Bankruptcy Terms and Definitions

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.

Reorganization
The resolving of a Chapter 11 bankruptcy by the emergence of the debtor as a viable business. Generally, the company agrees with creditors on a plan for payment of their claims (plan of reorganization) and emerges from Chapter 11 after the plan is confirmed by the court.

Deed in Lieu of Foreclosure
If you will be unable to cure the default, and a private sale does not appear realistic, VA will consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and VA agrees to accept a deed, you will have to sign legal papers making VA the owner of the property.

Chapter Seven
Liquidation proceedings; generally assets are sold by a trustee and the company ceases operation. (Individuals may file Chapter 7 also.)

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.

Debtor-in-possession
The debtor which remains in control of operations; as opposed to having a trustee operate the company.

Chapter Eleven
Reorganization proceedings, generally for business entities; the debtor maintains control of the business in Chapter 11 (unless the Court appoints a trustee).

Small claims
Also sometimes called convenience claims - under a plan of reorganization or liquidation, claims that are small (e.g. in the hundreds or thousands of dollars range) and numerous are often grouped into a single class and settled for cash for administrative convenience.

Skeleton filing
Term used at bankruptcy courts to describe a bankruptcy filing in which not all the necessary forms have been filed. Certain courts allow a case to commence if only certain important forms are filed so long as the balance of required forms are forthcoming within a certain period of time.

Disclosure statement
A comprehensive disclosure document sent to creditors when they are asked to vote on a plan of reorganization in Chapter 11.