Bankruptcy Terms and Definitions

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.

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

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.

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).

Reamortization
If your loan is reamortized, the delinquency is added to the loan balance in order to bring your payments up to date. This increases your loan amount and will also increase your monthly payments.

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

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

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.

Adequate protection
The right of a party with an interest in the debtor's property (such as a secured creditor) to assurance that its interest will not be diminished during the bankruptcy proceedings.

Chapter Thirteen
Bankruptcy proceedings for an individual with the intention of rescheduling the individual's debt (rather than liquidating the individual's assets and debt; an individual files under Chapter 7 to liquidate);