Glossary

Administrative Claims – Claims arising after the initiation of the bankruptcy case for taxes, and goods sold or services rendered to estate. Includes claims by professionals such as accountants and attorneys whose employment was previously approved by the Court.

Bankruptcy Estate – The debtor’s assets and liabilities.

Chapter 7 – A liquidating bankruptcy in which any nonexempt assets are sold and the proceeds distributed to creditors.

Chapter 11 – A reorganization of the debtor’s business affairs that culminates in a plan of reorganization, a plan that describes the distribution to creditors.

Chapter 13 – A bankruptcy in which the debtor makes monthly payments to a trustee, who remits them to creditors over a three- to five-year period. Also called wage earner plan.

Class – A group of creditors with substantially similar claims or interests.

Creditors – The individuals or entities owed money by the debtor.

Debtor-in-Possession – In a Chapter 11 bankruptcy, a debtor that continues to operate its business under the supervision of the Office of the U.S. Trustee.

Discharge Order – A finding entered by the U.S. Bankruptcy Court at the conclusion of an individual’s bankruptcy case that relieves the debtor of any further liability for scheduled debts and permanently enjoins creditors from taking any action to collect such debts.

Disclosure Statement – A document prepared by the Chapter 11 debtor that describes the debtor’s business operations both before and during the bankruptcy case and that includes financial statements and projected income and expenses over the period of the proposed plan of reorganization; must be approved by the U.S. Bankruptcy Court.

Dividend – A one-time or periodic payment made to creditors. The amount received is determined by the claim’s class.

Exempt – Specified assets that the individual debtor may retain in order to accomplish the “fresh start” objectives of the Bankruptcy Code. The debtor may choose to exempt assets under section 522 of the Bankruptcy Code or under state exemption statutes.

No Asset Report – Filed by the Chapter 7 trustee after conducting a 341 meeting with the debtor if there are no assets available for distribution to creditors.

Office of the U.S. Trustee – An arm of the U.S. Department of Justice, the Office oversees Chapter 11 cases. Debtors must file monthly reports of financial condition, along with proofs of insurance and payment of post-petition taxes.

Petition for Relief – A bankruptcy case is commenced by the filing of a petition for relief. Attached to the petition are schedules of assets and liabilities, current monthly income/expenses (for individual debtors), and statements of affairs and intentions.

Plan of Reorganization – Prepared by the debtor and sent to all creditors. In Chapter 13 cases, the proposed Plan is send to all creditors and parties and interest. A creditor may object to Plan Confirmation, but creditors do not vote to approve the proposed plan. In a Chapter 11 case, the proposed Plan is sent after review and approval by the Bankruptcy Court. The Plan details the payments each class of creditors will receive and any modifications of their claims or position. A class is deemed to have accepted a plan if the holders of allowed claims of at least two-thirds in amount and one-half in number in that class vote to approve the Plan.

341 Meeting – The initial examination of the debtor by the appropriate trustee. Creditors are sent notice and may attend.

Trustee – The Chapter 7 Trustee conducts a section 341 meeting with the debtor to review the schedules of assets and liabilities for accuracy and completeness. If non-exempt assets exist, the trustee liquidates the assets and distributes the net proceeds to creditors according to the priority of their claims.

The Chapter 13 Trustee – reviews the debtor’s proposed Plan to determine feasibility. If the Plan is confirmed the debtor makes monthly payments to the Trustee who periodically remits them to creditors according to the Plan terms. If the debtor fails to make monthly payments the Chapter 13 Trustee will seek to dismiss the case or convert it to Chapter 7 by filing a motion with the Court.

U.S. Bankruptcy Code – Federal bankruptcy law as codified in Title 11 of the U.S. Code.


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