Bankruptcy Terms and Definitions

Petition
The document that commences a bankruptcy proceeding. plan of reorganization - the document setting forth how a bankrupt company plans to satisfy its creditors.

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

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.

United States Trustee
An agent of the U.S. Department of Justice appointed to assist in bankruptcy cases. The U.S. Trustee administers many of the duties of the court including appointing committees.

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).

Automatic stay
The suspension of actions, such as debt collection or foreclosure, against the company in bankruptcy. Occurs automatically when the bankruptcy petition is filed.

Repo Laws Repossess
The repo laws: If you don't make your car payments for a number of months, your lender may repo or repossess your car. Without a car you may not be able to get to work.

Chapter Twenty
An unofficial term describing the filing of a Chapter 7 proceeding followed by a Chapter 13.

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

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.