Bankruptcy Terms and Definitions

Adequate protection
The right of a party with an interest in the debtor's property (such as a secured creditor) to assurance that its interest will not be diminished during the bankruptcy proceedings.

Absolute priority
The order of payment to the different classes of creditors mandated by the Bankruptcy Code. In theory, claims with higher priority are paid in full before other claims receive anything

Exclusivity (period of)
A debtor in Chapter 11 has the exclusive right to file a plan of reorganization for the first 120 days of its bankruptcy. Thereafter, unless the period of exclusivity is extended by the court, other parties may file reorganization plans.

Bankruptcy estate
Generally, the property of the debtor that is subject to the jurisdiction of the bankruptcy court.

Chapter Nine
Bankruptcies of municipalities; only a few of these are filed each year; over the period 1980 through 1988 there averaged about 4 Chapter 9 filings per year.

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.

Straight bankruptcy
An informal term for a Chapter 7 bankruptcy or liquidation; used more commonly to describe liquidation before the Bankruptcy Reform Act of 1978.

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.

Debtor-in-possession
The debtor which remains in control of operations; as opposed to having a trustee operate the company.

Core proceedings
Those proceedings that are inherent in and fundamental to the administration of a bankruptcy case.