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Bankrupt
The entity that files a bankruptcy; the debtor; the insolvent entity. This is a non-technical term and is not used in the Bankruptcy Code.
Post-petition
Occurring after the filing of a petition. Preference - a payment by a debtor made during a specified period (90 days or one year) prior to the filing that favors one creditor over others.
Chapter Twelve
Family farmer bankruptcies; created by Congress in 1986 (Chapter 12 became effective on November 26, 1986 and is now a permanent Chapter of the Bankruptcy Code); only a family owned farm business can qualify for Chapter 12
Chapter Thirty Three
An unofficial term describing a company that has filed for Chapter 11 three times.
Default
The failure by an entity to abide by the covenants in a debt obligation or other agreement to which it is a party. The most common default is non-payment of interest or principal.
Foreclosure
Your mortgage lender may start a foreclosure action and sell your home at a Sheriff's sale. If the sale nets less than you owe, there will be a "deficiency balance" that you will own to the lender.
Automatic stay
The suspension of actions, such as debt collection or foreclosure, against the company in bankruptcy. Occurs automatically when the bankruptcy petition is filed.
Small claims
Also sometimes called convenience claims - under a plan of reorganization or liquidation, claims that are small (e.g. in the hundreds or thousands of dollars range) and numerous are often grouped into a single class and settled for cash for administrative convenience.
Liquidation value
The aggregate value of a business if its assets are sold piecemeal.
Reorganization
The resolving of a Chapter 11 bankruptcy by the emergence of the debtor as a viable business. Generally, the company agrees with creditors on a plan for payment of their claims (plan of reorganization) and emerges from Chapter 11 after the plan is confirmed by the court.
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