Practice Areas - Bankruptcy

Adversary Proceedings – Adversarial proceedings are lawsuits that are brought by bankrupt individuals/businesses, creditors, or the U.S. Trustee that are ancillary to the main bankruptcy case.  The U.S. Trustee and bankrupt individuals/businesses often file adversary proceedings to recover money owed to the bankrupt individuals/businesses for the benefit of the bankrupt individuals/businesses and/or creditors.  The U.S. Trustee can also file adversary proceedings to collect money from creditors who have received money for the payment of an antecedent debt from the bankrupt individual/business during the “zone of insolvency.”  These proceedings are called “preference actions.”  Creditors can also file adversary proceedings against each other to establish lien priority or other disputed issues of law relating to the assets of the bankrupt individual/business.  Creditors and the U.S. Trustee can also file adversary proceedings to challenge the discharge of a debt, or challenge the bankrupt individual’s/business’ ability to receive a discharge.

Antecedent Debt – A debt that was owed prior to the payment from the bankrupt individual/business making a payment, this definition specifically excludes payment for goods/services provided contemporaneously in consideration for the payment being made.  An example of an antecedent debt is a payment on a credit card.  An example of a non-antecedent debt is paying a plumber in full for fixing your toilet prior to or immediately after the repair is completed.

Assets – Real property or personal property owned by an individual/business irrespective of whether or not the real property or personal property has been fully paid for.

Collateral – Assets that are pledged by the bankrupt individual/business to a creditor as security for repayment of a debt.  Collateral can be real property and/or personal property.

Cram Down – A forced modification of the terms of an instrument that creates a debt by order of a U.S. Bankruptcy Court.  Depending on the nature of the debt, the modification may include a reduction of the accrual of interest and/or principal amount due to the creditor.

Credit Counseling Course – A course that individuals who are filing bankruptcy must attend prior to filing bankruptcy as set forth in Title 11 § 521(b)(1) of the United States Bankruptcy Code.  A certificate of completion will be provided by the providers of the credit counseling course, and must be submitted to the U.S. Bankruptcy Court contemporaneously with the filing of a bankruptcy case.  For a list of approved courses, please visit http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm.

Creditors – Individuals and/or businesses who own a debt owed by the bankrupt individual/business.

Debt – An obligation of payment or performance owed to another person/business.

Debtor in Possession – An individual/business that remains in control and/or possession of their business during a Chapter 11 bankruptcy proceeding.

Deficiency – The difference between the sales proceeds of collateral and the debt owed to a secured creditor who owned the lien on the collateral.

Discharge – The termination and/or cancellation of liability to creditors.

Disposable Income – Income in excess of minimum living expenses.

Exempt – Real property and/or personal property that is not subject to seizure to satisfy debts owed to creditors.

Lien – A right to payment that attaches to collateral for the benefit of a secured creditor.

Liquidation – The sale, disposition, transfer, or other hypothecation of assets during the term of a bankruptcy proceeding.

Means Test – A test to determine whether an individual qualifies for Chapter 7 bankruptcy or Chapter 13 bankruptcy, which takes into consideration whether an individual’s median income in relation to other citizens of Texas or whether the individual has in excess of $100.00 in disposable income after payment of minimum living expenses.

Meeting of Creditors – Also referred to as a 341 meeting, this is a meeting conducted by the U.S. Trustee that individuals and/or businesses who file bankruptcy must attend to receive a discharge.  Creditors may, but usually do not, attend the meeting and can inquire as to the reasons why bankruptcy was filed, the location and/or condition of collateral upon which the creditor has a lien, and other issues related to the bankruptcy.

Minimum Living Expenses – Expenses that an individual must pay to maintain his/her minimum standard of living.  These expenses include mortgage/rent payment, car payment, food, clothing, day care, gas, utilities, medication, and other necessary items.

Non-Dischargeable Creditor – A creditor who owns a debt that is not subject to being discharged by the U.S. Bankruptcy Code.

Reaffirmation Agreement – An agreement entered into by an individual and/or business that filed bankruptcy and a creditor for the repayment of the creditor’s debt.  These agreements are usually entered into between individuals and/or businesses that desire to keep the collateral which is subject to a secured creditor’s lien.  It should be noted that a reaffirmation agreement will exempt the creditor’s debt from being discharged unless the individual and/or business files another bankruptcy after the execution of the reaffirmation agreement.

Retirement Accounts – Accounts whose primary purpose is to serve as retirement income for individuals upon reaching the age of retirement, and have penalties assessed against the account holder for early withdrawal of the money.

Secured Creditor – A creditor who owns a debt that is secured by a lien against collateral.

Surrendered – The process of returning and/or turning over collateral to secured creditors for liquidation.

Unsecured Creditor – A creditor that owns a debt that is not secured by a lien against collateral.

U.S. Trustee – A position created by the U.S. government whose stated purpose, in pertinent part, is to “promote integrity and efficiency in the nation’s bankruptcy system by enforcing bankruptcy laws.”  Normally the duties of the U.S. Trustee are carried out by an individual who is tasked with overseeing bankruptcy cases and monitoring compliance of bankruptcy attorneys and individuals/businesses who have filed bankruptcy with current bankruptcy rules and regulations.

Zone of Insolvency – A period of time ranging between 90 and 120 days prior to filing bankruptcy, wherein the U.S. Trustee will review transactions entered into by the individual/business filing bankruptcy and any creditor and/or payments made by the individual/business filing bankruptcy and any creditor.
 

Terminology Help

Chapter 7 - Liquidation form of Bankruptcy.

Chapter 13 - Payment Plan form of Bankruptcy.

Chapter 11 - Business and Corporate Reorganization

Businesses - What Happens to My Business in Bankruptcy?

Individuals - What Can I Keep In Bankruptcy?

Other Important Bankruptcy Terms You Should Know.