Bankruptcy Terms and Definitions

Adversary proceeding
Litigation within a bankruptcy proceeding instituted by the filing of a complaint.

Secured creditors
One of two general types of creditors of a company. Secured creditors have a lien on property of the company.

Asset
An economic resource or item owned by a business that is expected to benefit its future operations.

Bankruptcy Court
The federal tribunal where cases under the Bankruptcy Code are litigated.

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.

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.

Debtor
The entity seeking protection from creditors under the bankruptcy laws.

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

Post-petition
Occurring after the filing of a petition. Preference - a payment by a debtor made during a specified period (90 days or one year) prior to the filing that favors one creditor over others.

Avoidance power
The power of the court to invalidate certain obligations or transactions undertaken by a debtor prior to filing bankruptcy.