ADJUDICATION- this is the judgment or decree made by the bankruptcy court which decides that a person or entity is considered to be bankrupt.

AUTOMATIC STAY- This is an order, which becomes effective at the time the bankruptcy petition is filed, which prohibits any action against the debtor which arises before the petition of indebtedness.

AVOIDANCE OF POWERS- This gives the trustee the power to recover certain transfers of the debtor’s property and also gives the power to invalidate certain positions as well.

BANKRUPTCY COURTS- These are federal level courts, which is an adjunct to the U.S. District Courts and focuses on the administration of the Bankruptcy Act.

CHAPTERS- There five chapters under Bankruptcy Act:

CHAPTER 7- Liquidation

CHAPTER 9 - Adjustment of Debts of a municipality

CHAPTER 11- Reorganization

CHAPTER 13- Adjustment of debts of person with income

CHAPTER 15- United States trustee

CLAIM- This is a right to a payment against an estate.

CODE- Title 11 of the United States Code, The Bankruptcy Code.

CONFIRMATION- This is when the court approves of a plan.

CREDITOR- This is an entity which has a claim against an estate.

CREDITORS’ COMMITTEE- This is a group of unsecured creditors appointed by the U.S. Trustee which consists of the seven biggest creditors of the debtor who are willing to serve on the behalf of the unsecured creditor in a Chapter 11 proceeding.

DISCHARGE- This is granted by the Bankruptcy Court, which frees the debtor from the burden of the debt incurred before the petition was filed.

DEBTOR- This is the individual or entity which is concerned with the bankruptcy being commenced.

DEBTOR IN POSSESSION (DIP)- This when the debtor retains possession of its assets in a Chapter 11 proceeding and operates a business.

DISTRIBUTION- This is when the trustee makes a pro rata distribution of payments to the debtor’s creditors.

ESTATE- This constitutes all assets, real property, personal property, tangible or intangible property where the debtor has an interest in.

FORMS- These are official forms used by the Bankruptcy court, such as petitions and schedules.

INSIDER- This is any person who is a relative of the debtor or any person who is a director, officer, partner, etc., who is in control of the debtor (business).

PERSON- This term is used when referring to the debtor whether it be an individual or a company.

PETITION- This the document filed with the Bankruptcy court to start a case.

PLAN- This is found in Chapter 11 where a plan of reorganization is filed by the debtor (or other interested parties), where the debtor settles with the pre-petition creditors and continues to operate.

PROOF OF CLAIM- This is a written statement which sets forth the creditor’s claim.

PREFERENTIAL TRANSFER- This is a payment made by the debtor to a creditor during a specific time period which gives the creditor a preferred status over other creditors.

PRIORITY- This is the classification of a claim for the purpose of payment.

REAFFIRMATION- This is when an agreement is made between the creditor and the debtor for continuing the obligation to pay a dischargeable debt.

RULES- These govern the proceedings in Bankruptcy courts.

SCHEDULES- These are the official forms that list the assets, liabilities and unsecured creditors of a debtor.

SECURED CREDITOR- This is when a creditor holds a perfected security interest in the debtor’s assets, including liens.

TRUSTEE- This is a disinterested person who is appointed by the Bankruptcy court, who takes charge of the debtor’s estate. The job requires this individual to collect all the assets, operate business, liquidate assets, distribute proceeds, bring suit on debtor’s claim and defend actions against the bankrupt.

UNSECURED CREDITOR- This is a general creditor who does not have collateral, such as a lien or a perfected security interest in the debtor’s assets.

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