Bankruptcy Terms and Definitions

Garnishment Laws
Unsecured creditors in relation to garnishment laws do not hold any collateral that they can take from you if you fall behind on your payments.

Asset
An economic resource or item owned by a business that is expected to benefit its future operations.

Substantive consolidation
The combination of the estate of one debtor with the estate of one or more other debtors and the application of the combined estate to satisfy their combined liabilities.

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.

Insolvency
Another term used to describe a firm that is failing; generally it means that a firm's liabilities exceed its assets or that it is unable to satisfy its obligations as they come due.

Skeleton filing
Term used at bankruptcy courts to describe a bankruptcy filing in which not all the necessary forms have been filed. Certain courts allow a case to commence if only certain important forms are filed so long as the balance of required forms are forthcoming within a certain period of time.

Chapter Eleven
Reorganization proceedings, generally for business entities; the debtor maintains control of the business in Chapter 11 (unless the Court appoints a trustee).

Trustee
An agent of the court who manages the property of the debtor for the benefit of the creditors. The court appoints a trustee in most Chapter 7 cases and in Chapter 11 cases when it determines that the debtor's management should not remain in control.

Chapter Ten
A new chapter of the bankruptcy code proposed in 1992 and pending in 1993. Chapter 10, like Chapter XI of the old code, is designed for small business reorganizations.

Bankruptcy Amendments of 1984
A set of amendments to the Bankruptcy Reform Act of 1978. It contains a number of provisions including: limiting the jurisdiction of the bankruptcy court.