Bankruptcy Terms and Definitions

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.

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

Exclusivity (period of)
A debtor in Chapter 11 has the exclusive right to file a plan of reorganization for the first 120 days of its bankruptcy. Thereafter, unless the period of exclusivity is extended by the court, other parties may file reorganization plans.

Liquidating reorganization
An informal term for a Chapter 11 proceeding when the company is essentially liquidated through one or more asset sales.

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

Voluntary bankruptcy
Bankruptcy filed by the debtor itself; data from the U.S. Administrative Office of the Courts subdivides bankruptcies into voluntary and involuntary.

Absolute priority
The order of payment to the different classes of creditors mandated by the Bankruptcy Code. In theory, claims with higher priority are paid in full before other claims receive anything

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

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 Thirty Three
An unofficial term describing a company that has filed for Chapter 11 three times.