Bankruptcy Terms and Definitions

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.

Disclosure statement
A comprehensive disclosure document sent to creditors when they are asked to vote on a plan of reorganization in Chapter 11.

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

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.

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.

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 Thirteen
Bankruptcy proceedings for an individual with the intention of rescheduling the individual's debt (rather than liquidating the individual's assets and debt; an individual files under Chapter 7 to liquidate);

Chapter Twenty Two
An unofficial term describing a company that has filed for Chapter 11 twice.

Reverse leveraged buyout
When a company that was a leveraged buyout restructures its (usually unmanageable) debt by issuing new equity (usually in exchange for some or all of the outstanding debt incurred during the original leveraged buyout).