Lesson 12 Paralegal

Attachment

The legal process that makes a security interest enforceable between debtor and creditor

Automatic stay

A rule that stops most collection actions as soon as bankruptcy is filed

Avoidance powers

Legal authority to undo certain transactions made before bankruptcy to benefit all creditors

Bankruptcy abuse

The misuse of bankruptcy law through fraud or bad-faith filings

Bankruptcy estate

All of the debtor’s legal and equitable interests at the time of filing

Bankruptcy fraud

Any action to mislead the court, such as hiding assets or lying in filings

Bankruptcy trustee

A court-appointed person who manages the bankruptcy case and assets

Chapter 7

A type of bankruptcy that involves the liquidation of nonexempt assets to pay creditors

Chapter 11

A type of bankruptcy used mostly by businesses to reorganize debts

Chapter 13

A bankruptcy option where individuals repay debt over time through a court-approved plan

Charging Order

A court remedy giving creditors access to a debtor’s business distributions

Co-debtor stay

A rule that stops collection from someone jointly liable with the debtor in chapter 13

Collateral

Property pledged to secure a debt, which can be taken if the debtor defaults

Commercially reasonable

A legal standard requiring fairness in the sale of or handling of collateral

Confirmation

Court approval of a bankruptcy plan proposed by the debtor

Contested matter

A legal dispute in bankruptcy resolved by motion, not by full lawsuit

Court-approved disclosure

A detailed statement of financial affairs submitted for creditor review in chapter 11

Debtor in possession

A chapter 11 debtor who keeps control of their business during the case

Default

Failure to meet loan or legal obligations (by missing payments)

Discharge

A court order that removes the legal obligation to repay certain debts

Dischargeable debt

Debt that can be erased through the bankruptcy process

Disposable income

Leftover income after basic expenses, used to repay creditors under a plan

Equitable interests

Property rights or benefits held my the debtor that may be included in the bankruptcy estate

Execution of judgment

A legal process to seize and sell a debtor’s nonexempt property to satisfy a court judgment

Exempt assets

Property protected from creditors and not subject to liquidation in bankruptcy

Exemption laws

State or federal rules that allow debtors to keep certain property during bankruptcy

Fair debt collection

Lawful practices that creditors and collectors must follow when pursuing unpaid debts

Fair market value

The price an asset would sell for between willing parties in an open market

Federal jurisdiction

Legal authority granted to federal courts, including exclusive control over bankruptcy cases

Financing statement

A document filed to perfect a creditor’s security interest and notify others of a claim

Fixture filing

A legal filing used to perfect an interest in items attached to real property

Foreclosure

A legal process where a lender takes and sells the real property securing a loan

Fraudulent transfer

A transfer made to avoid paying creditors, often by selling property for less than it is worth

Garnishment

A legal process that takes part of a debtor’s wages to pay a debt

Guarantor

A person who agrees to pay a debt if the original debtor does not

Involuntary lien

A lien imposed by law, such as tax lien or judgment lien

Judgment lien

A lien arising from a money judgment and attached to a debtor’s property, usually by recording the judgement, to secure a payment of the court-awarded debt

Judicial lien

A broader type of lien created through court action, reflecting judicial authority to encumber property during or after litigation

Lien stripping

A legal process in chapter 13 to remove junior liens on property with no equity

Liquidation

Selling a debtor’s nonexempt assets to pay off creditors in chapter 7 bankruptcy

Means test

A calculation used to determine eligibility for chapter 7 bankruptcy based on income

Mechanic’s lien

A lien for unpaid work or materials placed on real property by contractors or suppliers

Nondischargable debt

Debt that cannot be eliminated through bankruptcy, such as child support or recent taxes

Nonexempt property

Property that is not protected under exemption laws and can be used to pay creditors

Notice requirements

Legal rules that require creditors and debtors to be notified before certain actions to be taken

Perfection

The legal step that makes a creditor’s interest in collateral valid against third parties

Personal guarantee

A third party’s promise to repay a debt if the primary borrower defaults

Preference

A payment made before bankruptcy that unfairly favors one creditor over others

Priority

The legal order in which creditors are paid from the bankruptcy estate

Proof of claim

A document filed by a creditor stating how much the debtor owes them

Purchase money security interest

A special security interest for when a creditor finances the purchase of collateral

Replevin

A legal action to recover specific personal property wrongfully taken or withheld

Repossession

A creditor’s act of taking collateral, such as a car or equipment

Schedule

A required bankruptcy form listing a debtor’s assets, debts, income, and expenses

Secured creditor

A creditor with a legal right to collateral if the debtor does not repay their loan

Secured debt

Debt backed by property that a creditor can take if the debtor defaults

Security agreement

A contract granting a creditor a security interest in the debtor’s property

Security interest

A creditor’s legal right to take and sell specific property if the debtor defaults

Small business reorganization

A streamlined chapter 11 process that helps small businesses reorganize more quickly and affordably

Statutory obligation

A debt created by law, such as unpaid taxes or child support

Strict foreclosure

A creditor’s option to keep collateral to satisfy a debt instead of selling it

Subchapter V

A part of chapter 11 that simplifies bankruptcy for eligible small businesses

UCC Article 9

The section of the Uniform Commercial Code that governs secured transactions in personal property

UCC-1 form

A financing statement filed to give a public notice of a security interest

Unsecured creditor

A creditor without collateral backing their claim, who gets paid after secured and priority claims if assets remain available

Unsecured debt

Debt, such as credit card bills or medical bills, that is not tied to specific collateral

Voluntary lien

A lien created with the debtor’s consent, like a mortgage or car loan

Writ of execution

A court order allowing the seizure and sale of a debtor’s property to satisfy a judgment