Appendix A Bankruptcy Terms

• Jurisdiction: United States

Appendix A: Bankruptcy Terms

Abandonment

What the trustee does with property that has no value to the estate. If the secured creditor has a claim of $1,000 against property that is worth $800, the trustee will abandon, leaving the secured creditor free to do what he needs to do to reach the property via nonbank-ruptcy law. If the claim is $800 and the property is worth $1,000, the trustee will not abandon. Rather, he will sell the property for $1,000 and pay the first $800 to the secured creditor (or sell it for $200, subject to the secured creditor's claim).

Abstention

A bankruptcy court may abstain from hearing a particular civil proceeding on the finding that it is in the interest of justice or of comity with state courts or state law. A bankruptcy court must abstain from a hearing involving a noncore proceeding based on a cause created by state law, where such cause is actually pending and can be timely adjudicated in a forum of appropriate jurisdiction. The bankruptcy court may abstain from hearing an entire bankruptcy case on the finding that the interest of both creditors and the debtor will be served by dismissal of the petition. See "Removal."

Administrative Expense Claim

A priority claim including the cost and expenses of preserving the state or operating the business after the petition, and all professional fees and charges that are allowed.

Adversary Proceeding

A "case within a case;" a lawsuit part of a bankruptcy case. A bankruptcy case may have many adversary proceedings, or few, or none. See "Contested Matter."

Asset Case

A case where there will be value to distribute to creditors.

Automatic Stay

A "statutory injunction" that protects (a) the debtor and (b) the property of the estate. There are many exceptions to the stay, and a creditor may seek relief from the stay. The stay continues until terminated or until the case ends — but at the end of the case, it may be supplanted by the "statutory injunction" of the discharge.

Avoidance Power

The Bankruptcy Code grants the trustee the power to reverse or undo certain transfers occurring before the commencement of the case, including "preferences" and "fraudulent transfers" (qv).

Bankrupt

Traditionally, the term denoting the debtor in a bankruptcy case. The Code does not use the term; it says merely "debtor," which is the standard term in bankruptcy parlance, although newcomers to the bankruptcy court will still use the old term.

Bankruptcy Code

(referred to in this text as "Code" or "BC")

Title 11 of the U.S. Code, as adopted in 1978 and amended many times since (most notably in 2005 by BAPCPA (qv)).

Bankruptcy Judge

A judge appointed for a 14-year term under Article I of the U.S. Constitution to hear and decide (or to recommend decisions in) bankruptcy matters. She takes assignments by reference from the "district judge," a lifetime appointee serving on the authority of Article III of the Constitution (the district judge sometimes hears bankruptcy matters; one says that she is "sitting in bankruptcy").

Best Interests

A chapter 11 plan passes the "best interests" test if the creditors will receive not less than they would receive in chapter 7. The court may not confirm a plan over the objection of a creditor unless it passes the test.

Case

The bankruptcy case as a whole, as distinct from a "proceeding" (qv) in a case.

Cash Collateral

Cash, but also negotiable instruments, documents of title...