of the contract or lease.
Assumption: An agreement by which you agree to continue to perform under a executory contract or unexpired lease.
Automatic stay: An injunction, created by law upon the filing of your bankruptcy case, that stops most types of adverse collection actions against you. Also called a bankruptcy stay.
Bank levy:: When a creditor forcibly takes money out of your bank account in repayment of a debt that you owe, or when the IRS forcibly takes money from your bank account in payment of past due taxes. In order for a creditor to do a bank levy, a creditor will first sue you and reduce the debt to a judgment.
Bankruptcy: A legal proceeding that you file in order to eliminate all of your debts that are dischargeable under bankruptcy law.
Bankruptcy Code: The federal bankruptcy law set forth in Title 11 of the United States Code.
Bankruptcy court: The court that administers bankruptcy cases. It is actually an arm of the United States District Court, yet it is often located in its own courthouse, separate from the District Court.
Bankruptcy judge: A federal judge of a United States District Court that oversees and decides bankruptcy cases being administered in the Bankruptcy Court.
Bankruptcy stay: See automatic stay.
Business bankruptcy: A bankruptcy where the majority of your debts are business debts.
Business debt: A debt that is incurred for business purposes, as opposed to being incurred for personal, family or household purposes.
California exemptions: The bankruptcy exemptions that govern your bankruptcy if you have lived in California for the past 2 years. California residents also have the option of selecting a set of federal-like exemptions that mirrors the federal exemptions.
Chapter 7: A liquidation bankruptcy in which you discharge all of your debts that are dischargeable under bankruptcy law. Chapter 7 is often referred to as straight bankruptcy or credit card bankruptcy.
Chapter 9: A bankruptcy for government entities and municipalities. A municipality refers a government agency, such as a public school district.
Chapter 11: A reorganization bankruptcy primarily for large corporation doing corporate reorganization. Chapter 11 is also available to individuals, however it is usually economically unfeasible because it is too expensive of a remedy.
Chapter 12: A reorganization bankruptcy that is very similar to Chapter 13 but is available only to family farmers and ranchers and has higher debt limits than Chapter 13.
Chapter 13: A reorganization bankruptcy for individuals in which you repay a portion or all of your debts over a 3 to 5 year period through a Chapter 13 plan.
Chapter 13 plan: The repayment plan that you file with your Chapter 13 bankruptcy.
Chapter 15: A bankruptcy available for dealing with cross-border cases.
Claim: An assertion by one of your creditors that states they had a right to payment from you at the time that you file bankruptcy.
Codebtor: A person or entity who is jointly responsible with you to repay a debt to one of your creditors.
Collateral: A lien against one of your assets that you give to a creditor as security for repayment of a debt.
Consumer bankruptcy: A bankruptcy where the majority of your debts are for personal, family or household purposes.
Consumer debt: A debt that is incurred primarily for personal, family or household purposes.
Creditor: A person or entity to whom you owe money.
Creditor committee: A committee formed in a Chapter 11 case to represent the interests of unsecured creditors.
Credit Counseling: A credit management course that you must complete before you can file bankruptcy. Credit Counseling is typically a one hour course that you take on the internet.
Debt: Your obligation to repay money that you owe to another person or entity.
Debtor: A person who has filed bankruptcy and is currently in bankruptcy. Also, a debtor can generally refer to someone who owes money to another person or entity.
Debtor Education: An online debt education course that you must take after you file bankruptcy and before you can receive a discharge. Debtor Education is also referred to as a Personal Financial Management course.
Debt relief agency: The Bankruptcy Code designates as a “Debt Relief Agency” anyone, including a bankruptcy lawyer, who provides bankruptcy assistance for a fee.
Deed of trust: a voluntary lien that you give to your lender to secure repayment of your debt associated with a home loan or 2nd mortgage. A deed of trust grants your lender the power to do a foreclosure of your home or other real property given as collateral if you do not make your loan payments.
Defendant: A person or entity against whom a lawsuit has been filed.
Discharge: A bankruptcy court order entered upon the conclusion of your bankruptcy case that eliminates your personal liability for all of your debts that are dischargeable under bankruptcy law. You receive your discharge in the form of a court order called a Discharge of Debtor.
Discharge of Debtor: a court order granting you a discharge, which eliminates your personal liability for all of your dischargeable debts.
Discharged: When the bankruptcy court grants you a discharge, your debts are said to be discharged.
Dischargeable: A debt that can be eliminated by your bankruptcy filing is referred to as a dischargeable debt. Debts are generally dischargeable, unless there is a provision of the Bankruptcy Code making the particular type of debt nondischargeable.
Discharge injunction: An injunction that goes into effect upon the entry of your discharge that protects you from your creditors, similar to the protection provided by the automatic stay that takes effect upon the filing of your bankruptcy.
Dismissal: A termination of a bankruptcy without granting the debtor a discharge, such that you still remain liable for all of your debts.
Dismissed: If your bankruptcy case is terminated by a dismissal, your case is said to be dismissed.
Disposable income: The amount of money that you have left over each month after subtracting all of your expenses that are allowed under applicable bankruptcy standards.
Domestic support obligation: An obligation to pay child support, alimony, or spousal support pursuant to a court order.
Equitable interest: An interest in real property or personal property that you may not own on paper, but in reality it is yours or you have an actual interest in it.
Equity: The value of your interest in your real property or personal property, less the amount of any loans or liens against your property.
Estate: All of your assets that you own as of the date that you file bankruptcy, including all of your legal as well as any equitable interest that you have in any property.
Executory contract: A contract that existed before you filed bankruptcy where both you and the other party to the contract still have unperformed obligations, such as a timeshare or a lease.
Exempt assets: Exempt assets refers to all of your assets, that is, all of your real property and personal property, that you get to keep when you file bankruptcy, as determined by your exemptions.
Exemptions: A set of laws that set forth what real property and other assets you get to keep, free from the claims of your creditors, when you file bankruptcy. Also called bankruptcy exemptions.
Exempt property: See exempt assets.
Family farmer: A person who owns a farming operation and who the majority of their income is derived from the farming operation and the majority of their debt arises out of the farming operation.
Federal exemptions: The bankruptcy exemptions provided for by the Bankruptcy Code. The federal exemptions are generally not available to California residents, who in most cases must use the California exemptions.
Foreclosure: When your home loan lender sells your home at an auction sale in order to pay off your home loan debt. The auction sale is conducted pursuant to the Deed of Trust that you gave to your lender, which gives your lender the right to sell your home if you don't make your payments.
Fraud: You commit fraud if you make a false statement with the intention of deceiving someone, or if you make false promise made without the intention of performing it.
Fraudulent transfer: If you transfer or sell your real property or other asset either with the intention to hinder the collection efforts of your creditors or to commit a fraud upon your creditors, or if you transfer or sell an asset without receiving fair value in exchange for the transfer or sale.
Fresh start: One of the main purposes of the bankruptcy laws are to afford the honest debtor a fresh start by granting you a discharge of your debts so that financially you can start with a clean slate.
Garnishment: When your creditor forcibly takes your wages through a wage garnishment.
Homestead: Your primary home or other property where you live.
Homestead exemption: The bankruptcy exemption that refers to the amount of equity in your home you are allowed to keep, free from the claims of your creditors, when you file bankruptcy.
Insider: A creditor who is a family member, friend, or business partner to whom you repay a debt prior to filing bankruptcy. Payments to an insider made during the one year period before you file bankruptcy can be recovered as a preference payment.
Involuntary lien: A lien placed against your home or one of your other assets against your will, such as a tax lien.
Joint administration: Consolidation of two or more cases that are then administered together in a single bankruptcy proceeding.
Joint petition: A bankruptcy petition filed by you and your spouse together.
Levy: When a creditor forcibly takes your money or other assets in repayment of a debt, such as through a bank levy.
Lien: A encumbrance against one of your assets that secures payment of a debt that you owe. A lien can be voluntary or involuntary.
Lienholder: A person or entity that has a lien against one of your assets.
Lien strip: The physical removal of a lien or part of a lien through the lienstripping process.
Lienstripping: The process of physically removing a lien or part of a lien against your real property so that the lien is no longer an encumbrance against your real property. Typically done in a Chapter 13 case in order to remove the lien associated with a 2nd mortgage against your home.
Liquidated claim: A claim where the amount of your creditor’s claim has already been determined.
Liquidated debt: A debt where the amount that you owe has already been determined, such as a credit card debt. This is in contrast to an unliquidated debt, such as an unresolved lawsuit involving physical injuries in which the amount of the potential judgment debt has not yet been determined.
Liquidation: When one or more of your assets that are not exempt are sold by the bankruptcy trustee and the funds generated from the sale are used to pay the claims of your creditors.
Means Test: A legal formula applied to determine what type of bankruptcy you qualify to file, and whether you will have to repay any of your unsecured debts. To qualify to file Chapter 7 bankruptcy, you must pass the Means Test. The same test is applied in Chapter 13 bankruptcy cases to determine how much of your unsecured debt, if any, you have to repay in your Chapter 13 case.
Meeting of creditors: A hearing that you must attend when you file bankruptcy in order to testify under oath as to the veracity of information contained in your bankruptcy petition and schedules and to respond to any questions of the trustee. Frequently referred to by lawyers as a 341 hearing because it is scheduled pursuant to Section 341 of the Bankruptcy Code.
Motion: A request that you make, or one of your creditors makes, asking the bankruptcy court to enter an order making a decision on a particular issue or set of issues.
Motion for Relief From Stay: A motion filed by one of your creditors requesting that the bankruptcy court grant it permission to foreclosure on your home, repossess your car, or take other action to collect a debt, notwithstanding the pendency of your bankruptcy and the injunction against collection action that is created by virtue of the bankruptcy stay.
No-asset case: A Chapter 7 bankruptcy in which you keep all of your assets. It is referred to as “no-asset” because from the standpoint of your creditors there are no assets to be sold through liquidation to pay their claims.
Nondischargeable: A debt that cannot be eliminated by your bankruptcy is referred to as a nondischargeable debt. The Bankruptcy Code itemizes what types of debt are nondischargeable.
Notice of Default: A document that your lender files with the county recorder to begin foreclosure of your home or other real property under a deed of trust. You can stop foreclosure under a deed of trust by repaying your missed payments in a lump sum payment, or by repaying your missed payments over a 3-5 year period in a Chapter 13 bankruptcy.
Order: A document signed by a bankruptcy judge stating that the Bankruptcy Court grants a party certain rights or benefits. An order can also refer to a document signed by a judge of any court of law granting a party certain rights or benefits.
Order for Relief: An order of the Bankruptcy Court that takes effect upon the filing of your bankruptcy case and creates the automatic stay.
Pension Plan: A type of retirement account funded and controlled by an employer for the benefit of its employees.
Personal bankruptcy: Another name for a consumer bankruptcy.
Personal property: All of your assets except your real estate.
Petition: The document that initiates a bankruptcy case and serves essentially as a cover sheet to your bankruptcy filing.
Petition date: The date that your bankruptcy is filed.
Plaintiff: A person or entity who files a lawsuit against another person or entity.
Plan: See repayment plan.
Postpetition: Subsequent to the date that a bankruptcy is filed.
Preference payment: When you pay a debt to a creditor during the 90 day period before you file bankruptcy, or when you pay a debt to an insider during the one year period prior filing bankruptcy.
Prepetition: Before the date that a bankruptcy is filed.
Priority claim: An unsecured claim of a creditor that is entitled to be paid ahead of other unsecured claims.
Proof of Claim: A document that a creditor files with the bankruptcy court to verify and establish the amount of its claim.
Rancher: A person who owns a ranching operation and who the majority of their income is derived from the ranching operation and the majority of their debt arises out of the ranching operation.
Real property: All of your real estate that you own.
Reaffirm: to agree to repay a debt after your bankruptcy filing.
Reaffirmation Agreement: a written agreement signed after you file bankruptcy under which you agree to repay a debt that was included in your bankruptcy. A Reaffirmation Agreement is frequently signed when you want to keep your car and the car loan.
Redeem: The act of buying back your car or other asset through the redemption process.
Redemption: The process of repurchasing your car or other asset pledged as security by paying your secured creditor the retail market value of your car or other asset. Redemption allows you to rebuild your car loan in bankruptcy.
Redemption loan: A loan that you take out during bankruptcy, typically at a very high rate of interest (25% or more), in order to repurchase an asset through the redemption process.
Repayment plan: A document filed in a Chapter 11, Chapter 12 or Chapter 13 case, in which you spell out which of your creditors you will repay, how much you will pay them, and the order and installments by which you will repay them, generally over a 3 to 5 year period.
Retail market value: See retail value.
Retail value: The expected resale value of your car or other asset if a dealer were to sell it. This is typically higher than the resale value of the asset if you were to sell it yourself.
Schedules: The documents filed in your bankruptcy that itemize your assets, debts, income and expenses. Your schedules are itemized as Schedules A – J.
Secured creditor: A creditor that has a security interest in one of your assets that you pledged as collateral for the repayment of your debt to that creditor, such as a mortgage lender holding a deed of trust against your home.
Secured claim: A claim of your creditor that is secured by collateral that you pledged as security.
Secured creditor: A creditor that has a secured claim.
Secured debt: A debt for which you pledged one of your assets as collateral, such as a home loan or a car loan.
Short sale: A sale of your real property where the sale price is insufficient to pay off all of the liens against the property. A short sale requires the consent of all lienholders.
Statement of Financial Affairs: A document filed with your bankruptcy in which you disclose certain financial affairs and transactions occurring during the years before your bankruptcy filing.
Statement of Intention: A document filed with your bankruptcy in which you state your intention with regard to your secured debts.
Transfer: To part with ownership of one of your assets.
Trustee: A bankruptcy court appointed representative that is charged with a duty to review your bankruptcy schedules and statements, and oversee your bankruptcy to make sure that you have honestly disclosed all of your assets, debts, income, expenses, and financial affairs, and, to the extent needed, to represent the interests of your unsecured creditors.
United States Trustee: An officer of the Department of Justice that supervises administration of Chapter 11 and Chapter 12 cases, appoints bankruptcy trustees to supervise Chapter 7 and Chapter 13 cases, and also investigates bankruptcy cases to prevent bankruptcy abuse and bankruptcy fraud.
Unsecured claim: A claim of your creditor that is not secured by any collateral pledged as security.
Unsecured creditor: A creditor that has an unsecured claim.
Unsecured debt: A debt where your creditor does not have any collateral pledged as security, such as credit card debt or medical bills.
Voluntary lien: A lien placed against your home or one of your other assets with your consent, such as a deed of trust given to your mortgage lender.
Voluntary petition: A bankruptcy petition that you file voluntarily. This is in contrast to an involuntary bankruptcy petition, which is a petition that your creditors join together and file in order to force you into bankruptcy so that your assets can be liquidated to pay your creditors.
Wage garnishment: When a creditor forcibly takes your wages in repayment of a debt that you, or when the IRS forcibly takes your wages in payment of past due taxes. In order for a creditor to do a wage garnishment, a creditor will first sue you and reduce the debt to a judgment.
Wildcard exemption: A bankruptcy exemption that you can apply to any asset that you want to apply it to.