Bankruptcy Terms and Definitions

Substantive consolidation
The combination of the estate of one debtor with the estate of one or more other debtors and the application of the combined estate to satisfy their combined liabilities.

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.

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.

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

Chapter Nine
Bankruptcies of municipalities; only a few of these are filed each year; over the period 1980 through 1988 there averaged about 4 Chapter 9 filings per year.

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

Bankruptcy Amendments of 1984
A set of amendments to the Bankruptcy Reform Act of 1978. It contains a number of provisions including: limiting the jurisdiction of the bankruptcy court.

Claims
Rights to repayment made by creditors against a debtor; they may be liquidated, unliquidated, fixed, contingent, matured, unmatured, secured, unsecured, subordinated, legal or equitable.

Insolvency
Another term used to describe a firm that is failing; generally it means that a firm's liabilities exceed its assets or that it is unable to satisfy its obligations as they come due.