Bankruptcy Terminology

Innovative Credit Consultants has provided credit repair solutions to consumers with a variety of credit issues. Many of our clients have compromised credit due to bankruptcy. Most people do not know anything about bankruptcy unless they are in the middle of it themselves. The following list breaks down bankruptcy jargon.

Creditor The person or organization to whom the debtor owes money or some other form of legal obligation.
 

Debtor The person liable for debts and could therefore be the subject of a bankruptcy case.
 

Assets A form of property owned by a debtor.
 

Personal Property Assets, cars, stock furniture, not real estate, not affixed to real property.
 

Bankruptcy Code Title 11 of the United States Code has governed bankruptcy proceedings since October of 2005. Bankruptcy is a matter of federal law. When it conflicts with state law, federal law presides.  
 

Chapter 7 The most common form of bankruptcy known as a liquidation proceeding.
 

Chapter 11 A reorganization proceeding. The debtor may continue in business or in possession of its property as a fiduciary. The plan to pay back creditors  in whole or in part.
 

Chapter 12 A simpler reorganization plan for family farmers whose debts fall within certain limits.

Chapter 13 A repayment plan for individuals with debts falling below statutory levels which provides repayment of some or all of the debts out of future income over 3-5 years.
 

Conversion Cases in the Code may be converted from one chapter to another chapter.
 

Trustee  The court appoints a trustee in Chapter 7 and Chapter 13 case to review the debtor's schedules and represent the interests of the creditors in the bankruptcy case.
 

Proof of Claim The form filed with the court establishing the creditors claim against the debtor.
 

Priority Claims Certain debts such as unpaid wages, spousal or child support and taxes are elevated in the payment hierarchy under the Code.
 

Confirmed A plan of reorganization  in chapter 11, 12 13 as approved by the court binding all parties.
 

Lien An interest in real or personal property which secures a debt; the lien may be voluntary, such as a mortgage in real property, or involuntary such as a judgement or tax lien.
 

Collateral The property which is subject to lien.
 

Liquidated A debt for a known number of dollars is liquidated.
 

Unliquidated Debt The debtor has liability but the exact monetary measure of that liability is unknown.
 

Discharge The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against a debtor.
 

Non-dischargeable A debt that can not be eliminated in bankruptcy. The debt is legally enforceable regardless of the bankruptcy discharge.
 

Indemnify To guarantee against any loss which another might suffer.  A spouse in a divorce assumes certain debts of the marriage that the other spouse does not have to pay.
 

Exempt An exempt property is removed from the bankruptcy estate and is not available to pay the claims of the creditors.  The debtor keeps the exempt property for use after bankruptcy.
 

Exemptions A list of the kinds and values of property that is legally beyond the reach of creditors that the debtor in bankruptcy gets to keep.  
 

Fiduciary One who is entrusted with duties on behalf of another.