• Great Recession
• Fresh Start
• User Friendly
• Famous Filers
• Why BottomLine Lawyers for Bankruptcy
• Bankruptcy FAQs (Frequently Asked Questions)
• A Glossary of Bankruptcy Jargon

If you are reading this you likely have been worried about your financial situation for some time. Will the RECOVERY come soon enough to help you?? The Media says things are getting better, but why are you not feeling the recovery in your personal financial and business situation?

Undeniably, the events in recent years including job losses, corporate downsizing, the catastrophic loss in home and property values and extremely poor market conditions have our clients SEARCHING for solutions.

Great Recession

Because the Great Recession has impacted such a broad range of the personal financial landscape, including but not limited to real estate, personal investments, 401K’s, income, job stability, small business operations, it is ESSENTIAL that you receive guidance and counsel from attorneys whose knowledge base covers this broad range of factors. This broad knowledge base will enable the formulation of a creative strategy for your unique circumstances.

Fresh Start

Each and every person who has faced a financial hardship or crisis has dreamed of a FRESH START and that’s exactly what Bankruptcy can be for you.

Bankruptcy can be the first step on the road to your financial recovery. The right toBankruptcy in the United States is found in the United States Constitution (Article 1, Section 8, Clause 4) which authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States.” The founding fathers knew that a judicious use of bankruptcy proceedings is good for the country because it allows individuals and businesses to shed debt and again become productive, contributing members of the national economy.

A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start”. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision: “[I]t gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

Bankruptcy is a personal business decision. If you are insolvent the road to your financial recovery will be slow going without the fresh start offered through Bankruptcy.
Bankruptcy law allows debtors, who are unable or partially unable to pay outstanding debts, to rid themselves of these debts and obtain a fresh start.

User Friendly

BottomLine Lawyers’ approach to bankruptcy is user friendly. We assemble the team: You, your spouse if applicable and our legal team. Our first step is a comprehensive consultation employing our unique 4 step “assessment protocol” [link to home page] that helps you and your spouse look at your financial picture objectively. After struggling with debt for a prolonged period of time it has been, we find our clients need this clarity more than anything.

During this consultation we begin the education process. Our process will enable you to get the essential knowledge to face your challenges head on. The empowerment we see in our clients as they begin to learn and act on this knowledge to retake control of their financial lives is very rewarding.

Out of this initial meeting we devise a strategy and a game plan complete with timelines, goals and benchmarks. Together we then deploy this strategy and get you on the road to financial recovery many times in as little as four months, depending on the course of action you choose.

Famous Filers

Do you know any of the names on this partial list of individuals who have relied on the fresh start afforded by Bankruptcy?
Phineas Taylor Barnum
Mark Twain, (Samuel Langhorne Clemens)
Henry John Heinz
Oscar Wilde
Milton Snavely Hershey
Henry Ford
Mickey Rooney
Johnny Unitas
Walt Disney
Donald Trump

All of them have filed Bankruptcy to receive a fresh start in their financial endeavors. Many have gone on to create subsequent empires.

And both General Motors and Chrysler had to rely on Bankruptcy protection to stay in business just LAST YEAR

Why BottomLine Lawyers for Bankruptcy?

BottomLine Lawyers is one of the most sophisticated consumer bankruptcy practices in the Greater Sacramento area because of its diversified knowledge base.

It’s simple, we put our knowledge of real estate, business and real estate law together with our understanding of bankruptcy and consumer credit law to help you with the specific issue you are facing…whether it is retaining a home, business or other asset very important to you.

Don’t you think your situation warrants learning everything you need to best provide for your family’s well being?

BottomLine Lawyers go above and beyond to meet the needs of our clients. Using our unique Assessment Protocol, we listen and learn everything we can about your situation. We look at things from every angle. We stand in your shoes. Then we devise a specific strategy that will give you the best outcome consistent with your values and desires.

In choosing the right law firm to represent you, be sure they have the competence and experience to:

• Address current and future issues your circumstances may present
• Identify related issues in real estate, contract, family law, tax, etc.
• Provide a comprehensive analysis, not just crisis management

A loan modification mill, foreclosure mill or bankruptcy mill might leave you with worse problems than you started with:

• Filing too soon so you don’t discharge all your debts
• Filing too late so you don’t get the full benefit of the automatic stay
• Invalid liens on secured property that were not properly challenged
• Reaffirmation of un-economic, undesired debt
• Unnecessary loss of property
• Expensive, hidden charges

At BottomLine Lawyers, we practice integrative law, bringing all relevant aspects into play to provide you with the best possible result.

Bankruptcy FAQs (Frequently Asked Questions)

1. WHAT IS BANKRUPTCY?

A debtor filing for bankruptcy freezes actions taken by creditors (such as lawsuits, wage garnishments, and collection letters) against the debtor. In legal terms, the court orders a stay on actions by creditors against the debtor. The court notifies creditors of the bankruptcy proceeding and orders them not to contact the debtor to try to collect the debt. From this point, creditors may only seek repayment from the debtor within the bankruptcy proceeding. However, creditors have the right to contest the bankruptcy by initiating an adversarial proceeding. After bankruptcy is final, creditors who attempt to collect a debt covered by the bankruptcy may be punished for contempt of court.

Federal bankruptcy law consists of statutes published in the Bankruptcy Code (11 U.S.C. § 101-1330). In addition, state statutory law on bankruptcy also addresses areas delegated to states or not covered by federal law. Debtors usually file bankruptcy cases in Federal Bankruptcy Court (an adjunct of the Federal District Courts).

Certain debts cannot be cleared (or “discharged”) in bankruptcy, such as most taxes, most student loans, alimony, child support, court fines, debts of restitution owed for committing a criminal act, and debts arising from personal injury inflicted while driving under the influence. Debts not listed by the debtor in the bankruptcy filing are not discharged.

A debtor may only file for bankruptcy once every eight years. In addition to voluntary bankruptcy filed by a debtor, a creditor can initiate bankruptcy proceedings against a debtor. Bankruptcy filings appear on credit reports for ten years and may impact the ability to obtain credit. Debtors may voluntarily pay debts discharged through bankruptcy, but have no legal obligation to do so.

2. WHAT ARE THE DIFFERENT TYPES OF BANKRUPTCY?

The Bankruptcy Code provides for six different types of bankruptcy, each known by the chapter in the Bankruptcy Code in which it is located. Although they differ in form and procedure, they all provide for permanent relief from certain debts. In bankruptcy terms, the debtor’s dischargeable debts are discharged. Most debtors file for bankruptcy under Chapters 7, 11, and 13.
Chapter 7 is often referred to as straight bankruptcy and is by far the most common. All exempt assets are retained by you, free from creditors’ claims (except mortgages and secured debts). Assets that cannot be exempted are sold and the proceeds divided among your creditors. Your debts are then discharged (legally terminated), and you are free to start your financial life anew. Chapter 7 provides for liquidation of the debtor’s non-exempt assets. Certain assets, such as a home or car, may be exempt from bankruptcy. A court-appointed trustee conducts the sale of debtor’s non-exempt assets and distributes the proceeds to creditors. Both individuals and businesses may file for bankruptcy under Chapter 7.

Chapter 9 provides for the reorganization of municipalities (which includes cities, towns, villages, taxing districts, municipal utilities, and school districts).

Chapter 11 provides for a supervised reorganization of a business or investment portfolio, including real estate, and allows the debtor to maintain portfolio assets while implementing a payment plan confirmed by the court. Chapter 11 also reorganizes debts by submitting a repayment plan to the court. This chapter is used when debts exceed the dollar limits of a Chapter 13. Chapter 11 is more complex but does offer greater flexibility.

Chapter 12 contains bankruptcy provisions applicable to family farmers and fisherman.

Chapter 13 provides for bankruptcy of an individual with a regular income, which is used to make a payment plan to pay debts, usually within three to five years. Chapter 13 permits you to pay your creditors in monthly installments over three to five years. A formal plan is prepared which allocates how much money will be paid to your creditors each month. This plan is submitted to the Bankruptcy Court and the Chapter 13 Trustee for approval. Chapter 13 is most often used when there would be some problem with filing a Chapter 7 bankruptcy. For example, if your mortgage payments are behind and you do not have the ability to bring the payments current in the next few months, you will want to consider Chapter 13. It allows the past-due payments to be paid in installments over 36 months. If you have considerable assets which could be lost in a Chapter 7, you might consider filing Chapter 13. Chapter 13 permits you to keep all your assets because, over time, you will be paying your creditors the value of these assets. Debts that may not be discharged in Chapter 7 can be made to go away with a Chapter 13. For example, debts incurred by fraud may not be “dischargeable” in Chapter 7. However, they can be discharged in Chapter 13. Lastly, taxes which are not “dischargeable” can be repaid over a three-to-five year period while under the protection of the Bankruptcy Court.
Chapter 15 applies to cross-border bankruptcies. It adopts and implements the United Nations’ Model Law on Cross Border Insolvency

3. WILL I LOSE MY HOME, CAR, OR OTHER POSSESSIONS?

The general answer to this question is NO. However, care must be taken to protect assets, through the use of exemptions, prior to, and during, a bankruptcy. For example, a residence with $50,000 in equity can be protected as exempt in a bankruptcy proceeding. However, in order to be protected, certain steps must be taken prior to the bankruptcy filing to establish the homestead and then properly claim the exemption in the bankruptcy paperwork. Assets not properly exempt can be lost to the bankruptcy trustee.

4. WHEN WILL CREDITORS STOP CALLING?

Creditors usually stop calling as soon as you can give them the name and phone number of an attorney whom you have hired to represent you in your bankruptcy proceeding. Of course, if you represent yourself, you will still need to take these calls. Once your bankruptcy is filed, creditors stop calling completely if they are simply trying to collect on the debt. However, if they are claiming to have a security interest in your assets, believe your debt to them was fraudulently incurred, or simply want you to voluntarily sign a reaffirmation agreement, they can continue to contact your attorney or you personally if you do not have an attorney.

5. WILL MY EMPLOYER FIND OUT I FILED FOR BANKRUPTCY?

Unless you disclose a bankruptcy to your employer (or a talkative co-worker) the employer is only officially notified under the following circumstances:
a. There was a wage garnishment pending at the time of the filing, in which case they must be notified to stop withholding money from your salary;
b. You owed your employer money, in which case they must be listed as a creditor in the bankruptcy proceeding; or
c. They see your bankruptcy published in the paper, which is unlikely (see question #12 below).

6. DO I HAVE TO GO TO COURT?

With very few exceptions, every person who files for bankruptcy must attend at least one hearing. This is called the first meeting of creditors, or the 341(a) hearing. All creditors get notice of this hearing, can attend, and are allowed to ask you questions during the examination.

7. CAN CREDITORS COME UP TO YOU OUTSIDE THE HEARING ROOM?

If you are not represented by an attorney, a creditor can briefly discuss matters with you at almost any time. Some creditors make it a practice to attend the first meeting of creditors so they can discuss things such as payment on a security interest with debtors. Individuals represented by attorneys should have all such communication go through their attorney and they never directly speak with any creditors.

8. WHAT ARE THE DISADVANTAGES OF FILING BANKRUPTCY?

The advantages to bankruptcy seem so great that sometimes clients have a hard time believing that it’s all true. There are, however, some disadvantages to bankruptcy which must be taken into consideration. First, a bankruptcy filing can remain on your credit report 7 to 10 years. While this is something to consider, most clients find that it is not insurmountable. Many are surprised to receive new credit within a few years after they filed bankruptcy. Second, you cannot file another Chapter 7 Bankruptcy for eight years. While this means that you give up your financial safety net for this period of time, few people require a second Bankruptcy. If additional problems arise, you may still file a Chapter 13 Bankruptcy anytime after the Chapter 7 proceeding is concluded. Third, it will be difficult to purchase a home for approximately three years.

9. MUST BOTH SPOUSES FILE BANKRUPTCY TOGETHER?

The answer is NO. Either spouse may file a bankruptcy on their own. However, many times it is far more advantageous for both spouses to file together because of California community property laws. This decision should be made with a competent bankruptcy attorney.
10. DO MY BILLS NEED TO BE DELINQUENT IN ORDER TO FILE BANKRUPTCY?
There seems to be some misconception that only delinquent bills can be made to go away in bankruptcy. This simply is not true. However, if a person’s debts are current and they are considering bankruptcy, they may not need to file bankruptcy. Again, this analysis should be done with a competent bankruptcy attorney.

11. CAN I PICK AND CHOOSE WHICH DEBTS TO INCLUDE?

No, all debts must be listed in a person’s bankruptcy papers. You may not want to include a particular creditor, such as a relative, friend, or credit card company whose card you want to keep. However, you must include all of your creditors. You are committing fraud if you do not include all persons to whom you owe, or may owe, money. If you wish to pay a discharged debt after your bankruptcy, it is your legal right to do so. You simply reaffirm the debt. Reaffirmation means that you legally recreate the debt after the bankruptcy is filed, but any reaffirmation should only be undertaken after consultation with your attorney for you to avoid new legal problems.

12. WILL THE TRUSTEE COME INTO MY RESIDENCE?

At the time of a bankruptcy filing, all the debtor’s assets become property of their bankruptcy estate (right down to your toothbrush) and subject to administration by the bankruptcy trustee. Fortunately, in most instances, a debtor’s assets have been exempted by their attorney in the bankruptcy paperwork. If a trustee wished to view personal assets inside a residence, he or she would probably be free to do so. However, as a practical matter, this almost never occurs because the personal possessions have protected by the careful use of exemptions. Personal possessions usually do not have significant liquidation value. As a result, a trustee usually has little interest in a debtor’s personal possessions.

13. WILL MY BANKRUPTCY AUTOMATICALLY BE PUBLISHED IN THE NEWSPAPER?

No. However, bankruptcy is a public record. Some newspapers feel that business filings have some news value to their readers, but they rarely report consumer filings.

14. HOW LONG DOES A BANKRUPTCY TAKE TO BECOME FINAL?

A normal chapter 7 bankruptcy takes about 110-115 days until the discharge is received. At this point, most consider the bankruptcy final.

15. CAN I TRANSFER ASSETS PRIOR TO FILING BANKRUPTCY?

Certain transactions can be set aside as fraudulent. If you transfer assets to a friend or relative without receiving fair consideration in return, the transaction is voidable as fraud. It is improper to transfer assets to others prior to filing bankruptcy so as to deprive your creditors of their right to satisfy their claims out of your assets. However, you are entitled to transfer assets into exempt property which you may keep free of creditors’ claims. You should always discuss any transfers of assets with an attorney before your bankruptcy is filed. Also, payments to creditors which favor one creditor at the expense of the others may be voided by the trustee. Bankruptcy law mandates that all similar type creditors should be treated equally. For instance, you cannot pay off an unsecured debt to your uncle a few months before filing bankruptcy because your other unsecured creditors can complain that the payment is a preference payment.

16. CAN A BANKRUPTCY CHANGE THE TERMS OF MY MORTGAGE?

A Chapter 13 bankruptcy can allow a person to repay delinquencies over a three to five year period. However, at the same time, they must continue to make the new payments as they become due. A bankruptcy will not allow you to force a bank to modify your interest rate, monthly payment, or term of the loan on a first deed of trust. There are some notable exceptions to this rule with a second deed of trust or mortgage on a second home.

17. CAN I FILE MY OWN BANKRUPTCY?

Any individual can file their own bankruptcy proceeding. This is called filing pro se. If a person wishes to spend enough time learning about this area of the law, they can probably get through a simple bankruptcy filing. However, individuals with assets or problem debts are ill advised to “DIY” as they will most certainly harm themselves financially as a result.

18. CAN A BANKRUPTCY BE DENIED?

Yes. There are a number of grounds upon which a bankruptcy can be denied. Failure to cooperate with the trustee or provide an adequate explanation as to assets and liabilities are common grounds to deny a discharge in bankruptcy.

19. SHOULD I USE A PARALEGAL?

We do not recommend it. Many paralegals know what they are doing. However, using an independent paralegal (one not affiliated with a law office) can be a risky proposition. In California, for example, paralegals are not licensed or regulated. Yet, people seem to place the same trust and confidence in them as in attorneys who have gone to school for years and passed the most difficult bar exam in the country. Many paralegals charge almost as much as attorneys. Given these facts, it just doesn’t make sense to take a chance with an independent paralegal.

20. HOW DO I FIND A GOOD BANKRUPTCY ATTORNEY?

The best way is by personal referral. If you cannot get a referral, you must rely on media advertising. Interview a few attorneys and choose one with plenty of experience helping people with financial problems and with whom you feel comfortable sharing personal information. An experienced bankruptcy attorney can make all the difference in ensuring that you get your fresh start.

21. WHAT IS MY FINANCIAL FUTURE LIKE AFTER BANKRUPTCY?

When people seek advice about bankruptcy, they are usually quite distressed. They may be facing the loss of their home and are being harassed by creditors. Frequently, these financial problems have spilled over into their personal lives and caused problems with their health or disruption of their family relationships. These people are suffering from anxiety about their future. There is no disgrace in seeking help for financial problems. It is far better to address these issues and solve these problems now rather than ignoring them and allowing the situation to become worse. Many successful and famous people have gone through bankruptcy. It has been said that the average millionaire has been broke more than two times during his or her lifetime. Our financial system is based on the concept of risk. People are encouraged to incur debt to finance business ventures or the purchase of goods and services associated with the good life. Unfortunately, not all risks work out for the best. Consequently, the Constitution gives each person the right to seek relief under the Bankruptcy Code if they are unable to repay their debts. The worst thing that you can do is nothing. Do not continue to let financial problems eat you up. Do something today. Your life is not getting any shorter! Most of our clients tell us that their only regret is they waited too long to take action. Bankruptcy may not be the total answer. However, it might be part of a comprehensive financial plan.

A Glossary of Bankruptcy Jargon

A

adversary proceeding A lawsuit arising in or related to a bankruptcy case that begins by filing a complaint with the court. A nonexclusive list of adversary proceedings is set forth in Fed. R. Bankr. P. 7001.
assume An agreement to continue performing duties under a contract or lease.
automatic stay An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.

B

bankruptcy A legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).

bankruptcy administrator An officer of the judiciary serving in the judicial districts of Alabama and North Carolina who, like the U.S. trustee, is responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties. Compare U.S. trustee.

Bankruptcy Code The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.

bankruptcy court The bankruptcy judges in regular active service in each district; a unit of the district court.

bankruptcy estate All legal or equitable interests of the debtor in property at the time of the bankruptcy filing. (The estate includes all property in which the debtor has an interest, even if it is owned or held by another person.)

bankruptcy judge A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.

bankruptcy petition The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case) by which opens the bankruptcy case. (There are official forms for bankruptcy petitions.)

C

chapter 7 The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.)

chapter 9 The chapter of the Bankruptcy Code providing for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts).

chapter 11 The chapter of the Bankruptcy Code providing (generally) for reorganization, usually involving a corporation or partnership. (A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.)

chapter 12 The chapter of the Bankruptcy Code providing for adjustment of debts of a “family farmer,” or a “family fisherman” as those terms are defined in the Bankruptcy Code.

chapter 13 The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)

chapter 15 The chapter of the Bankruptcy Code dealing with cases of cross-border insolvency.

claim A creditor’s assertion of a right to payment from the debtor or the debtor’s property.

confirmation Bankruptcy judges’s approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.

consumer debtor A debtor whose debts are primarily consumer debts.

consumer debts Debts incurred for personal, as opposed to business, needs.

contested matter Those matters, other than objections to claims, that are disputed but are not within the definition of adversary proceeding contained in Rule 7001.

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.

creditor One to whom the debtor owes money or who claims to be owed money by the debtor.

credit counseling Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered. There are exceptions to both requirements for certain categories of debtors, exigent circumstances, or if the U.S. trustee or bankruptcy administrator have determined that there are insufficient approved credit counseling agencies available to provide the necessary counseling.

creditors’ meeting see 341 meeting

current monthly income The average monthly income received by the debtor over the six calendar months before commencement of the bankruptcy case, including regular contributions to household expenses from nondebtors and income from the debtor’s spouse if the petition is a joint petition, but not including social security income and certain other payments made because the debtor is the victim of certain crimes. 11 U.S.C. § 101(10A).

D

debtor A person who has filed a petition for relief under the Bankruptcy Code.

debtor education see credit counseling

defendant An individual (or business) against whom a lawsuit is filed.

discharge A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code. (A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.)

dischargeable debt A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.

disclosure statement A written document prepared by the chapter 11 debtor or other plan proponent that is designed to provide “adequate information” to creditors to enable them to evaluate the chapter 11 plan of reorganization.

E

equity The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. (Example: If a house valued at $100,000 is subject to a $80,000 mortgage, there is $20,000 of equity.)

executory contract or lease Generally includes contracts or leases under which both parties to the agreement have duties remaining to be performed. (If a contract or lease is executory, a debtor may assume it or reject it.)

exemptions, exempt property Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in.

F

family farmer or family fisherman An individual, individual and spouse, corporation, or partnership engaged in a farming or fishing operation that meets certain debt limits and other statutory criteria for filing a petition under chapter 12.
fraudulent transfer A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.

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

I

insider (of individual debtor) Any relative of the debtor or of a general partner of the debtor; partnership in which the debtor is a general partner; general partner of the debtor; or a corporation of which the debtor is a director, officer, or person in control.
insider (of corporate debtor) A director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

J

joint administration A court-approved mechanism under which two or more cases can be administered together. (Assuming no conflicts of interest, these separate businesses or individuals can pool their resources, hire the same professionals, etc.)
joint petition One bankruptcy petition filed by a husband and wife together.

L

lien The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.
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.

M

means test Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). Abuse is presumed if the debtor’s aggregate current monthly income (see definition above) over 5 years, net of certain statutorily allowed expenses is more than (i) $10,950, or (ii) 25% of the debtor’s nonpriority unsecured debt, as long as that amount is at least $6,575. The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.

motion to lift the automatic stay A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.

N

no-asset case A chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims.
nondischargeable debt A debt that cannot be eliminated in bankruptcy. Examples include a home mortgage, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud or defalcation while acting in a fiduciary capacity may be declared nondischargeable only if a creditor timely files and prevails in a nondischargeability action.

O

objection to dischargeability A trustee’s or creditor’s objection to the debtor being released from personal liability for certain dischargeable debts. Common reasons include allegations that the debt to be discharged was incurred by false pretenses or that debt arose because of the debtor’s fraud while acting as a fiduciary.
objection to exemptions A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.

P

party in interest A party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The debtor, the U.S. trustee or bankruptcy administrator, the case trustee and creditors are parties in interest for most matters.
petition preparer A business not authorized to practice law that prepares bankruptcy petitions.
plan A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.
plaintiff A person or business that files a formal complaint with the court.
postpetition transfer A transfer of the debtor’s property made after the commencement of the case.
prebankruptcy planning The arrangement (or rearrangement) of a debtor’s property to allow the debtor to take maximum advantage of exemptions. (Prebankruptcy planning typically includes converting nonexempt assets into exempt assets.)
preference or preferential debt payment A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy (or within one year if the creditor was an insider) that gives the creditor more than the creditor would receive in the debtor’s chapter 7 case.

presumption of abuse see means test

priority The Bankruptcy Code’s 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. For example, under the Bankruptcy Code’s priority scheme, money owed to the case trustee or for prepetition alimony and/or child support must be paid in full before any general unsecured debt (i.e. trade debt or credit card debt) is paid.

priority claim An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.

proof of claim A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money. (There is an official form for this purpose.)

property of the estate All legal or equitable interests of the debtor in property as of the commencement of the case.

R

reaffirmation agreement An agreement by a chapter 7 debtor to continue paying a dischargeable debt (such as an auto loan) after the bankruptcy, usually for the purpose of keeping collateral (i.e. the car) that would otherwise be subject to repossession.

S

schedules Detailed lists filed by the debtor along with (or shortly after filing) the petition showing the debtor’s assets, liabilities, and other financial information. (There are official forms a debtor must use.)

secured creditor A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.

secured debtDebt 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. Examples include home mortgages, auto loans and tax liens.

small business caseA special type of chapter 11 case in which there is no creditors’ committee (or the creditors’ committee is deemed inactive by the court) and in which the debtor is subject to more oversight by the U.S. trustee than other chapter 11 debtors. The Bankruptcy Code contains certain provisions designed to reduce the time a small business debtor is in bankruptcy.

statement of financial affairs A series of questions the debtor must answer in writing concerning sources of income, transfers of property, lawsuits by creditors, etc. (There is an official form a debtor must use.)

statement of intention A declaration made by a chapter 7 debtor concerning plans for dealing with consumer debts that are secured by property of the estate.

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 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 The meeting of creditors required by section 341 of the Bankruptcy Code at which the debtor is questioned under oath by creditors, a trustee, examiner, or the U.S. trustee about his/her financial affairs. Also called creditors’ meeting.

T

transfer Any mode or means by which a debtor disposes of or parts with his/her property.

trustee The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all chapter 7, chapter 12, and chapter 13 cases and some chapter 11 cases. The trustee’s responsibilities include reviewing the debtor’s petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In chapter 7, the trustee liquidates property of the estate, and makes distributions to creditors. Trustees in chapter 12 and 13 have similar duties to a chapter 7 trustee and the additional responsibilities of overseeing the debtor’s plan, receiving payments from debtors, and disbursing plan payments to creditors.

U

U.S. trustee An officer of the Justice Department responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties. Compare, bankruptcy administrator.

undersecured claim A debt secured by property that is worth less than the full amount of the debt.

unliquidated claim A claim for which a specific value has not been determined.

unscheduled debt A debt that should have been listed by the 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 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 upon the creditor’s assessment of the debtor’s future ability to pay.

V

Voluntary transfer A transfer of a debtor’s property with the debtor’s consent