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Glossary of Bankruptcy Terms

Dealing with a bankruptcy process is often confusing and you will run across various terms you may not be familiar with and need to understand. This glossary will provide you with the most common terms you will encounter and their meaning.

Attachment: Process of seizing a debtor’s property in order to secure the debt or claim of a creditor in the event that a judgment is taken against a debtor.

Bankruptcy: A condition where a debtor cannot pay debts now or as they come due and uses the protection of the law to either liquidate property or reorganize his or her financial affairs.

Bankruptcy Code: Federal law which governs bankruptcy proceedings.

Bankruptcy court: Special courts under federal law which deal exclusively with administering bankruptcy proceedings, presided over by a bankruptcy judge.

Bankruptcy estate: The property of a debtor which comes under the jurisdiction of the bankruptcy court and trustee when a person files for protection under the Bankruptcy Code.

Bankruptcy trustee: A person appointed by the Bankruptcy Court to take charge of the bankruptcy estate and handle any actions on behalf of the estate.

Creditor: One who is owed money or some other thing by obligation or by promise.

Debtor: One who owes a debt.

Default: A failure to perform an obligation imposed by law or contract.

Deficiency: The unpaid balance of a debt on which there is a security agreement, where the sale of the secured property has failed to pay the full amount of the debt owed.

Discharge: The cancellation of an obligation.

Eviction: The action of depriving a person of the possession of land or rental property which the person has held or leased.

Execution: The legal process of enforcing a judgment. A money judgment is usually executed by seizing and selling property of the debtor.

Exemption: A privilege allowed by law to a judgment debtor that he or she may hold certain property from all liability to being seized or sold on execution or by any other court order.

Foreclosure: A process by which a creditor with a mortgage can force a debtor to give up his or her interest in the property because of default. The creditor can then have the property sold to satisfy the debt. Also may be referred to as foreclosure by sale, or performance foreclosure.

Garnishment: A process under law where a debtor’s property, money or credits under another party’s control are applied as payment of a debt to a creditor.

Homestead: A building which can be used for a home and an amount of land at least one-quarter acre, if available, and not exceeding 40 acres (outside city limits) and ½ acre inside city limits.

Judgment: A determination of law as the result of an action in court as to whether a legal duty or liability does or does not exist.

Judgment creditor: A person who has obtained a money judgment in court and can now enforce the judgment by execution.

Judgment debtor: A person who has a money judgment taken against them, which has not been satisfied.

Judgment lien: A lien which can be filed by a judgment creditor against the real property of a judgment debtor, in order to satisfy the judgment.

Lien: An interest in collateral which provides that the collateral may be taken and sold in order to pay a debt if a debtor defaults. See also security interest.

Mortgage: A lien on real property.

Personal property: Movable property.

Purchase money security interest: A lien which is created when a debtor uses money loaned by a creditor to make a purchase and gives the creditor a lien on the property purchased with the creditor’s money.

Real property: Land, real estate.

Redemption: The right of a debtor to regain title to property under a foreclosure judgment by paying the judgment or fulfilling other conditions.

Replevin: An action to recover personal property by a party with a lien or security interest on the property.

Secured debt: A debt subject to a security interest.

Secured party: A creditor, seller or other person who holds a security interest in the property of a debtor.

Security agreement: A written document which creates or provides for a security interest.

Security interest: An interest in collateral which provides that the collateral may be taken and sold in order to satisfy a debt if a debtor defaults. See also lien.

Unsecured debt: Debt not subject to a security interest

Unsecured party: A creditor, seller or other person who is owed a debt without having obtained a security interest through a security agreement on property of the debtor

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