Abandonment - The trustee may abandon property that is burdensome or of inconsequential value to the estate. Generally, when abandonment occurs, the property is considered to be abandoned to the debtor, although abandonment does not affect the continuing validity of a secured creditor's lien.

Absolute Priority Rule - The rule holds that junior classes may take nothing under the plan until senior classes have been paid in full; and senior classes cannot be overpaid until junior classes have been paid in full.

Abuse - A word representing a standard or level of compliance with BAPCPA. This term is usually applied to a Chapter 7 case that should have been more appropriately (per BAPCPA) filed as a Chapter 13 repayment plan. Under "Abuse" circumstances the debtor would appear to have enough disposable income to fund a Chapter 13. 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. When abuse is found, the case will be dismissed unless the debtor consents to a conversion to a case under chapter 11 or 13.

Acceleration - The forfeiture of the debtor's right to pay a debt in installments, so that the debt becomes immediately due and payable.

Adequate Protection - The Bankruptcy Court attempts to value and protect a creditor's secured position, as it exists at the commencement of the case. The Court then acts in such a manner so as to protect that creditor's interest throughout the case.

Administrative Claim - Those claims which are reasonable and necessary expenses of the estate post petition, including post petition wages, taxes, the Debtor In Possession's and Creditors' Committee's attorney's fees and costs, other professional fees and costs and the compensation/reimbursement for a trustee or an examiner.

Adversary Action - Inside a Bankruptcy, there can be other actions filed by either a creditor, the trustee or the debtor. Some of these actions are adversarial in nature since parties to the action are on opposite sides.

Essentially, an adversary action is a lawsuit arising in or related to a bankruptcy case that is commenced because of an issue or claim which is adversarial and which is handled by filing a complaint with the bankruptcy court.

All Parties in Interest - The debtor and his/her counsel, the U.S. Trustee and its counsel, any appointed trustee and/or examiner and their counsel and creditors and equity interest holders and their counsel


Allowable Expenses - those expenses allowed under the Financial Collection Standards.

Allowance Of Claim - Unless a party in interest objects, a claim or interest that has been filed will be allowed by the court and will serve as the basis for distribution.

Application - Applications in bankruptcy practice are used to employ professional persons for compensation for services and reimbursement of expenses.

Asset - An asset is anything of value whether it be tangible (material) or intangible (goodwill, personality, etc.).

Asset Case - A case that consists of an estate with sufficient non exempt, unencumbered assets to potentially provide a distribution for unsecured creditors.

Assignment - The debtor sells the rights of the leasehold to someone else.

Assisted Person - Any person whose debts are primarily consumer debts who receives bankruptcy assistance and whose non-exempt property is valued at less that $150,000.00.

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

Assumption - The debtor continues to keep the lease property and must continue to keep up the payments.

Attachment - An attachment is a legal proceeding carried out by a governmental agent to seize or take possession of property. See also, the definition of repossession.

Audit - Professional examination and verification of a debtor's documents and supporting data for the purpose of rendering an opinion as to their legitimacy, transparency, consistency and conformity with BAPCPA.

Automatic Preservation for Benefit of Estate - Any transfer that has been avoided or any lien that is void under the Bankruptcy Code is automatically preserved for the estate's benefit.

Automatic Stay -When the debtor files bankruptcy, creditors everywhere are automatically enjoined and "stayed" from proceeding in any way to collect their debts from the debtor. An injunction against the commencement or continuation of acts against the debtor or its property that becomes effective automatically upon the commencement of a case under the Bankruptcy Code.

A statutorily imposed injunction that automatically stops lawsuits, foreclosure, garnishments and all collection activity against the debtor the moment a bankruptcy petition is filed.

Avoiding Power - The Bankruptcy Code grants the Trustee the power to avoid certain transactions or transfers occurring before the commencement of the bankruptcy case.

Bankruptcy Code - A. The Bankruptcy Code consists of Title 11, of the United States Code. Each of the Bankruptcy Chapters (Chapter 7-Chapter 13-Chapter11) are included within these code sections.

Bankruptcy Court - The branch of the federal judicial system that administers bankruptcy law, presently subordinated to the federal district court. The bankruptcy court is a "unit" of the district court.

In some States, there is only one Bankruptcy court District, usually located in the capital city of the State, but, there are branches scattered throughout the State in other populus areas. However, most States have more than one district, usually defined as either the Northern, Central, Southern, Eastern or Western Districts.

Bankruptcy Court Rules - The procedures of the Bankruptcy Court are governed by three or more sets of rules, for example, (1) The Federal Rules of Bankruptcy Procedure (F.R.Bankr.P), are the rules adopted by Congress and the United States Supreme Court; (2) The Federal Rules of Civil Procedure (F.R.C.P.) are the civil rules that govern most of the civil matters brought before the Federal Courts: (3) The Local Rules are those rules adopted by the local courts for the purpose of improving their efficiency.

Bankruptcy Estate - All of the legal and equitable rights, claims or interests of the debtor which exist at the time of the commencement of the case. All property of the debtor is generally called his/her bankruptcy estate. The trustee technically takes control of your bankruptcy estate for the duration of your bankruptcy case.

Bankruptcy Judge - The Federal Judge who presides over the administration of a bankruptcy case and decides contested aspects of the case. which involve either the liquidation or reorganization of a debtor.

Bankruptcy Lawyer - A lawyer who is licensed to practice law in the federal courts. Remember Bankruptcy Court is not like a State Superior Court, but rather it is found within the Federal District Court System.

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

Bankruptcy Petition Preparer - A person who is not an attorney and for a fee prepares bankruptcy documents for filing.

Bankruptcy Trustee - A private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases to represent the interests of the bankruptcy estate and the debtor's creditors.

BAPCPA - The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Referred to as BAPCPA or the Act) became effective as the new bankruptcy law on October 17, 2005.

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

Best Interests Test - "for the best interests" of creditors. That meant the creditors were entitled to receive under a plan as much as or more than they might receive under a straight bankruptcy liquidation.

Case - There is only one case: the Chapter 11 (or 7,9,12 or 13) Bankruptcy case.

Cash Collateral - Collateral for a loan that is cash or cash equivalent. Examples: accounts receivable, pledged accounts or certificates of deposit, assigned rents, or cash proceeds from sale of collateral. The debtor is not allowed to use this type of collateral after filing bankruptcy, except by an order of the bankruptcy court.

Chapter 7 - A type of bankruptcy in which the debtor's assets are liquidated by a court-appointed trustee. Often referred to as "straight liquidation" or "straight" bankruptcy. Corporations, partnerships and individuals may file a Chapter 7 bankruptcy: only an individual receives a discharge of his or her debts. BAPCPA provides remedies for "substantial abuses" of Chapter 7. (i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors).

Chapter 7 Trustee - A person appointed in a chapter 7 case to represent the interests of the bankruptcy estate and the unsecured 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 of the debtor to recover property of the bankruptcy estate).

Chapter 11 - A type of bankruptcy in which the debtor attempts to prepare a plan of reorganization of his debts and assets which must be approved by the bankruptcy court. A trustee is not appointed unless the creditors so convince the court. Corporations, partnerships and individuals may file a Chapter 11 bankruptcy. This chapter was primarily designed for business reorganizations, although an individual can utilize this chapter.

Chapter 12 - The chapter of the Code providing for adjustment of debts of a "family farmer," as that term is defined in the Code.

Chapter 13 - A type of bankruptcy in which an individual proposes an arrangement or plan concerning his/her debts and assets (a three-to-five-year period). Previously called "wage earner' bankruptcies, only an individual may file a Chapter 13 and he or she may not owe more than $300,00 in unsecured debts or more than $1,000,000 in secured debts. A standing trustee serves only as disbursing agent to collect part of the debtor's income and pay it out under the plan. BAPCPA changes Chapter 13 confirmation standards and adds protections for unsecured creditors.

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.

Code - The Bankruptcy Code (11 U.S.Code).

Collateral - Property which is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral. The general rule with respect to liens is "First in time, first in right."

Confirmation Hearing - The hearing before the Bankruptcy Court on whether the proposed plan of reorganization in a Chapter 11 (or a plan in Chapter 13) has been accepted by the necessary group or groups of creditors and also meets other statutory restrictions.

The Court order makes the terms of the plan for repayment of debts in a Chapter 11,12, or 13, binding. The terms of the confirmed plan replace the prepetition rights of the debtor and creditor.

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

Consumer Debt - Debts incurred by an individual for personal, family or household purposes. Taxes are not consumer debts; neither are business loans. The means test only applies to those with primarily consumer debt.

Contested Matter - Essentially, any disputed matter other than "adversary proceedings." Relief in a contested matter is sought by motion, and no responses are required unless ordered by the Court.

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, but the contingency has not yet occurred.

Core Proceedings - Those matters before a bankruptcy court directly tied to the bankruptcy case and arising under the Bankruptcy Code. Core proceedings include estate administration matters, allowance or disallowance of claims, use and sale of property, obtaining credit by the debtor/estate, turnover matters, preference litigation, automatic stay litigation, fraudulent conveyance litigation, nondischargeability litigation, plan confirmation, use of cash collateral litigation, lien validity litigation, etc.

Cramdown - A slang term referring to a debtor's plan of reorganization under which a secured creditor is to be paid the market value of his collateral instead of the full amount of his debt. In a Chapter 11 case, no classes of creditors junior to a crammed down class may receive anything under the plan unless they fund the plan (i.e. purchase the right to participate under the plan).

Creditor - There are basically two types of creditors, namely, secured and unsecured. A secured creditor is the person or entity who is owed money that is secured by either a lien against the debtor's property, or who holds title to certain property owned by the debtor, for example, a home mortgage, an automobile installment contract, time pay department store contracts, etc. An unsecured creditor is a person or entity who is owed money, but has no collateral to secured the indebtedness, for example, credit card charges, doctor bill, eg. the holder of the claim.

Current Monthly Income - Income received from all sources, whether or not taxable, during the six months preceding the filing, except for Social Security payments and payments to victims of crimes and crimes against humanity.

Debtor - An individual, partnership or corporation who files a bankruptcy proceeding or has one filed involuntarily against him. A debtor is a person or entity who owes a debt to another (the creditor). Also, the person who files for bankruptcy.

Debtor-in-Possession- A debtor is allowed to remain in possession of his/her business/property unless cause is shown why a trustee should be appointed. As a result of being allowed to remain in possession, the "debtor in possession" is imbued with most of the right and duties of a trustee. This means that the debtor-in possession has fiduciary obligations with respect to the estate.

The debtor-in-possession exercises all the power and right of a trustee in bankruptcy and is similarly charged with all of the duties. For a corporation or business partnership, this means that current management will remain in control after filing Chapter 11.

Debts - An obligation to pay or perform on another's claim or obligation. Under the Bankruptcy Code, all debts must be classified not only as secured and unsecured, but also, whether they are contingent, liquidated or unliquidated.

The meaning of each of these debt classifications is: (a) A contingent debt is a debt that is known to exist, but its value is not readily ascertainable, for example, a liability arising from an auto accident, but not settled; (b) a liquidated debt is a debt that has been sued upon in Court, and subsequently, reduced to a Court judgment; (c) an unliquidated debt is an outstanding debt that has not proceeded to a law suit and reduced to a sum certain or judgment in a Court action.

Discharge - A. The official order of the court that releases the individual debtor from all of his or her unsecured debts incurred prior to bankruptcy. Secured debts are not discharged, except to the extent that the collateral is insufficient to cover the amount of the claim.

The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien which secures the debt may survive the bankruptcy case.

An order that bars the debtor's in personam liability on claims within its scope and acts as a permanent injunction against judicial proceedings or nonjudicial collection efforts with respect to such claims.

Denial of Discharge - Penalty for debtor misconduct with respect to the bankruptcy case. When the debtor's discharge is denied, the debts that could have been discharged in the bankruptcy case. The administration of the case, the liquidation of assets and the recovery of avoidable transfers, continues for the benefit of creditors.

Dischargeable Debt - A debt for which the debtor's personal liability has been eliminated.

Disclosure Statement - A document that is sent to the creditors explaining the background of the proposed Chapter 11 plan, similar to a stock prospectus. The disclosure statement must be approved by the bankruptcy court and must be mailed to the creditors with the proposed plan.

Dismissal - The process by which a bankruptcy case or proceeding is ENDED. Dismissal of a case terminates all stays and the existence of the bankruptcy estate. After a case is dismissed, the debtor and the creditors have the same rights as they had before the bankruptcy case was commenced. Dismissal is the penalty for infractions of bankruptcy procedures under the BAPCPA.

Domestic Support Obligation - Debts for alimony, maintenance or support owed to a child, a spouse or a governmental entity (that paid for the support of the child or spouse). A new term introduced by BAPCPA.

Equality of Distribution - People who have the same status outside of bankruptcy are treated the same in bankruptcy.

Equity - The value of a debtor's interest in property that remains after liens and other creditors' interests are considered.

Equity Interest Holder - A general or limited partner of a partnership, owner of equity securities warrants, options or any other indicia of a right to share in company profits.

Estate - Upon the filing of a bankruptcy petition, a new entity is created consisting of all of a debtor's legal and equitable rights in and to his/her property, which entity is termed the bankruptcy "estate." The representative of the estate in a Chapter 7 or 13 is the trustee, and in the Chapter 11 case it is the debtor-in-possession.

Examiner - A court-appointed investigator authorized to delve into the financial and business affairs of a debtor-in-possession. Examiners are frequently accounting firms. Examiners have limited powers and are compensated as an administrative claim of an estate.

Executory Contract - An unexpired contract which the trustee or debtor may elect to assume, continue or reject. Example: The trustee might elect to keep a valuable lease by paying the back rent and "assuming" the lease.

A contract under which the obligations of both the debtor and the other party are so far unperformed. The Code grants the trustee the ability to assume, assign or reject executory contracts and unexpired leases for the benefit of the estate, subject to bankruptcy court approval.

Exempt - A description of any property that a debtor may prevent creditors from recovering.

Exempt Property - A debtor's right to exclude (or cover with a fire blanket) certain property from the bankruptcy estate. The debtor retains exempt property free from the claims of its unsecured creditors (or from the bankruptcy estate). Exempt property is that property exempt from execution or attachment under either State Laws or Federal Laws. In an action under chapter 7 of the Bankruptcy Code, the trustee must take all non-exempt property and sell the same to the highest bidder, then distribute the proceeds to the creditors having priority.

Execution - The legal process of carrying out a Court Order, Decree or Judgment. Generally, there are two types of executions, namely, a Special Execution and a General Execution. (a) A General Execution is one that does not name any particular property of the judgment debtor, but can be executed against any property found to be owned by the judgment debtor. (b) A special execution is one that is directed against specific property of the judgment debtor.

Feasible - The analysis by which the debtor shows to the Bankruptcy Court that it will be able to make payments required under a plan of reorganization.

Federal Law - Article I of the Constitution empowers Congress to enact uniform laws of bankruptcy.

Fraudulent Conveyance - Under both state and federal law, a transfer of property by the debtor for less than the true value of the property prior to bankruptcy. Example: Debtor transfers real property worth $10,000 to uncle for $50 during the year prior to bankruptcy. Such "fraudulent conveyance" may be voided.

FRBP - Federal Rules of Bankruptcy Procedure.

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

General, Unsecured Claim - An unsecured claim that is not entitled to priority treatment under the Code.

In Re - This is a legal phrase that means "In the matter of".

Insider (of individual debtor) - Any relative of the debtor or of a general partner of 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.

Insider - Someone who has a particularly close relationship to the debtor. This can include relatives, partners or partnerships, affiliated companies (parents or subsidiaries). The danger of being an insider is that it increases your vulnerability to a preference suit by the trustee.

Involuntary Bankruptcy Action - An involuntary bankruptcy action is one that is initiated by a creditor against the debtor.

Involuntary Transfer- A transfer of property or interest in property without the consent of the debtor (e.g., a foreclosure or repossession).

Joint Administration - A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate firms or individuals can pool their resources, have the same trustee, hire the same professionals, etc.)

Joint Petition - A single bankruptcy petition filed by a husband and wife together.

Judgment - A final determination made by a Court of Law.

Judgment Creditor - A creditor who has obtained a judgment against the defendant in a Court action.

Judgment Debtor - The person or entity who has a judgment against them as a result of losing a Court action.

Judgment Lien - A judgment lien is a lien arising from a Court judgment, which is usually recorded in the public records. The lien affixes to all real property owned by the judgment debtor.

Liability - An obligation or responsibility to another for either money owed or performance under a contract. Something for which one is liable.

Lien - A lien is a legal claim or encumbrance against the property of another, for example, a realty mortgage lien, a judgment lien, a tax lien, a labor lien, etc. A lien is an interest in property. A charge upon specific property designed to secure payment of a debt or performance of an obligation.

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.

Local Housing and Utility Standards - Part of the Financial Collection Standards establishing the maximum amount allowable for housing and utilities (the debtor must use the lesser of actual expenses or the applicable local standard). These standards are issued on a state-by-state basis at the county level.

Local Transportation Standards - Part of the Financial Collection Standards used to determine maximum allowable expenses for the operation of a car or in connection with public transit (the debtor must use the lesser of actual expenses or the applicable local standard). Although divided into two parts - national ownership cost and operating costs - only the operating costs are used. These standards are issued for geographical regions and major metropolitan areas.

Means Tests - The means test is used to determine if by filing a petition under chapter 7 of the Code it would constitute an abuse of the bankruptcy process. This test measures the ability of a debtor to repay at least some significant portion of that person's unsecured obligations (debts). The test is comprised of numerical graphs, calculations and standards utilized by the U.S. Trustee Program and the Department of Justice.

Median Family Income - The median income for a family of the same or smaller size as the debtor's family determined by the Bureau of Census for the state in which the debtor resides.

Monthly Net Income - Current monthly income after deduction of allowable expenses.

Motion to Lift the Automatic Stay - A request by a creditor to allow the creditor to take an action against a debtor or the debtor's property after the debtor has filed bankruptcy which would otherwise be prohibited by the automatic stay.

National Standards - The expenses allowed under the Financial Collection Standards promulgated by the Internal Revenue Service for food, clothing and household expenses. These are used in the means test in lieu of the debtor's actual expense.

No-asset Case - A chapter 7 case where there are no assets available to satisfy any portion of the creditors' general unsecured claims.

Nondischargeability - A creditor may file a proceeding in the bankruptcy court to have his particular unsecured debt declared nondischargeable, i.e., after bankruptcy the debtor would still owe the creditor the money. BAPCPA adds three grounds - debts for luxury items incurred within a short time before bankruptcy, injuries caused by a drunk driver, and domestic support obligations.

Nondischargeable Debt - A debt that cannot be eliminated in bankruptcy.

Notice and Hearing - Sections throughout the Code refer to actions that may be taken "after notice and hearing." This phrase means after such notice of and such opportunity for a hearing, as may be appropriate.

Objection to Claim - The filing of an objection to a claim (usually by the debtor) which initiates a process that will ultimately result in a decision about the allowance or disallowance of that claim by the bankruptcy court.

Objection to Discharge - A creditor's adversary proceeding to have the debtor's discharge of debts entirely denied. Grounds for a total bar of the discharge generally concerns misconduct by the debtor after he/she files bankruptcy.

Generally, a trustee's or creditor's objection to the debtor's being released from personal liability for all otherwise dischargeable debts.

Objection to Exemptions - A trustee's or creditor's objection to a debtor's attempt to claim certain property as exempt (i.e., not liable for any pre-petition debt of the debtor).

Order for Relief - "The commencement of a voluntary case� constitutes an order for relief�". There is no written order for relief. The date of the order for relief is the date the petition is filed.

Party in Interest - A party who is actually and substantially interested in the subject matter, as distinguished from one who has only a nominal or technical interest in it (e.g., a creditor, the trustee or the debtor).

Petition - The document filed by a debtor that initiates a bankruptcy proceeding. Petitions may be voluntarily filed by the debtor, or involuntarily filed


Petition: Voluntary and Involuntary - A voluntary petition is filed if a debtor voluntarily seeks relief under one of the chapters of the Bankruptcy Code. An involuntary petition is filed when creditors seek to place the debtor in bankruptcy. If the debtor contests and prevails, the court shall dismiss the involuntary petition.

Plan - A document which divides the claims of creditors into groups and restructures their payments and/or collateralization. Some creditors are not materially affected and are considered "unimpaired." The debtor's attorney files a "plan" proposing who is going to be paid and how they are going to be paid.

Plan or Reorganization - The document debtor submits for confirmation a plan to pay restructure and perhaps forgive certain pre-petition debt. The debtor proposes a plan in chapters 11, 12, and 13. Creditors may propose their own plans in chapter 11, but not in chapters 12 and 13.

Possessory Lien - A possessory lien is a lien that affixes to property as a matter of law.

Post-Petition Transfer - A transfer of a debtor's property made after the commencement of the case.

Pre-Bankruptcy Planning - The arrangement (or rearrangement) of a debtor's property to allow the debtor to take maximum advantage of exemptions. (Pre-bankruptcy planning typically includes converting nonexempt assets into exempt assets.)

Preference - A transfer of the debtor's property to or for the benefit of a creditor, for or on account of a pre-existing debt, made while the debtor was insolvent, within 90 days before bankruptcy (within one year before bankruptcy in an "insider" situation), the effect of which was to give the creditor more than it would have otherwise received in a chapter 7 distribution. The goal in bankruptcy is to provide an equal playing filed to foster equality of distribution among the creditors of an insolvent debtor.

Presumption of Abuse - Arises when the current monthly income of an individual in a case filed under chapter 7 of the Code exceeds allowable expenses by a specified amount.

Prime a Lien - To obtain court authorization to borrow by extending a security interest in property that is senior to existing liens on the property. (Super Priority Lending) - Slang for a lender who lends money on the bankruptcy estate's assets in a secured position prior to "existing secured debt." Example: Bank A has a secured debt of $50,000 on a $100,000 piece of realty. Bank B agrees to lend a new $50,000 on the same realty of the bankruptcy estate, but only in a first position. The bankruptcy court can "prime" Bank A's secured position by shifting it to a second position behind the new $50,000 loan of Bank B.

Priority - The 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 Claims - Claims which, must be paid before unsecured claims may be paid anything. Examples: taxes, wages, consumer deposits, etc. Priority claims also include, as a first priority, all "administrative" claims of the estate.

Process - Process is legal notice from the Court that an action has been filed and that the parties must appear and defend. This legal notice can be in the form of a Summons or Writ.

Proof of Claim - A pleading filed with the clerk of the bankruptcy court setting forth the amount, nature and classification (e.g., secured, unsecured, administrative, priority, etc.) of the claim. The supporting documentation is usually attached.

Document a creditor files with the clerk of the bankruptcy court to become eligible for payment from the estate. The proof of claim should include all supporting evidence of such claim, including documentation reflecting perfection of a security interest, if any. There is usually a deadline in which to file of proof of claim.

Proof of Service - Proof of service is simply an affidavit, certification or declaration by a party that legal service was completed upon the party entitled to receive such papers. In the case of mailing, the proof of service is completed by the party mailing the papers and then filed with the court.

Property - There are basically two types of property, real and personal. Real property is land, buildings, or other permanently fixed structures or things attached to the land or building. Personal property, on the other hand, is moveable property, like a vehicle, clothing, furnishings, stocks, bank account, property contracts, personality contracts, jewelry, etc. in other words, the distinguishing character of personal property is that it can be moved.

Property of the Estate - All of debtor's interest in property. All legal or equitable interests of the debtor in property as of the commencement of the case.

Purchase Money Lien - A purchase money lien is an ownership lien created under an installment purchase contract that includes provisions, whereby the seller reserves unto himself, the right of title to the property until buyer fully satisfies the terms of the contract.

Reaffirmation - An agreement entered into by the debtor and the creditor during the bankruptcy case which says that the debtor is going to repay a particular amount.

Reaffirmation of Debt - A writing in which the debtor agrees to retain personal liability on a claim that would otherwise be discharged. Unless the claim is secured by real property, the debtor's attorney or the court must approve the reaffirmation. In addition, such agreements are enforceable only if made before discharge, filed with the court and not rescinded by the debtor.

Redemption - Redemption must be a cash transaction, unless the creditor consents to payment over time. To redeem property means that one party recovers property from another. Normally, in a bankruptcy action, the debtor can redeem (or buy back) personal property from the creditor at its current market value; or whatever value is negotiated.

Relief from Stay - An adversary proceeding filed with the bankruptcy court in which the creditor requests that the court modify (or "lift") the stay to allow the creditor to proceed in its actions against the debtor's property. Example: A secured creditor requests the court to lift the automatic stay so that he may continue his state court foreclosure on the debtor's realty. The creditor normally asserts that his position does not have "adequate protection."

Schedules - Documents (pleading's) submitted by the debtor along with the petition showing the debtor's assets, liabilities and other financial information. (There are official forms a debtor must use.)

Secured Claim - An allowed claim secured by a lien on property in which the Bankruptcy Estate has an interest.

Secured Creditor Priority - An individual or business holding a claim against the debtor that is secured by a lien on property of the estate or the debtor, or that is subject to a right of setoff.

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.

Setoff - A setoff occurs when a party in interest applies funds from other accounts, within the institution, to reduce the balance of an outstanding loan. This commonly happens when a bank will take money from a savings or checking account and apply it to a defaulted loan owed to the institution by the debtor.

Special Notice List - This list consists of the following persons, who should receive copies of all pleadings in matters where notice to all parties in interest is required: debtor and its counsel, the official creditors' committee and its counsel, the U. S. Trustee, any appointed trustee and trustee's counsel, and those person who have requested special notice.

State Debtor-Creditor law - Focuses on individual actions by a particular creditor.

Statement of Financial Affairs - The document that must be filed by all debtors, under penalty of perjury, listing detailed information as to the whereabouts of financial records, pre-bankruptcy transfers, pre-bankruptcy income, and so forth.

Statement of Intention - An official bankruptcy form that debtors with secured debts must file to indicate what they want to do with the property that secures the debt. For instance, a debtor with a car note must indicate whether he or she wants to keep the car and continue the debt (reaffirmation), pay off the car note at a reduced price (redemption), or give the car back to the creditor and cancel the debt (surrender).

Statutory Law - Title II of the United States Code

Strong Arm - This graphic expression refers to the trustee's avoiding powers.

Substantive Consolidation - Putting the assets and liabilities of two or more related debtors into a single pool to pay creditors. (Courts are reluctant to allow substantive consolidation in most cases other than a husband and wife since the action must not only justify the benefit that one set of creditors receives, but also the harm that other creditors suffer as a result.) 341 Meeting - A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, examiner or the United States Trustee about his/her financial affairs.

Transfer - Any mode or means by which a debtor disposes of or parts with the debtor's property.

Trustee - The court-appointed representative of the estate who actually administers the estate. A chapter 7 trustee is in charge of liquidating the estate. In some chapter 11 cases, the debtor-in-possession is replaced by a chapter 11 trustee, who administers the estate. In chapters 12 and 13, there ordinarily is at lease one standing trustee in each district to whom all cases under chapter 12 or chapter 13 are assigned. In a Chapter 13, a standing trustee exists to administer the wage-earner's plan by collecting the set percentage of wages and paying the percentages out to creditors.

In a Chapter 7 case the trustee is charged with gaining control of the property of the estate, selling it, and distributing the proceeds.

U.S. Trustee - In all districts, a formal office of the United States Trustee exists as an arm of the U. S. Department of Justice. The U.S. Trustee, not the Bankruptcy Court, appoints trustees from a private panel and appoints official creditors committees and official equityholders committees. The U.S. Trustee program was designated to free the Bankruptcy Courts from administrative supervision over trustees.

Undersecured Claim - A debt secured by property that is worth less than the amount of the debt.

Unliquidated Claim - A claim for which a specific value has not been determined and cannot be determined by a simple mathematical computation.

Unscheduled Debt - A debt that should have been listed by a 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 that is not secured by collateral. 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 on the creditor's assessment of the debtor's future ability to pay.

Voluntary Transfer - A transfer of a debtor's property with the debtor's consent.

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