Bankruptcy Law Glossary: Key Terms and Definitions

Bankruptcy law in the United States operates through a specialized vocabulary defined by statute, judicial interpretation, and administrative rule. This glossary covers the core terms appearing throughout the Bankruptcy Code overview and related procedural frameworks, from filing concepts to discharge mechanics. Precise terminology matters because the legal consequences of terms like "exemption," "priority claim," and "nondischargeable debt" differ substantially from their plain-language meanings. The definitions below draw on Title 11 of the United States Code (the Bankruptcy Code) and related federal rules.

Definition and scope

Bankruptcy terminology derives primarily from Title 11, U.S. Code, enacted in its modern form by the Bankruptcy Reform Act of 1978 and substantially amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The U.S. Courts administer a uniform federal system in which these terms carry specific statutory meanings that preempt state definitions.

Core foundational terms:

• Debtor — The individual, business, or municipality that files a bankruptcy petition under Title 11.
• Creditor — Any entity holding a claim against the debtor that arose before the bankruptcy filing date (11 U.S.C. § 101(10)).
• Claim — A right to payment, whether liquidated or unliquidated, fixed or contingent (11 U.S.C. § 101(5)).
• Estate — All legal and equitable interests of the debtor as of the petition filing date; governed broadly by 11 U.S.C. § 541. See the bankruptcy estate assets reference for a full breakdown of what property is included.
• Discharge — A statutory injunction that eliminates a debtor's personal liability for qualifying debts (11 U.S.C. § 524).
• Trustee — A court-appointed officer who administers the bankruptcy estate. The bankruptcy trustees directory lists qualified trustees by district.
• Automatic Stay — The immediate halt to most collection actions triggered upon filing (11 U.S.C. § 362). Detailed mechanics appear in the automatic stay in bankruptcy reference page.
• Means Test — The income-based calculation under 11 U.S.C. § 707(b)(2) that determines Chapter 7 eligibility for consumer debtors, introduced by BAPCPA.
• Plan — A formal repayment or reorganization schedule filed in Chapter 11, 12, or 13 cases.

How it works

Bankruptcy terminology functions within a tiered classification system. Terms are not interchangeable across chapters, and the same word can carry different procedural weight depending on the chapter filed.

1. Debt classification terms

• Secured debt — A debt backed by a lien on specific property. The creditor holds a security interest enforceable against the collateral. Contrast with secured vs. unsecured creditors in bankruptcy.
• Unsecured debt — A debt with no collateral backing. General unsecured creditors typically receive the lowest distribution priority.
• Priority claim — An unsecured claim elevated by statute above other unsecured claims. 11 U.S.C. § 507 establishes 10 priority categories, including domestic support obligations (ranked first) and certain tax claims. See priority claims in bankruptcy.
• Nondischargeable debt — A debt that survives bankruptcy discharge. Categories defined in 11 U.S.C. § 523 include student loans (with a narrow undue hardship exception), most tax obligations within specified lookback periods, domestic support obligations, and debts arising from fraud. See dischargeable vs. nondischargeable debts.

2. Asset and exemption terms

• Exemption — A statutory protection that removes specified property from the bankruptcy estate. Each state establishes its own exemption schedule; 11 U.S.C. § 522 sets a federal baseline. State-by-state schedules are catalogued at bankruptcy exemptions by state.
• Lien stripping — A process under 11 U.S.C. § 506(a) and (d) that removes wholly unsecured junior liens from real property in certain chapter contexts. See lien stripping in bankruptcy.
• Cramdown — The court confirmation of a reorganization plan over creditor objection, provided the plan meets the "fair and equitable" standard under 11 U.S.C. § 1129(b) (Chapter 11) or analogous provisions in Chapters 12 and 13. See cramdown in bankruptcy.

3. Procedural terms

• 341 Meeting — The mandatory meeting of creditors under 11 U.S.C. § 341, at which the trustee examines the debtor under oath. No judge presides. See 341 meeting of creditors.
• Adversary proceeding — A lawsuit filed within a bankruptcy case, governed by Part VII of the Federal Rules of Bankruptcy Procedure. Common uses include nondischargeability actions and fraudulent transfer recovery. See adversary proceedings in bankruptcy.
• Preference payment — A transfer made to a creditor within 90 days before filing (or 1 year for insiders) that allows the trustee to recover funds for equitable distribution (11 U.S.C. § 547). See preference payments in bankruptcy.
• Fraudulent transfer — A pre-petition transfer made with intent to hinder, delay, or defraud creditors, or for less than reasonably equivalent value (11 U.S.C. § 548). See fraudulent transfers in bankruptcy.
• Reaffirmation agreement — A voluntary agreement by which a debtor agrees to remain personally liable on a specific debt that would otherwise be discharged (11 U.S.C. § 524(c)). See reaffirmation agreements in bankruptcy.

Common scenarios

Specific terms arise with frequency in identifiable filing contexts:

Chapter 7 liquidation cases — Terms most active include: means test, exemptions, trustee, 341 meeting, discharge, preference payment, and nondischargeable debt. The Chapter 7 bankruptcy services page covers the procedural sequence in which these terms appear.

Chapter 13 wage-earner plans — Terms most active include: plan, confirmation, disposable income, cramdown, lien stripping, and curing mortgage arrears. The Chapter 13 bankruptcy services page maps the plan structure.

Chapter 11 reorganization — Terms most active include: debtor-in-possession (DIP), plan of reorganization, disclosure statement, absolute priority rule, cramdown, and exit financing. The Chapter 11 bankruptcy services page covers the full timeline.

Chapter 12 family farmer/fisher cases — Shares substantial terminology with Chapter 13 but adds farm-specific debt thresholds and modified cramdown rights. The Family Farmer Relief Act of 2019, enacted August 23, 2019, raised the Chapter 12 debt eligibility ceiling under 11 U.S.C. § 101(18) from $3,237,000 to $10,000,000, substantially expanding access to Chapter 12 relief for family farmers carrying higher levels of debt. This ceiling is subject to periodic adjustment under 11 U.S.C. § 104. See Chapter 12 Bankruptcy Services for current eligibility thresholds.

Chapter 9 municipal bankruptcy — Introduces terms specific to governmental debtors: plan of adjustment, special revenues, and the political body exception to trustee appointment. See municipal bankruptcy: Chapter 9.

Decision boundaries

Several terms define critical legal thresholds where the distinction between categories produces materially different outcomes.

Dischargeable vs. nondischargeable:
The burden of proof matters. For most § 523 exceptions (fraud, willful injury, false pretenses), the creditor bears the burden of proving nondischargeability by a preponderance of the evidence in an adversary proceeding. For student loans, the debtor bears the burden of proving undue hardship.

Secured vs. unsecured:
A claim is secured only to the extent of the value of the collateral. Under 11 U.S.C. § 506(a), a amounts that vary by jurisdiction mortgage on a property worth amounts that vary by jurisdiction yields a amounts that vary by jurisdiction secured claim and a amounts that vary by jurisdiction unsecured claim — a bifurcation that drives cramdown and lien-stripping eligibility.

Priority vs. general unsecured:
11 U.S.C. § 507 establishes a strict waterfall. Domestic support obligations (first priority) must be paid in full before general unsecured creditors receive anything in a Chapter 13 plan or Chapter 7 distribution.

Voluntary vs. involuntary:
Most bankruptcy cases are voluntary — filed by the debtor. Involuntary cases (11 U.S.C. §§ 303–304) may be filed by 3 or more qualifying creditors (or 1 creditor if fewer than 12 total creditors exist) holding aggregate unsecured claims of at least amounts that vary by jurisdiction (adjusted under 11 U.S.C. § 104 for inflation). See voluntary vs. involuntary bankruptcy.

Exempt vs. non-exempt property:
The trustee may administer only non-exempt property. A debtor who correctly claims available exemptions retains those assets regardless of liquidation. Errors in exemption claims — including untimely amendments — can result in loss of the exemption, as courts apply Bankruptcy Rule 4003 deadlines strictly.

References

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