Bankruptcy Terminology

SECURED CREDITOR

An individual or business holding a claim against the debtor that is secured by a lien on property of the estate or that is subject to a right of setoff.

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.

SCHEDULES

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.)

STATEMENT OF FINANCIAL AFFAIRS

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

SUBSTANTIAL ABUSE

The characterization of a bankruptcy case filed by an individual whose debts are primarily consumer debts where the court finds that the granting of relief would be an abuse of chapter 7 because, for example, the debtor can pay its debts.

SUBSTANTIVE CONSOLIDATION

Putting the assets and liabilities of two or more related debtors into a single pool to pay creditors. (Courts are reluctant to allow substantive consolidation since the action must not only justify the benefit that one set of creditors receives, but also the harm that other creditors suffer as a result.)

341 MEETING

A meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, examiner, or the United States trustee about his/her financial affairs.