GLOSSARY

• Jurisdiction: United States

GLOSSARY

Abandonment

A disclaimer of any interest by the trustee or debtor in burdensome or inconsequential property. Once property has been "abandoned," it is no longer property of the estate.

Acquisition Value

The price that a particular, specifically identified buyer would be expected to pay for a target company with consideration given to any and all unique benefits of that target company asset to the specifically identified buyer.

Adjusted Net Asset Value (ANAV) Method

An asset-based approach valuation method that involves the collective revaluation of all of a company's asset accounts and liability accounts to conclude a defined value of the company's net asset (or owners' equity) balance.

Administrative Expense Claim

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

Adversary Proceeding

A lawsuit within a bankruptcy case.

Arbitrage Pricing Theory (APT) Model

A multi-variate model for estimating the cost of equity capital that incorporates several systematic risk factors.

Asset Case

A case that consists of an estate with sufficient non-exempt, unencumbered assets to potentially provide a distribution for unsecured creditors.

Automatic Stay

The filing of a voluntary, joint or involuntary petition under any chapter of the Bankruptcy Code automatically operates as a stay against the commencement or continuation of most judicial, administrative or other proceedings against the debtor or the debtor's estate. The purpose of the stay is to give the chapter 11, chapter 12 or chapter 13 debtor "breathing time" for rehabilitation, to give the chapter 7 trustee the protection necessary for administering the assets of the estate, and to relieve the chapter 7 debtor from the pressure of creditor collection efforts. The law provides a number of exceptions to this general rule. A party seeking relief from the automatic stay must file a motion to lift the stay.

Avoiding Power

The Bankruptcy Code grants the trustee the power to avoid certain transactions or transfers occurring before the commencement of the case, including preferences and fraudulent conveyances.

Balance Sheet Test

A valuation method to determine whether the total fair value of a company's assets is greater than the total amount of a company's liabilities.

Bankruptcy Code

Legislation found at 11 U.S.C. §101 et. seq. ("title 11") containing both substantive and procedural law for bankruptcy liquidation and rehabilitation cases. The Code has been amended several times since its passage in 1978, most recently in 2005.

Bankruptcy Court Clerk

The clerk of the bankruptcy court receives all documents that are placed in the court record in a bankruptcy case. In addition, the clerk's office schedules hearings for the bankruptcy judges, usually upon written request by an attorney.

Beta

One component of the cost of equity capital; a coefficient that estimates the volatility of a company's publicly traded stock price relative to the overall market.

Build-Up Model

Additive cost of equity capital model in which the return on an asset is estimated as the sum of a risk-free rate and one or more risk premiums. Each risk premium represents the reward an investor receives for taking on a specific risk.

Business Enterprise Value (BEV)

Aggregate value of the company that includes the total of all long-term, interest-bearing debt and all owners' equity accounts (including common stock and preferred stock); is often used as a synonym for market value of invested capital (MVIC) or total invested capital (TIC).

Cancellation of Debt (COD)

When a creditor forgives a debt without requiring consideration in return. The amount of debt that is forgiven by cancellation of debt is considered to be taxable income to the debtor and must be reported as a result. In most cases, it is taxable as ordinary income and is known as cancellation of debt (COD) income.

Capital Adequacy Test

A solvency test method to determine whether the debtor company is engaged in a business or a transaction for which it has an unreasonably small amount of capital.

Capital Asset Pricing Model (CAPM)

A model used to calculate the cost of equity. It measures the relationship between the market risk and expected return of different classes of securities.

Capitalized Excess Earnings Method (CEEM)

A method for estimating the value of a tangible or intangible asset determined by the direct capitalization of a measure of excess earnings where excess earnings are defined as actual earnings less a fair return on all of the entity's contributory assets. This method is frequently used to value an entity's goodwill.

Cash Flow Test

A solvency test method that analyzes the debtor company's ability to meet its debt obligations as they become due.

Cash Collateral

Cash, negotiable instruments, documents of title, securities, deposit accounts or other cash equivalents in which the debtor's estate and an entity other than the estate have an interest. Cash collateral may not be used, sold or leased in the ordinary course of business unless the creditor with an interest in the collateral consents or the court, after notice and a hearing, authorizes the transaction.

Chapters of the Bankruptcy Code:

Chapter 7
Chapter of the Code addressing liquidation, available both to individual and business debtors. Its purpose is to achieve a fair distribution to creditors of whatever non-exempt property the debtor has and to give the individual debtor a fresh start through the discharge in bankruptcy.
Chapter 9
Chapter of the Code addressing the adjustments of debts of a municipality.
Chapter 11
Chapter of the Code addressing reorganization, available both to individual and business debtors. The purpose of chapter 11 is to rehabilitate a business as a going concern or reorganize an individual's finances. The chapter 11 debtor is given a fresh start through the binding effect on all concerned of the order of confirmation of a reorganization plan.
Chapter 12
Chapter of the Code designed to give special relief to a family farmer or family fisherman with regular income.
Chapter 13
Chapter of the Code used as a rehabilitation vehicle for an individual with regular income whose debts do not exceed specified amounts, typically used to budget some of the debtor's future earnings under a plan through which creditors are paid in whole or in part.

Civil Proceeding

Any action that occurs within a bankruptcy case and includes contested matters, adversary proceedings and plenary actions as well as disputes related to administrative matters in a bankruptcy case.

Claim

Any right to payment, as well as any right to an equitable remedy for breach of performance if that breach also gives right to payment.

Closely Held Corporation...