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  4.  » Bankruptcy Terms

​Helping You Understand Common Bankruptcy Terms

For the attorneys at Levitt & Slafkes, P.C., in Maplewood, New Jersey, bankruptcy law is second nature. But our clients need clear and easy to understand explanations when they seek answers about their situation. We can help and have assembled a list of common bankruptcy terms for our clients in Essex County and throughout New Jersey.

Adversary proceeding

A lawsuit filed in the bankruptcy court that is related to the debtor’s bankruptcy case. Examples are complaints to determine dischargeability and complaints to determine the extent and validity of liens.


Things that you own or have a legal interest in that have value. Houses, cars, bank accounts, cash, household goods and furnishings are all considered assets, even if you are making payments on them.


An agreement to continue performing duties under a contract or lease.

Automatic stay

An injunction that automatically stops lawsuits, foreclosures, garnishments and most collection activities against the debtor the moment a bankruptcy petition is filed.


A legal procedure for dealing with debt problems of individuals and businesses. It specifically refers to a case filed under of the Chapters of the United States Bankruptcy Code.

Bankruptcy code

The Bankruptcy Code is found in Title 11 of the United States Code. This is the source of the Bankruptcy law.

Bankruptcy estate

All legal or equitable interests in property, that the person filing bankruptcy (known as the debtor) has at the time they file bankruptcy.

Bankruptcy judge

A judicial officer of the U.S. District Court who has the decision-making power over federal bankruptcy matters.

Bankruptcy petition

Legal papers filed with the bankruptcy court that start a bankruptcy case. There is an official form for bankruptcy petitions.

Bankruptcy trustee

A private individual appointed in all Chapter 7 and Chapter 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.

Business bankruptcy

A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.

Chapter 7

In a Chapter 7 bankruptcy case, a debtor’s unsecured debts (usually credit cards, doctor’s bills and personal loans) are wiped out. Most people can keep their home, car and all of their belongings, but if you can’t bring your mortgage or car payments current quickly, you may lose the house or car.

Chapter 11

A reorganization bankruptcy, 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. Individuals or people in business can also seek relief in Chapter 11.

Chapter 13

The chapter of the bankruptcy code providing for the adjustment of debts of an individual with regular income, often referred to as a “wage earner” plan. Chapter 13 allows a debtor to keep property and use his or her disposable income to pay debts over time, usually three to five years.

Chapter 13 plan

When a person files for Chapter 13, he or she proposes a plan to the court to repay creditors some or all of the money they are owed. The Chapter 13 plan must be approved by the court at the Chapter 13 confirmation hearing.

Chapter 13 trustee

A person appointed to administer a Chapter 13 case.


In bankruptcy cases, a creditor, or someone to whom you owe money, files a proof of claim to tell the court how much you owe.


Approval of a Chapter 13 plan of reorganization by a bankruptcy judge.

Confirmation hearing

In a Chapter 13 case, this is a court hearing for the judge to approve your Chapter 13 plan. In many cases, it is not necessary for you to appear for this meeting as your attorney works things out in advance with the Chapter 13 trustee.

Consumer bankruptcy

A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.

Consumer debts

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


A person or business that claims it is owed money by the debtor.

Credit counseling

Generally refers to two events in individual bankruptcy cases:

  1. The counseling that can occur online from a nonprofit budget and credit counseling agency that individual debtors must complete before filing under any chapter of the bankruptcy code.
  2. The “instructional course in personal financial management” in Chapters 7 and 13 that an individual debtor must complete before a discharge is entered.


A person who has filed a petition for relief under the bankruptcy code.


Money that is owed.


An individual or business against whom a lawsuit is filed.


The legal term for wiping out debts through bankruptcy. When a debt is discharged, it cannot be legally collected, although a lien that secures the debt is not automatically wiped out.

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.

Disposable income

Income that is not reasonably necessary for the maintenance or support of the debtor or dependents. If the debtor operates a business, disposable income is defined as those amounts over and above what is necessary for the payment of ordinary operating expenses.

Exempt assets

Property that a debtor is allowed to retain, free from the claims of creditors that do not have liens on the property.

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, since the debtor is free of most, if not all, debts.

Joint petition

One bankruptcy petition that is filed together by a married couple.


The sale of a debtor’s property with the proceeds to be used for the benefit of creditors.

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).


A request by a litigant to a judge for a decision on an issue relating to the case.

Motion to lift the automatic stay

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

No-asset case

A Chapter 7 bankruptcy in which 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 debts for alimony or child support, certain taxes, debts for most government-funded or guaranteed educational loans or benefit overpayments, and debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs.

Nonexempt assets

Property of a debtor that can be liquidated to satisfy claims of creditors.

Objection to discharge

A trustee’s or creditor’s objection to the debtor being released from his or her debts.


The document that when filed with the bankruptcy court, starts the bankruptcy case. Events that happen before the petition is filed are called “Pre-petition” and events that happen after the petition is filed are called “Post-petition.”

Post-petition transfer

A transfer of the debtor’s property made after the commencement of the case.

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.


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.

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

The document that creditors file with the bankruptcy court stating how much the creditor is owed and the reason the debtor owes this money.

Property of the estate

All of the debtor’s legal or equitable interests in property as of the time the bankruptcy petition is filed.


To assume personal liability after bankruptcy for a debt that would otherwise be discharged in the bankruptcy case.

Reaffirmation agreement

An agreement by a debtor to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of keeping collateral, such as a vehicle that would otherwise be subject to repossession.


A procedure in a Chapter 7 case whereby a debtor removes a secured creditor’s lien on collateral by paying the creditor the value of the property. The debtor may then retain the property.


Lists submitted by the debtor along with the petition (or shortly thereafter) showing the debtor’s assets, liabilities, and other financial information. There are official forms a debtor must use.

Secured creditor

A creditor whose loan is secured by collateral. If you don’t pay, the creditor can take the collateral. Most mortgages and car loans are secured and if you do not make the payments, they can foreclose on the house or repossess the car.

Secured debt

Debt 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.

Statement of financial affairs

A series of questions the debtor must answer in writing concerning sources of income, transfers of property and lawsuits by creditors. 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.

341 meeting

A meeting of creditors at which the debtor is questioned under oath by a bankruptcy trustee about their financial affairs, and the bankruptcy petition they filed. Although allowed to attend, creditors rarely attend. The debtor’s lawyer attends the meeting.

Unsecured claim

A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien. It is a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.

Wage garnishment

A nonbankruptcy legal proceeding whereby a plaintiff or creditor seeks to have part of the debtor’s future wages paid to the creditor for a debt owed to the creditor.

We Understand the Bankruptcy Laws and Can Help You, So Call Now

Levitt & Slafkes, P.C., in Maplewood, New Jersey, is a group of skilled attorneys who understand bankruptcy law and knows how to successfully guide clients through the legal process. We are attentive, provide thorough explanations and are prepared to help. Contact our law firm online or call us at 973-313-1200.

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