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Bankruptcy Clinic
c/o Ted Tinsman, Attorney
901 E. St. Louis, Ste. 1200
Springfield, MO 65806
Phone: 417 4NO-DEBT (466-3328)


Ted L. Tinsman Attorney at Law, Attorneys & Lawyers, Springfield, MO
National Association of Consumer Bankruptcy Attorneys

General Information

Glossary of Terms

341 meeting – In a bankruptcy proceeding, a meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, an examiner, or the U.S. Trustee about his or her financial affairs.

Adversary proceeding – A lawsuit arising in or related to a bankruptcy case that begins by filing a complaint with the court, that is, a “trial” that takes place within the context of a bankruptcy case.

Affidavit – A written or printed statement made under oath.

Answer – The formal written statement by a defendant in a civil case that responds to a complaint, articulating the grounds for defense.

Assets – Property of all kinds, including real and personal, tangible and intangible.

Assume – An agreement to continue performing duties under a contract or lease.

Automatic stay – An injunction that automatically stops lawsuits, foreclosure, garnishments, and most 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 administrator – An officer of the Judiciary serving in the judicial districts of Alabama and North Carolina who, like the United States trustee, is 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.

Bankruptcy code – The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.

Bankruptcy court – The bankruptcy judges in regular active service in each district; a unit of the district court.

Bankruptcy estate – All interests of the debtor in property at the time of the bankruptcy filing. The estate technically becomes the temporary legal owner of all of the debtor’s property.

Bankruptcy judge – A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.

Bankruptcy petition – A formal request for the protection of the federal bankruptcy laws. (There is an official form for bankruptcy petitions.)

Bankruptcy trustee – A private individual or corporation appointed in all Chapter 7, Chapter 11, and Chapter 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.

Bench Trial – A trial without a jury, in which the judge serves as the fact-finder.

Business bankruptcy – A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.

Case File – A complete collection of every document filed in court in a case.

Case Law – The law as established in previous court decisions. A synonym for legal precedent. Akin to common law, which springs from tradition and judicial decisions.

Caseload – The number of cases handled by a judge or a court.

Cause of Action – A legal claim.

Cease and Desist Letter – A letter telling the debt collector to stop collection attempts.

Chapter 7 – The chapter of the Bankruptcy Code providing for “liquidation,” that is, the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors. In order to be eligible for Chapter 7, the debtor must satisfy a “means test.” The court will evaluate the debtor’s income and expenses to determine if the debtor may proceed under Chapter 7.

Chapter 7 trustee – A person appointed in a Chapter 7 case to represent the interests of the bankruptcy estate and the creditors. The trustee’s responsibilities include reviewing the debtor’s petition and schedules, liquidating the property of the estate, and making distributions to creditors. The trustee may also bring actions against creditors or the debtor to recover property of the bankruptcy estate.

 

Chapter 9 – The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).

Chapter 11 – A reorganization bankruptcy, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.

Chapter 12 – The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” as that term is defined in the Bankruptcy Code.

Chapter 13 – The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income, often referred to as a “wage-earner” plan. Chapter 13 allows a debtor to keep property and use his or her disposable income to pay debts over time, usually three to five years.

Chapter 13 trustee – A person appointed to administer a Chapter 13 case. A Chapter 13 trustee’s responsibilities are similar to those of a Chapter 7 trustee; however, a Chapter 13 trustee has the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.

Claim – A creditor’s assertion of a right to payment from a debtor or the debtor’s property.

Collateral – Property that is promised as security for the satisfaction of a debt.

Common law – The legal system that originated in England and is now in use in the United States that relies on the articulation of legal principles in a historical succession of judicial decisions. Common law principles can be changed by legislation.

Complaint – A written statement that begins a civil lawsuit, in which the plaintiff details the claims against the defendant.

Concurrent sentence – Prison terms for two or more offenses to be served at the same time, rather than one after the other. Example: Two five-year sentences and one three-year sentence, if served concurrently, result in a maximum of five years behind bars.

Confirmation – Approval of a plan of reorganization by a bankruptcy judge.

Consumer bankruptcy – A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.

Consumer debts – Debts incurred for personal, as opposed to business, needs.

Contingent claim – A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.

Contract – An agreement between two or more persons that creates an obligation to do or not to do a particular thing.

Counsel – Legal advice; a term also used to refer to the lawyers in a case.

Creditor – A person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.

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. There are exceptions to both requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.

Damages – Money that a defendant pays a plaintiff in a civil case if the plaintiff has won. Damages may be compensatory (for loss or injury) or punitive (to punish and deter future misconduct).

Debtor – A person who has filed a petition for relief under the Bankruptcy Code.

Debtor’s plan – A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Debt Collector – A debt collector is anyone who regularly collects debts owed to other creditors.

Default Judgment – A judgment awarding a plaintiff the relief sought in the complaint because the defendant has failed to appear in court or otherwise respond to the complaint.

Defendant – In a civil case, the person or organization against whom the plaintiff brings suit; in a criminal case, the person accused of the crime.

Discharge – A release of a debtor from personal liability for certain dischargeable debts. Notable exceptions to dischargeability are taxes and student loans. 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 or the debtor’s property to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including through telephone calls, letters, and personal contact.

Dischargeable debt – A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.

Discovery – Procedures used to obtain disclosure of evidence before trial.

Disposable income – Income not reasonably necessary for the maintenance or support of the debtor or dependents. If the debtor operates a business, disposable income is defined as those amounts over and above what is necessary for the payment of ordinary operating expenses.

Docket – A log containing the complete history of each case in the form of brief chronological entries summarizing the court proceedings.

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 $60,000 is subject to a $30,000 mortgage, there is $30,000 of equity.)

Evidence – Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case in favor of one side or the other.

Executory contracts – Contracts or leases under which both parties to the agreement have duties remaining to be performed. If a contract or lease is executory, a debtor may assume it (keep the contract) or reject it (terminate the contract).

Exempt assets – Property that a debtor is allowed to retain, free from the claims of creditors who do not have liens on the property.

Exemptions, exempt property – 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.

Ex Parte – A proceeding brought before a court by one party only, without notice to or challenge by the other side.

Family farmer – An individual, individual and spouse, corporation, or partnership engaged in a farming operation that meets certain debt limits and other statutory criteria for filing a petition under Chapter 12.

FDCPA – also known as Fair Debt Collection Practices Act: In 1977, Congress passed the Fair Debt Collection Practice Act to try to stop debt collectors from abusing people who owed personal debts.

File – To place a paper in the official custody of the clerk of court to enter into the files or records of a case.

Fraudulent transfer – A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.

Fresh start – The characterization of a debtor’s status after bankruptcy, i.e., free of most debts. (Giving debtors a fresh start is one purpose of the Bankruptcy Code.)

Insider (of corporate debtor) – A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

Insider (of individual debtor) – Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or corporation of which the debtor is a director, officer, or person in control.

Joint petition – One bankruptcy petition filed by a husband and wife together.

Judgment – The official decision of a court finally resolving the dispute between the parties to the lawsuit.

Jurisdiction – The legal authority of a court to hear and decide a certain type of case. It also is used as a synonym for venue, meaning the geographic area over which the court has territorial jurisdiction to decide cases.

Lien – A charge on specific property that is designed to secure payment of a debt or performance of an obligation. A debtor may still be responsible for a lien after a discharge.

Liquidation – A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.

Liquidated claim – A creditor’s claim for a fixed amount of money.

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) $10,000, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,000. 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.

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 in which 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 over payments, 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 non-dischargeable only if a creditor timely files and prevails in a non-dischargeability action.

Nonexempt assets – Property of a debtor that can be liquidated to satisfy claims of creditors.

Objection to dischargeability – A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargeable debts. Common reasons include allegations that the debt to be discharged was incurred by false pretenses or that debt arose because of the debtor’s fraud while acting as a fiduciary.

Objection to exemptions – A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.

Original Creditor – The person or company to whom you first owed the money.

Party in interest – A party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The debtor, the U.S. trustee or bankruptcy administrator, the case trustee and creditors are parties in interest for most matters.

Petition preparer – A business not authorized to practice law that prepares bankruptcy petitions.

Petition – The document that initiates the filing of a bankruptcy proceeding, setting forth basic information regarding the debtor, including name, address, chapter under which the case is filed, and estimated amount of assets and liabilities.

Plan – A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Pleadings – Written statements filed with the court which describe a party’s legal or factual assertions about the case.

Postpetition transfer – A transfer of the debtor’s property made after the commencement of the case.

Prebankruptcy planning – The arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Prebankruptcy planning typically includes converting nonexempt assets into exempt assets.)

Preferential debt payment – A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor’s chapter 7 case.

Priority – The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full.

Priority claim – An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.

Proof of claim – A written statement describing the reason a debtor owes a creditor money, which typically sets forth the amount of money owed. (There is an official form for this purpose.)

Property of the estate – All legal or equitable interests of the debtor in property as of the commencement of the case.

Pro Se – Representing oneself. Serving as one’s own lawyer.

Reaffirmation agreement – An agreement by a debtor to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of keeping collateral or mortgaged property that would otherwise be subject to repossession.

Redemption – A procedure in a Chapter 7 case whereby a debtor removes a secured creditor’s lien on collateral by paying the creditor the value of the property. The debtor may then retain the property.

Schedules – Lists submitted by the debtor along with the petition (or shortly thereafter) showing the debtor’s assets, liabilities, and other financial information. (There are official forms a debtor must use.)

Secured creditor – A secured creditor is an individual or business that holds a claim against the debtor that is secured by a lien on property of the estate. The property subject to the lien is the secured creditor’s collateral.

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. (There is an official form a debtor must use.)

Statement of intention – A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.

Statute of Limitations – The length of time a debt collector or creditor can lawfully collect a debt.

Substantial abuse – The characterization of a bankruptcy case filed by an individual whose debts are primarily consumer debts where the court finds that the granting of relief would be an abuse of chapter 7 because, for example, the debtor can pay its debts.

Transfer – Any mode or means by which a debtor disposes of or parts with his/her property.

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.

Undue hardship – The most widely used test for evaluating undue hardship in the dischargeability of a student loan includes three conditions: (1) the debtor cannot maintain––based on current income and expenses––a minimal standard of living if forced to repay the loans; (2) there are indications that the state of affairs is likely to persist for a significant portion of the repayment period; and (3) the debtor made good faith efforts to repay the loans.

U.S. trustee – An officer of the U.S. Department of Justice 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.

Undersecured claim – A debt secured by property that is worth less than the full amount of the debt.

Unliquidated claim – A claim for which a specific value has not been determined.

Unscheduled debt – A debt that should have been listed by the debtor in the schedules filed with the court but was not. (Depending on the circumstances, an unscheduled debt may or may not be discharged.)

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.

Validation Request – Letter to collector asking them to provide the documentation validating they have the right to collect the debt.

Voluntary transfer – A transfer of a debtor’s property with the debtor’s consent.

Wage garnishment – A non-bankruptcy legal proceeding whereby a plaintiff or creditor seeks to subject to his or her claim the future wages of a debtor. In other words, the creditor seeks to have part of the debtor’s future wages paid to the creditor for a debt.