OakTree Law’s Legal Glossary

OakTree Law's Legal Glossary

Whether on your own or with an attorney, bankruptcy can be challenging. Don’t let legalese get you down, OakTree’s Legal Glossary is here to clarify and dispell any questions you may have about the legal terms you may encounter during the legal process.

A B C D E F G H I J K  L M N O P Q R S T U V W X Y Z


Adversary proceeding

The process of filing a complaint in court against another person who has wronged you. These lawsuits are known as adversary proceedings because they take place between two parties, one being the defendant and another plaintiff whose duty is to prove their case through evidence or testimony instead of just relying on conjecture. This means any litigant can file suit against them and it will be heard in court under Rule 7001. 


A written contract or lease agreement is a binding promise between two parties.

Automatic stay

The automatic stay provision in bankruptcy law will stop lawsuits and other legal proceedings like collections against the debtor while they are trying to get back on their feet.



Filing for bankruptcy is a legal procedure that’s often used when individuals and businesses are in debt. Filing under one of the chapters of title 11 U.S Code (the Bankruptcy Code), such as chapter 7 or 13 cases, can help debtors find relief from creditors and collection agencies. 

Bankruptcy Administrator

A court official who is in charge of overseeing bankruptcy cases, estates, and trusts. They also monitor plans and disclosure statements among other things to ensure creditors’ committees are being run correctly as well as clearing fee applications.

Bankruptcy Code

The informal name for title 11 of the United States Code (11 U.S.C., 101-1330), which is known as “the bankruptcy law.”

Bankruptcy Court

The bankruptcy courts are a specialized unit of the district court. 

Bankruptcy Estate

All of the debtor’s assets, including property that they might own or have an interest in but isn’t technically part of their bankruptcy estate.

Bankruptcy Judge

A Judiciary of United States District Court Officer who’s responsible for making decisions related to bankruptcy proceedings within the United States. 

Bankruptcy Petition

The bankruptcy petition is the document filed by a debtor in order to open and maintain their bankruptcy case. There are official forms for both voluntary and involuntary cases that must be completed accurately. 


Chapter 7

The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale and distribution) will be one where a debtor can get quick relief from debts by selling off any unnecessary property while also making payments to creditors over time, or with lump-sum settlements as appropriate. The process known as liquidation engages in a thorough analysis of all non-exempt assets owned by an individual under Chapter 7.

Chapter 9

For Chapter 9 bankruptcies, the municipality is one of many unsecured creditors. The city’s fiscal health and ability to pay its taxes should be considered when determining whether or not it can be reorganized under this provision in the Bankruptcy Code. The chapter on reorganization provided for municipalities which include cities/towns, as well as villages, counties, taxing districts, municipal utilities, and school districts, may also apply here since they all fall into this category. 

Chapter 11

Chapter 11 bankruptcy provides for reorganization of corporations, usually involving an orderly liquidation to keep the business afloat. A debtor may seek relief in Chapter 11 if they are unable or unwilling to pay off creditors on time along with some flexibility regarding how much money is owed. 

Chapter 12

If you’re trying to file bankruptcy with assets related directly or indirectly to agriculture like farmland, this chapter provides for adjustment of debts owed by family farmers and fishermen as those terms are defined in this section. 

Chapter 13

The Bankruptcy Code is the law of debt, and Chapter 13 allows for adjustment. Debts are usually settled in 3-5 years when you’re allowed to keep your property while making payments over time with regular income. This is a solution that helps both creditors and consumers get back on their feet without being biased regarding their level of income. 

Chapter 15

This chapter of the Bankruptcy Code deals with cases where a company has debts outside its borders.


A creditor’s assertion of a right to payment from the debtor or his/her property in a multitude of ways.


Bankruptcy judges are empowered to approve plans of reorganization or liquidation in Chapter 11, payment plan decisions on behalf of debtors who File Chapter 12 ( debts up to about $407K), and Chapter 13 cases involving more than that amount owed ($5 million).

Consumer Debtor

A debtor who owes primarily consumer debt.

Consumer Debts

Personal debts are incurred for the needs of a person, and not necessarily related to business.

Contested Matter

If the debtor disagrees with a claim or claims that are disputed but not within rule 7001, then it’s time for an informal conference.

Contingent Claim

A claim is a debt an individual may owe under certain circumstances, such as when they’re a co-signer on someone else’s loan and fail to pay.


An entity that has a right to receive payment from the debtor.

Creditors’ Meeting

see 341 meeting

Current Monthly Income

The average monthly income that someone earns during the six calendar months before their bankruptcy case. This includes regular contributions to household expenses from non-debtors, and if it is a joint petition, any wages earned by their spouse if this is a joint petition. This does not include social security payments made if the debtor was a victim in certain crimes. 11 U.S.C. § 101(10A).



A person who has filed a petition for bankruptcy.

Debtor Education

see credit counseling


An individual (or business) who has a lawsuit filed against them. 


A debtor being released from personal liability for certain dischargeable debts outlined in the Bankruptcy Code. (A discharge releases an individual from their financial obligations, preventing creditors who are owed these discharged assets from taking any action against them.)

Dischargeable Debt

The elimination of personal liability on behalf of the debtor as outlined in the United States Bankruptcy Code. 

Disclosure Statement

A plan of reorganization, a written document designed to provide the creditors with “adequate information” on which they can evaluate your bankruptcy filing and business affairs.




The balance in favor of the debtor when liens and other creditors’ claims are subtracted. (Example: If a house is valued at $200,000 and there is a $180,000 mortgage, there is equity of $20,000.) 

Executory Contract or Lease

The contract is a legal document that outlines the terms and conditions of an agreement. The parties involved in this type of deal must fulfill their side before it can be considered complete. If a contract or lease is executory, a debtor may assume it or reject it.


Exemptions, Exempt Property

The Bankruptcy Code and applicable state laws allow individuals to protect certain property from unsecured creditors. For example, there are many different homestead exemptions in some states that can exempt all or a portion of equity on your primary residence (the “homestead exemption”), as well as other personal effects the debtor uses for livelihood such as tools used by them to generate income called “tools of trade.”




The economic assessment of a company’s viability means that they either aren’t earning what is expected or meeting their obligations- it isn’t synonymous with bankruptcy because one does not always lead to another, though these situations can sometimes occur due in part from how businesses fail (i.e., become insolvent).


First Meeting of Creditors (341 Meeting) 

The debtor is required to attend a mandatory meeting with their creditors. This meeting is scheduled within a month of bankruptcy, but often occurs later when information on financial schedules have been filed by both parties involved in this process


Gap Period 


The period between the filing of an involuntary petition and dismissal, whether through an order for relief or voluntary action.


Going Concern Value 


The value of a company for its continuing operation, rather than the liquidation price.



Insider (of individual debtor)

The spouse, children, or parent of the debtor; and any individual who has a significant relationship to the debtor such as an affiliate.

Insider (of corporate debtor)

A debtor is identified by their relation to the company. A director, officer, or person in control of them; a partnership where they are both general partners; and finally any relative who may be connected with one of those three roles also falls into this category as an obligation under law.


Joint Administration

A court-approved process where two or more cases can be administratively processed simultaneously. This way, if there are no conflicts of interest between the separate businesses, then all parties will receive a fair trial with full representation. 

Joint Petition

A single bankruptcy filed jointly by a husband and wife. 



KERP- Key Employee Retention Plan

These incentives were traditionally put in place to encourage upper management of debtors to continue to work for them throughout bankruptcy proceedings. KERPs have been substantially curtailed under the 2005 amendments, but not entirely eliminated as an incentive for continued employment. 



The right to take hold or sell a debtor’s property as security or as payment for a debt or duty.


Liquidation is the process of selling off all your possessions to pay back what you owe.

Liquidated claim

A creditor’s claim for a fixed amount of money.



Means Test

The Bankruptcy Code has a number of tests to determine if a chapter 7 filing is being abused. The Means Test is applied when the debtor’s monthly income, over five years net of certain expenses, is more than $12,850 or 25% of the debtor’s unsecured debt. Provided the amount is at least $7,700.

Motion to Lift the Automatic Stay

A creditor’s request to take action against the debtor or their property is usually prohibited under federal law unless they can make an exception.


No-asset Case

A chapter 7 case where there are no assets available to satisfy any portion of the creditors’ unsecured claims is one in which all collateral for the debt has already been pledged, abandoned, or otherwise disposed of.

Nondischargeable Debt

A debt that cannot be eliminated in bankruptcy is called a “nondischargeable debt.” Impracticability arises when there are too many creditors with claims on your assets. This can include unpaid child support or alimony payments, taxes owed to multiple governments (federal, state, and local), any loans originated by colleges/universities before they became government-funded institutions as well what’s left over after paying off student loan lenders (the federal bankruptcy law doesn’t help here). 



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 debtor’s fraudulent conduct arose because they were acting in a fiduciary capacity at the time of incurring these obligations, and/or false pretenses may have been used when taking out loans on behalf of other people – this would make them liable too. 

Objection to Exemptions

The trustee’s or creditor’s objection to the debtor as they attempt claiming a certain property as exempt from liquidation by virtue of its nature.



Party in Interest

The debtor, the U.S trustee or bankruptcy administrator, and creditors are parties in interest for most matters before a judge overseeing bankruptcy cases being filed. 

Petition Preparer

A business not authorized to practice law that prepares bankruptcy petitions is a branch of our legal system.


A person or business that files a formal complaint with the court.

Post Petition Transfer

Post Petition transfers can be used to transfer property after the case has started, but before it is finalized and closed out for creditors’ satisfaction (i.e., without any outstanding debts).

Pre Bankruptcy Planning

The arrangement (or rearrangement) of a debtor’s property to allow them maximum advantages with their exemptions. This includes converting nonexempt assets into exempt ones, and it typically happens before filing for bankruptcy as well.

Preference or Preferential Debt Payment

Preference debt is a special type of payment for an old or existing creditor that gives them more than what they would get in bankruptcy, but not enough to force repayment.

Creditors are incentivized by law when it comes time for the debtor to file Chapter 7 because there’s no guarantee about who will be paid back after liquidating assets which could include homes and cars among other things.


The Bankruptcy Code is a statutory ranking system that determines the order in which unsecured claims will be paid if there isn’t enough money to pay all of them. For example, under this priority scheme, you must first satisfy any debts owed directly by an individual (such as alimony or child support) before general unsecured debt like credit card bills can get handled.

Priority Claim

An unsecured claim that is entitled to be paid ahead of other, less important debts. Priority refers to the order in which these claims are processed with payments being made before any others. 

Proof of Claim

An official form and written statement by the creditor to verify documentation of why the debtor owes them money.

Property of the Estate

All of a debtor’s legal or equitable interests in property at the time they file for bankruptcy.




Reaffirmation Agreement

As part of the bankruptcy process, a debtor is allowed to keep property as collateral for debts. If they agree and continue paying these loans after filing their original petition with court approval this can be referred to as an “agreement,” which means that both parties are committed enough in their agreement that no further action is required. 



Secured Creditor

A creditor who has a claim against you. They can take and sell certain property in satisfaction for all or part of their debt if they have the right to do so under law.

Secured Debt

This might be the most important term in your loan agreement. It’s what gives creditors their right to take away any collateral you’ve pledged if they’re not paid back with interest on time for an agreed-upon price, like 10% per year or 180 days worth of principle + accrued interest whichever comes first but at least annually (or beyond).

Small Business Case

A special type of Chapter 11 case in which there is no creditors’ committee (or the Bankruptcy Code deems it inactive), and small business debtors are subject to more oversight by US Trustee. The United States has specifically designed certain provisions for reducing the time a small company takes out bankruptcy protection from their industries so they can continue to do business. 

Statement of financial affairs

The process of answering questions about your finances. The debtor must answer all the inquiries on this form. 

Statement of intention

The statement of intention is a declaration that the debtor has plans for dealing with consumer debts secured by property in their estate.

Substantive consolidation

Substantive consolidation is the process of combining two or more debtors into one pool to pay creditors. Courts are hesitant in allowing this since it must benefit all creditor groups equally, and not just some at the expense of others; however, when there’s enough risk-sharing among them (such as with an insurance policy), substantive consolidations can be legal under certain conditions.

341 meeting

The meeting of creditors required by section 341 is an extremely important event. It brings the debtor in front of his or her peers and all those who are owed money by him/her. The individual will answer any questions about their financial affairs under oath. 



Any means by which the debtor sells or disposes of parts of his/her assets or property. 


A bankruptcy trustee is appointed to represent the interests of unsecured creditors in a case. They are given statutory powers for this task under supervision by court and U.S Trustee or Administrator on behalf of all parties involved with an action being filed, until it’s settled through mediation or otherwise approved after discharge from debtorship



Undersecured Claim

An undersecured debt is one that has less equity than the full amount owed.

Unliquidated Claim

A claim for which the amount is not yet determined.

Unscheduled debt

When a debtor doesn’t file their scheduled debts, the court may deem these unscheduled transactions to be valid and enforceable. Unscheduled debts are usually discharged if they meet certain criteria – for example, that payment was due but not made on time or in full without good cause (such as illness).

Unsecured claim

The creditor holds your debt as an unsecured claim due to the fact that they do not have any special assurance of payment.



Voluntary transfer

A voluntary transfer of a debtor’s property with the consent of the debtor. 





The workout is an arrangement by a debtor and its creditors for payment or rescheduling of payments. It can be formal, but it usually doesn’t need to follow any set rules.