NJ Bankruptcy Glossary

Below is a list of common terms and definitions in bankruptcy. Please review the list below to become familiar with each term.

341 Meeting – Meeting of Creditors with your attorney, trustee, and creditors.

Abuse – A disregard of financial capability. For example, purchasing luxury items on pre-bankruptcy shopping sprees with no reasonable or probable means of repayment.

Adversary Proceeding – A separate lawsuit filed in the Bankruptcy Court which arises in or is related to the bankruptcy case and involves opposing parties.

Animals – The “animal” exemption varies among states. In many places, pets or livestock and poultry are specifically exempt. If your state simply allows you to exempt “animals,” you may include livestock, poultry or pets. Some states exempt only domestic animals, which are usually considered to be all animals but pets.

Appeal – A request to the U.S. District Court or the Bankruptcy Appellate Panel, if there is one in the circuit, to review a decision of the Bankruptcy Court. A request to the Circuit Court of Appeals to review a decision of the U.S. District Court.

Automatic Stay – An automatic injunction requiring the suspension of collection activity on any debts listed in bankruptcy. The automatic stay goes into effect upon the filing of the bankruptcy, not when the creditor receives the notice of bankruptcy.

Bankruptcy Code – The Bankruptcy Code is a federal law that provides a process for individuals and businesses to reorganize their debts or to have their debts discharged. The Bankruptcy Code is divided into 15 chapters, each of which provides a different type of bankruptcy relief. The most common chapters of the Bankruptcy Code are: Chapter 7: Liquidation, Chapter 11: Reorganization and Chapter 13: Individual Debt Adjustment

Bankruptcy estate – All assets, whether real or personal, belonging to the bankrupt debtor at the time the petition is filed. (Co-debtors or spouses income or property may be part of the bankruptcy estate.)

Bankruptcy trustee – A bankruptcy trustee is a person appointed by the court to oversee the bankruptcy case of an individual or business. The trustee is responsible for managing the debtor’s assets, liquidating any non-exempt assets, and distributing the proceeds to creditors. The trustee also has the authority to investigate the debtor’s financial affairs and to challenge any fraudulent transfers that the debtor may have made.

Bar date – Last date for a creditor to timely file a Complaint to Determine Dischargeability of a debt. For non-governmental creditors, that date is 90 days after the first date set for the meeting of creditors (341 meeting). Governmental units such as the IRS have 180 days from the date the petition was filed to file a claim.

Chapter 7 – The chapter of the Bankruptcy Code which sets forth the provisions relating to liquidation of a debtor’s assets. In a Chapter 7 filing, a trustee is appointed to collect and liquidate no -exempt assets and distribute the proceeds to creditors in accordance with set priorities.

Chapter 9 – This chapter is a reorganization of debts but exclusively available to municipalities and public agencies.

Chapter 11 – This chapter is a reorganization chapter where a debtor seeks to rehabilitate and reorganize its financial structure. This plan is normally used by businesses but can be filed by an individual debtor.

Chapter 12 – This chapter was developed for family farmers exclusively. This chapter seeks to reorganize and rehabilitate the financial structure of the debtor. Normally it allows a debtor to propose a plan to pay creditors.

Chapter 13 – Chapter 13 has long been referred to as the wage earners’ plan. It allows a debtor with disposable income to propose a plan in order to pay the creditors in full or in part. The plan is three or five years and the percentage of pay back could range from 0% to 100%. A Chapter 13 cannot be filed if a debtor has unsecured debts of more than $360,475 or secured debts of more than $1,081,400.

Co-debtor stay – There is an automatic stay which protects persons who did not file bankruptcy but are liable on the same debt along with the person or entity who did file. Joint cardholders or co-signers of the debt would be protected by the automatic stay. This co-debtor protection is available primarily in Chapter 13 cases only.

Collateral – Property pledged for the payment of a loan or line of credit.

Community property – Only applicable in community property states. It consists of all property acquired by either spouse during the term of the marriage. For example, during marriage the wages of either spouse would be considered community property.

Complaint to Determine Dischargeability – The official complaint a creditor’s attorney files with the court to decide the dischargeability of a particular debt. This action must be commenced prior to the bar date.

Confirmation – The official act of the court in approving a Chapter 13 repayment plan.

Co-debtor – An individual who signs a contract for credit with another debtor.

Co-signed Debt – Debt for which more than one person is legally responsible.

Conversion – Converting a bankruptcy case from one chapter to another.

Cram down – Also known as lien stripping. It is the process where a creditor’s secured claim is split into secured and unsecured amounts based on the market value of the collateral. The creditor ends up with two separate claims.

Credit grantor – Business or individual who gives a loan or line of credit; also referred to as the creditor.

Cure defaults – Bring accounts up-to-date that were past due at the time of filing.

Debt – Something that is owed to another, normally money or property.

Debtor – The person or entity who owes the debt.

Delinquent – Overdue, not paid on the due date agreed to.

Deposition – The testimony of a witness taken down in writing under oath. This is normally taken outside of the courtroom in an informal setting.

Discharge – Discharge of debts is the goal in a bankruptcy filing. Unless a specific debt is determined to be non-dischargeable or a debt has been reaffirmed, all of the debtor’s debts become non-collectable by any creditors.

Discovery – The disclosure of pertinent facts or documents by either party prior to trial. This includes such things as interrogatories, requests to produce documents, and depositions.

Dismissal – An order terminating the bankruptcy. After approval by the bankruptcy court, this order allows creditors to begin collecting on the debt involved in the bankruptcy.

Disposable Income – Funds the debtor has available that are not required for reasonable living expenses.

Exemptions – Certain property belonging to the debtor is allowed to be excluded from the bankruptcy. The Bankruptcy Code sets forth guidelines where property can be exempted. This means the debtor is allowed to keep certain property in order to have a “fresh start.” The Bankruptcy Code also sets forth provisions allowing each state to create their own exemptions. The debtor usually has the option to choose which exemptions will be followed, the exemptions designed by the state in which he resides, or the federal exemptions set forth in the Bankruptcy Code.

Feasibility – Likelihood of being successfully completed.

Foreclosure – To take back legal title to and possession of property.

Fraud – Intentional misrepresentation or deceit by the debtor

Guarantor – Person who promises to repay a debt incurred by another (also referred to as co-maker or co-signer).

Insolvent – The inability to pay debts as they fall due in the usual course of business or the inability of the debtor to pay current obligations as they become due. There is no requirement of insolvency in the Bankruptcy Code.

Interrogatories – A formal question or a series of questions that are proposed in writing by one party of an action to another. The answers can be used later in court for various reasons. This is a form of discovery used by attorneys when investigating a case. Sanctions can be levied for willfully refusing to respond timely to interrogatories.

Involuntary Chapter 7 – Liquidation bankruptcy that is forced by creditors.

Joint bankruptcy – A debtor filing bankruptcy together with a spouse.

Jurisdiction – Geographical region over which a court has power.

Last Day to File Complaint to Determine Dischargeability – (Also known as Bar date.) This is the last day a Complaint to Determine Dischargeability can be filed against the debtor.

Liability – Debt

Liquidation – A conversion of assets to cash in order to pay creditors all or a portion of the debt owed.

Luxuries – Purchases made that provide pleasure or comfort but are not absolutely necessary.

Matrix – List of names and addresses of each creditor.

Meeting of Creditors – Also known as the Section 341 (a) meeting or First Meeting of Creditors. This is an opportunity for the Trustee and the creditors to question the debtor (with the debtor’s attorney present) about assets, statements made by the debtors in the bankruptcy schedules, etc. All questions are answered under oath.

Modification of Plan – A repayment plan, normally filed in a Chapter 13 or Chapter 11 bankruptcy, can be modified to change the amount paid to classes within the plan. This can only be done with the Court’s approval.

Motion – A formal request to a court to allow or require a specific legal action.

Necessities – Purchases that are required for the sustenance of life without being excessive. For example, food, clothing, shelter, etc.

Net disposable income – The amount of income left over after all expenses are paid.

Non-dischargeable Debt – Certain debts not included in the debtor’s discharge. Some are automatically excluded (e.g., taxes, alimony, debts incurred due to any drunk driving violations) and some require action by the creditor in the case. If your debt is declared non-dischargeable, collection activity can resume regarding the debt.

Offset – Using a debt to cancel another debt. For example, the IRS keeping all or part of a tax refund to apply to debt owed to the IRS.

Order – A formal ruling by a judge allowing or requiring a specific legal action.

Periodic – Occurring at regular intervals, usually semi-annually or annually.

Petition – A document used to begin a bankruptcy case. It can also be referred to as the facesheet of the bankruptcy schedules. The petition must be filed in order to begin bankruptcy proceedings, while other bankruptcy documents (such as schedules, statement of financial affairs, statement of intention, etc.) can be filed within 15 days after the filing of the petition document.

Post petition indebtedness – Any debt incurred after the filing of the bankruptcy. Post petition charges are not under the jurisdiction of the bankruptcy and the post petition dollar amount can be collected without violation of the automatic stay.

Preference period – A ninety-day window before the bankruptcy was filed. The trustee may recover any payments made to creditors in that time frame.

Presiding officer – The trustee or a representative of the Trustee at a 341 meeting.

Presumption period – According to Section 523(a)(2)(C) purchases incurred over $1,000 for “luxury goods or services” within 60 days of the date of the bankruptcy filing or cash advances over $1,000 made within 60 days of the bankruptcy filing are presumed to be non-dischargeable.

Priority debts – Debts that are paid ahead of others. Generally administrative costs are paid first followed by secured debts and then unsecured debts.

Pro Per – A debtor filing bankruptcy without representation by legal counsel. Also known as Pro Se.

Pro rata basis – Divided proportionately.

Pro Se – A debtor filing bankruptcy without representation by legal counsel. Also known as Pro Per.

Proof of claim – A form used to file a claim in order to receive payment from the bankruptcy estate.

Reaffirmation Agreement – You can voluntarily agree to pay back any of your debts. If you sign a reaffirmation agreement, it binds you to repaying the debt despite the bankruptcy. In some cases the Bankruptcy Court Judge must approve the reaffirmation agreement. Reaffirmed debt is not affected by the discharge. If the debtor defaults on the reaffirmation agreement, the creditor may pursue all avenues of collection activity available.

Recission period – The debtor may rescind (cancel) a reaffirmation agreement at any time before discharge, or within 60 days after filing the agreement with the court, whichever occurs later.

Relief from Stay – In certain situations, a creditor may obtain an Order for Relief from Stay to allow them to enforce their claims, pursue collections on a co-debtor, or any other activity that would otherwise violate the automatic stay. When an order for relief of stay is granted by the court, the automatic stay is canceled.

Restitution – In the context of bankruptcy recovery, the act of repaying debt incurred as a result of fraud or abuse. The Court usually imposes this. The Court will order the debtor to pay back all or a part of the debt usually as a result of a conviction or a plea bargain.

Sanction – A monetary penalty placed upon a party or its attorney in response to a violation of the Bankruptcy Code or rules. The penalty ranges in dollar amount depending on the violation, the intent of the party, and the district in which the violation occurred.

Schedules – Written information given by the debtor filed with the Bankruptcy Court on the day of filing or by the 15th day after. These forms give the bankruptcy court and trustee a financial picture of the debtor and are required to be filled out truthfully and accurately under penalty of perjury. These schedules include items such as the petition, the Schedule of Income and Expenses, the Statement of Financial Affairs, etc.

Secured creditor – A creditor holding a lien on property (i.e., judgment) or a debt that is secured with collateral.

Sole proprietorship – A business owned by an individual; not incorporated.

Special classification – Legally allowed to be treated differently.

Stipulation for Judgment – An agreement between the bankrupt debtor and creditor which ends the lawsuit. The document is filed with the court usually requiring repayment of a debt. In the event of default, a judgment may be immediately entered in favor of the creditor.

Substantial abuse – The court may dismiss a bankruptcy case on the motion of a U.S. Trustee, if the debts are primarily consumer debts and if the Trustee believes that the Chapter 7 petition represents substantial abuse under the Bankruptcy Code.

Subpoena – A formal notice usually issued by a court, commanding specific action be taken under penalty or contempt of court.

Summons – An order to answer a lawsuit within a specified time.

Trustee (Chapter 7) – A person appointed to collect the non-exempt assets of the debtor and liquidate them to pay creditors.

Trustee (Chapter 13) – A person appointed to collect funds from the debtor and pay the funds over to creditors over a 3 or 5 year period pursuant to a court approved plan.

U.S. Trustee – The Office of the United States Trustee monitors the financial reporting in bankruptcy cases. The Chapter 13 and Chapter 7 trustees report to the U.S. Trustee. The U.S. Trustee oversees the operation of the trustee offices and appoints and removes trustees from office.

Unsecured creditor – A creditor whose debt is not secured by property or collateral. This would include credit card debts.