This document provides an overview of key concepts related to bankruptcy, including types of bankruptcies, common shocks experienced during bankruptcy, out-of-court settlement options, steps to file UCC documents, issues related to distressed debtors, actions creditors can take after a bankruptcy filing is made, and definitions of key terms like reclamation and bankruptcy priorities. The document covers corporate and individual bankruptcy filings and considerations, as well as non-bankruptcy liquidation and restructuring alternatives.

1. The Practical Side of Bankruptcy
Anthony Kelley, CCE, MBA
Controller

2. The Practical Side of Bankruptcy
• Types
• Shocks
• Out of Court Settlements
• UCC Documents
• Distressed Debtors
• After the Filing
• Definitions

3. Types Of Bankruptcies
• Corporate
– Voluntary
– Involuntary
– Pre-packaged
– Chapter 11 Reorganization
– Chapter 7 Liquidation
• Individual
– Chapter 13
– Chapter 7

4. • Corporations, limited liability companies and partnerships are legal entities
separate from their shareholders or partners. They can file Chapter 7 or Chapter
11 bankruptcy in their own right.
• Partnership pitfall:
– In a partnership's Chapter 7 case, the trustee can sue the general partners of the partnership if
the partnership's assets are insufficient to pay all claims for the amount by which the
partnership assets fall short of partnership debts. 11 U.S.C. 723.
– As a result, partners may be facing a suit by a well funded trustee suing for the benefit of all
creditors of the partnership.
• Proprietorships are just an extension of the owner: they can't file bankruptcy
alone: the proprietor must file bankruptcy, since the assets and the liabilities of
the business are really just one form of assets of the proprietor. The individual
owner may file Chapter 7, Chapter 11 or Chapter 13 (if the debt limits are met).
See Chapter 13 eligibility standards.
• Should the business be reorganized or liquidated?
– To answer this question, you have to know what has caused the problems the business now
faces and what are the prospects for change:
– Reorganization can't create a market; increase gross revenue, or make up for a poor fit
between the skills available and the skills required to run the business.
– Reorganization could free up cash from servicing the old debt to permit current
operations; permit rejection of leases or contracts that are no longer advantageous (an
expensive facility lease or improvident equipment purchase); or prevent the loss of vital assets
or cash to creditor collection actions.

5. Shocks of Bankruptcies
• The Leaders loose control of the business
decisions
– Cash collateral lenders
– Unsecurred Creditors
– Trustee
– Accounting firms
• Costs of Bankruptcy
– Financial costs for all of the players – attorneys,
trustee and accountants
– Extra time spent on non-operating functions and
reporting

6. Out of Court Settlements
• Non-Bankruptcy Restructurings:
• For businesses that want to continue in business, a composition or exchange offer may be the way to go.
– A composition is simply an agreement between a company and its creditors to restructure the company's debt. If it can be
achieved, it can be quick, quiet, and far less expensive than Chapter 11.
– The main obstacle to a composition's success is the holdout. If one or more creditors refuse to compromise their claims, a
composition does not offer any way to compel them. Everyone else takes a haircut, while the holdout keeps its full claim and
reaps the benefit of an improved balance sheet for its borrower. For this reason, compositions typically work only in situations
where few creditors hold the majority of the company's debt.
– Exchange offers can work when a company has public debt that needs to be restructured. They often involve the troubled
company issuing new bonds with more favorable (to it) terms or new equity, and then offering those new securities to its
bondholders in exchange for their old debt. Exchange offers are subject to securities laws and so are expensive.
– They are cheaper than bankruptcy, however, and can be completed much faster.
• Non-Bankruptcy Liquidations:
• Shareholders and/or management who want to liquidate a company and provide for a cost-effective way for creditors to get the
proceeds of liquidation have at least two non-bankruptcy options.
– First, they can oversee the liquidation themselves under the relevant state corporations law.
– Second, they can use an assignment for the benefit of creditors (ABC), if the company has sufficient connections to a state
that has an acceptable ABC process.
• Under an ABC, the company chooses an assignee and conveys its assets to that person or entity to conduct the liquidation. Not only
does this mean that someone else will be responsible for the sometimes unpleasant tasks that accompany liquidation, like telling
creditors that they won't be paid in full, but it allows the company to choose its liquidator. In contrast, in a bankruptcy, a trustee or a
creditors' committee is sometimes viewed as looking to find someone to sue, in order to place blame for a corporate failure on
someone. And, while an assignee in an ABC also typically has a duty to also investigate potential causes of action, there is a view
that assignees are less likely to bring "trumped up" strike suits.
• Creditors of a company that undertakes an ABC are often satisfied that a third party is overseeing the liquidation. Moreover, the
creditors may enjoy a larger recovery than a bankruptcy would produce, because of an ABC's reduced costs, especially in professional
fees.
• ABC laws vary from state to state, and in some states an ABC is not a viable option at all. Many practitioners are also unfamiliar
with the process. Where they fit, however, they can offer significant advantages over bankruptcy.

7. Steps to File UCC Documents
• Obtain customer agreement to sign agreement.
• Search Secretary of State records to verify legal name.
• Security agreements are generated and sent to the debtor for
authentication.
• UCCs are prepared and recorded with the appropriate state
and/or county offices.
• Searches are initiated for other UCC holders(if applicable).
• Once searches are complete, notification letters are prepared
and sent for authentication via courier or certified mail.

8. SECURITY AGREEMENT
This Security Agreement, made and entered in this ______ day of _____________, 200____, by and between SECURED PARTY NAME, located at SECURED PARTY ADDRESS, (hereinafter “Secured Party”) and
DEBTOR NAME, with chief executive offices located at DEBTOR ADDRESS, and if registered, incorporated in the state of __________ (hereinafter “Debtor”).
I CREATION OF SECURITY INTEREST
In consideration for the extension of credit, Debtor hereby grants a security interest in and assigns to the Secured Party the Collateral described in paragraph II below to secure payment and performance of
all debts, liabilities and obligations of Debtor of any kind whenever and however incurred to Secured Party.
II COLLATERAL
To secure payment for all purchases from Secured Party, now and in the future, Debtor hereby grants Secured Party a continuing security interest in all of Debtor’s presently owned or hereafter acquired (a)
goods, (b) instruments, (c) promissory notes (d) Chattel paper including electronic chattel paper and tangible chattel paper, (e) documents, (f) books and records, (g) accounts, (h) accounts receivable,
(i) equipment, (j) inventory, (k) commercial tort claims (l) general intangibles, (m) payment intangibles and (n) software, together with all proceeds and all support obligations thereof. Secured Party’s
security interest is explicitly limited to outstanding obligations between Secured Party and Debtor.
The term “Obligations” as used in this Agreement shall mean and include all indebtedness, liabilities and obligations, liabilities and obligations of any nature, however arising whether monetary or otherwise,
now existing or hereafter arising in favor of Secured Party, including any attorney’s fees and expenses to which Secured Party may be entitled as further provided in this Agreement.
III DEBTOR’S OBLIGATIONS
A. Debtor warrants and covenants: That the Collateral will be held for use, sale or lease in and for Debtor’s business and will be kept only at the principal place of business set forth herein (and Debtor’s
additional address(es) set forth with its signature, if any); Debtor will notify Secured Party in writing fifteen (15) days prior to any of the following:
(1) Change(s) or additions to location of any material or substantial portion of the Collateral,
(2) Change(s) in location of chief executive offices (if an unregistered entity),
(3) Change(s) in state of Incorporation (if a registered entity),
(4) Change(s) in state of residence (if an individual),
(5) Change(s) in name of Debtor’s business.
B. Debtor will notify Secured Party in writing 30 days prior of: its opening of any new places of business, or the closing of any existing places of business, or the change of name or nature of the entity
including changes to state of incorporation or state of chief executive offices.
IV DEFAULT
The following shall constitute a default by Debtor:
Non-payment: Failure to pay the principal or any installment of principal or of interest on the indebtedness or any notes when due. In addition, Debtor shall be in default if
bankruptcy or insolvency proceedings are instituted by or against the Debtor or if Debtor makes any assignment for the benefit of creditors.
Misrepresentation: Misrepresentation or misstatement in connection with, noncompliance with or nonperformance of any of Debtor’s obligations or agreements under paragraphs III
and VII shall constitute default under this Security Agreement
V SECURED PARTY’S RIGHTS AND REMEDIES
A. Secured Party may assign this security agreement, and...
(1) If Secured Party does assign this security agreement, the assignee shall be entitled, upon notifying the Debtor, to performance of all Debtor’s obligations and agreements under paragraphs III and VII,
and assignee shall be entitled to all of the rights and remedies of Secured Party under this paragraph V, and...
(2) Debtor will assert no claims or defenses he may have against Secured Party or against its assignee except those granted in this security agreement, and...
B. Upon Debtor’s default, Secured Party, shall have all rights set forth under the Uniform Commercial Code, including, but not limited to Article 9, and may exercise his rights of enforcement under the
Uniform Commercial Code in force in the State where the Collateral is located or where the UCC Financing Statement is filed and in conjunction with, in addition to or substitution for those rights, at
Secured Party’s discretion, may
(1) Declare all unpaid balances due and payable, notwithstanding otherwise stated maturities; and/or,
(2) Waive any default or remedy any default in any reasonable manner without any or all Accounts or other collateral or proceeds, or to sell, transfer, compromise, waiving the default remedied and
without waiving any other prior or subsequent default.
VI RIGHTS AND REMEDIES OF DEBTOR
Debtor shall have all the rights and remedies before or after default provided in Article 9 of the Uniform Commercial Code in force in the State of where the Collateral is located or where the UCC Financing
Statement is filed.

9. VII ADDITIONAL AGREEMENTS AND AFFIRMATIONS
A. Debtor Agrees and Affirms
(1) That information supplied and statements made by him in any financial or credit statement or application for credit prior to this security agreement are true and correct and,
(2) Debtor warrants and covenants that it will keep and maintain its business as presently constituted and will advise Secured Party immediately of any change in the name or nature or
location thereof and of any fact or occurrence which does, or with lapse of time could, impair Debtor's ability to perform hereunder. Debtor warrants that all locations of collateral and all corporate,
partnership, doing business, trade and individual names are listed below the signature line (hereon) are absolutely accurate and complete and that it will give Secured Party at least thirty (30) days prior
written notice of any change thereof, addition thereto or deletion therefrom.
(3) That if Debtor is also buyer of the Collateral, there are no express warranties unless they appear in writing signed by the seller and there are no implied warranties of merchantability or fitness for a
particular purpose in connection with the sale of the Collateral.
B. Mutual Agreements
(1) “Debtor” and “Secured Party” as used in this security agreement include the heirs, executors or administrators, successors or assigns of those parties.
(2) The law governing this secured transaction shall be that of the State where the Collateral is located or where the UCC Financing statement is filed.
(3) If more than one Debtor executes the security agreement, their obligations hereunder shall be joint and several.
(4) This agreement doesn’t waive Secured Party’s rights under any other agreement that Debtor has signed with the Secured Party.
(5) Debtor authorizes Secured Party to file a UCC Financing Statement describing the collateral and appoints Secured Party as Debtor’s agent and grants Secured Party limited Power of Attorney to sign UCC
forms for the purpose of protecting Secured Party’s interest.
C. Form of Debtor’s Business
(1) Debtors business is (circle one);
a. Registered Organization b. Unregistered Organization c. Individual
(a) If a. Registered Organization: State where Incorporation/Formed _______________.
(b) If b. Unregistered Organization: Location of Business (state) or if more than one place of business, “chief executive office” ________________________________.
(c) If c. Individual: State or States of Residence (include all states) ______, _______, _______.
- Registered Organizations include: Includes corporations, limited liability corporations and limited partnerships.
- Unregistered Organizations include:
Partnerships.
- Individuals Include: Sole Proprietorships
D. Further Assurances.
(1) Debtor agrees to execute any further documents, and to take any further actions, reasonably requested by Secured Party to evidence or perfect the security interest granted herein or to effectuate the
rights granted to the Secured Party herein.
(2) Exact legal name is set forth in the first paragraph of this Security Agreement.
VIII PARTIAL INVALIDITY
In the event that any one or more of the provisions contained in this Security Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Security Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been contained herein.
IN WITNESS WHEREOF, Debtor has executed this Security Agreement as of the date indicated above.
DEBTOR NAME
BY: ____________________________________ BY: ___________________________________
(Signature and Title) (Signature and Title)
ACCEPTED at CITY, STATE, this _____ day of _____________, 200___.
SECURED PARTY NAME
BY: _____________________________________
(Signature and Title)

10. Distressed Debtors
• Know your customer and the legal structure
• Be careful of putting yourself in the position of
having preference payments/security in
eagerness to collect a debt – best defense is
the normal course of business
• Know the other large secured and unsecured
creditors

11. After the Filing
• Reclaimation - UCC
• Don’t give up – maximize your return by being
active and interested
• Serve on the creditors committee if you have a large
enough balance
• Always file your claim – timely
• Get a Pacer account and monitor the court filings –
financials, plan, motions
• Be aware of possible preferences by other large
creditors
• Look for sweetheart deals – owners, attorneys,
auditors, banks, bulk sale transfers
• Look for Preferences

12. Reclaimation - UCC
• § 2-702. Seller's Remedies on Discovery of Buyer's Insolvency.
– (1) Where the seller discovers the buyer to be insolvent he may refuse
delivery except for cash including payment for all goods theretofore
delivered under the contract, and stop delivery under this Article (Section
2-705).
– (2) Where the seller discovers that the buyer has received goods on credit
while insolvent, the seller may reclaim the goods upon demand made
within a reasonable time after the buyer's receipt of the goods. Except as
provided in this subsection, the seller may not base a right to reclaim
goods on the buyer's fraudulent or innocent misrepresentation of
solvency or of intent to pay.
– (3) The seller's right to reclaim under subsection (2) is subject to the rights
of a buyer in ordinary course of business or other good -faith purchaser
for value under Section 2-403. Successful reclamation of goods excludes
all other remedies with respect to them.

13. 507. Priorities
(a) The following expenses and claims have priority in the following order:
(1) First:
• (A) Allowed unsecured claims for domestic support obligations that, as of the date of the filing of the petition in a case
under this title, are owed to or recoverable by a spouse, former spouse, or child of the debtor, or such child’s parent,
legal guardian, or responsible relative, without regard to whether the claim is filed by such person or is filed by a
governmental unit on behalf of such person, on the condition that funds received under this paragraph by a
governmental unit under this title after the date of the filing of the petition shall be applied and distributed in accordance
with applicable nonbankruptcy law.
• (B) Subject to claims under subparagraph (A), allowed unsecured claims for domestic support obligations that, as of the
date of the filing of the petition, are assigned by a spouse, former spouse, child of the debtor, or such child’s parent, legal
guardian, or responsible relative to a governmental unit (unless such obligation is assigned voluntarily by the spouse,
former spouse, child, parent, legal guardian, or responsible relative of the child for the purpose of collecting the debt) or
are owed directly to or recoverable by a governmental unit under applicable nonbankruptcy law, on the condition that
funds received under this paragraph by a governmental unit under this title after the date of the filing of the petition be
applied and distributed in accordance with applicable nonbankruptcy law.
• (C) If a trustee is appointed or elected under section 701, 702, 703, 1104, 1202, or 1302, the administrative expenses of
the trustee allowed under paragraphs (1)(A), (2), and (6) of section 503 (b) shall be paid before payment of claims under
subparagraphs (A) and (B), to the extent that the trustee administers assets that are otherwise available for the payment
of such claims.
(2) Second, administrative expenses allowed under section 503 (b) of this title, and any fees and charges assessed against the estate
under chapter 123 of title 28.
(3) Third, unsecured claims allowed under section 502 (f) of this title.
(4) Fourth, allowed unsecured claims, but only to the extent of $10,000 for each individual or corporation, as the case may be,
earned within 180 days before the date of the filing of the petition or the date of the cessation of the debtor’s business,
whichever occurs first, for—
• (A) wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual; or
• (B) sales commissions earned by an individual or by a corporation with only 1 employee, acting as an independent
contractor in the sale of goods or services for the debtor in the ordinary course of the debtor’s business if, and only if,
during the 12 months preceding that date, at least 75 percent of the amount that the individual or corporation earned by
acting as an independent contractor in the sale of goods or services was earned from the debtor.

14. (5) Fifth, allowed unsecured claims for contributions to an employee benefit plan—
– (A) arising from services rendered within 180 days before the date of the filing of the petition or the date of the cessation of
the debtor’s business, whichever occurs first; but only
– (B) for each such plan, to the extent of—
• (i) the number of employees covered by each such plan multiplied by $10,000; less
• (ii) the aggregate amount paid to such employees under paragraph (4) of this subsection, plus the aggregate amount
paid by the estate on behalf of such employees to any other employee benefit plan.
(6) Sixth, allowed unsecured claims of persons—
– (A) engaged in the production or raising of grain, as defined in section 557 (b) of this title, against a debtor who owns or
operates a grain storage facility, as defined in section 557 (b) of this title, for grain or the proceeds of grain, or
– (B) engaged as a United States fisherman against a debtor who has acquired fish or fish produce from a fisherman through a
sale or conversion, and who is engaged in operating a fish produce storage or processing facility— but only to the extent of
$4,000 for each such individual.
(7) Seventh, allowed unsecured claims of individuals, to the extent of $1,800 for each such individual, arising from the deposit, before
the commencement of the case, of money in connection with the purchase, lease, or rental of property, or the purchase of services,
for the personal, family, or household use of such individuals, that were not delivered or provided.
(8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for—
– (A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the
petition—
• (i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the
petition;
• (ii) assessed within 240 days before the date of the filing of the petition, exclusive of—
• (I) any time during which an offer in compromise with respect to that tax was pending or in effect during that 240-day
period, plus 30 days; and
• (II) any time during which a stay of proceedings against collections was in effect in a prior case under this title during
that 240-day period, plus 90 days.[1]
• (iii) other than a tax of a kind specified in section 523 (a)(1)(B) or 523 (a)(1)(C) of this title, not assessed before, but
assessable, under applicable law or by agreement, after, the commencement of the case;

15. – (B) a property tax incurred before the commencement of the case and last payable without penalty after
one year before the date of the filing of the petition;
– (C) a tax required to be collected or withheld and for which the debtor is liable in whatever capacity;
– (D) an employment tax on a wage, salary, or commission of a kind specified in paragraph (4) of this
subsection earned from the debtor before the date of the filing of the petition, whether or not actually
paid before such date, for which a return is last due, under applicable law or under any extension, after
three years before the date of the filing of the petition;
– (E) an excise tax on—
• (i) a transaction occurring before the date of the filing of the petition for which a return, if required, is
last due, under applicable law or under any extension, after three years before the date of the filing
of the petition; or
• (ii) if a return is not required, a transaction occurring during the three years immediately preceding
the date of the filing of the petition;
– (F) a customs duty arising out of the importation of merchandise—
• (i) entered for consumption within one year before the date of the filing of the petition;
• (ii) covered by an entry liquidated or reliquidated within one year before the date of the filing of the
petition; or
• (iii) entered for consumption within four years before the date of the filing of the petition but
unliquidated on such date, if the Secretary of the Treasury certifies that failure to liquidate such entry
was due to an investigation pending on such date into assessment of antidumping or countervailing
duties or fraud, or if information needed for the proper appraisement or classification of such
merchandise was not available to the appropriate customs officer before such date; or
– (G) a penalty related to a claim of a kind specified in this paragraph and in compensation for actual
pecuniary loss. An otherwise applicable time period specified in this paragraph shall be suspended for any
period during which a governmental unit is prohibited under applicable nonbankruptcy law from collecting
a tax as a result of a request by the debtor for a hearing and an appeal of any collection action taken or
proposed against the debtor, plus 90 days; plus any time during which the stay of proceedings was in effect
in a prior case under this title or during which collection was precluded by the existence of 1 or more
confirmed plans under this title, plus 90 days.

16. (9) Ninth, allowed unsecured claims based upon any commitment by the debtor to a Federal depository institutions regulatory agency (or
predecessor to such agency) to maintain the capital of an insured depository institution.
(10) Tenth, allowed claims for death or personal injury resulting from the operation of a motor vehicle or vessel if such operation was
unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.
– (b) If the trustee, under section 362, 363, or 364 of this title, provides adequate protection of the interest of a holder of a
claim secured by a lien on property of the debtor and if, notwithstanding such protection, such creditor has a claim allowable
under subsection (a)(2) of this section arising from the stay of action against such property under section 362 of this title,
from the use, sale, or lease of such property under section 363 of this title, or from the granting of a lien under section 364
(d) of this title, then such creditor’s claim under such subsection shall have priority over every other claim allowable under
such subsection.
– (c) For the purpose of subsection (a) of this section, a claim of a governmental unit arising from an erroneous refund or credit
of a tax has the same priority as a claim for the tax to which such refund or credit relates.
– (d) An entity that is subrogated to the rights of a holder of a claim of a kind specified in subsection (a)(1), (a)(4), (a)(5), (a)(6),
(a)(7), (a)(8), or (a)(9) of this section is not subrogated to the right of the holder of such claim to priority under such
subsection.
– If a creditor of a partnership debtor receives, from a general partner that is not a debtor in a case under chapter 7 of this title,
payment of, or a transfer of property on account of, a claim that is allowed under this title and that is not secured by a lien on
property of such partner, such creditor may not receive any payment under this title on account of such claim until each of
the other holders of claims on account of which such holders are entitled to share equally with such creditor under this title
has received payment under this title equal in value to the consideration received by such creditor from such general partner
http://uscode.law.cornell.edu/uscode/html/uscode11/usc_sup_01_11.html

17. § 547. Preferences
(a) In this section—
– (1) “inventory” means personal property leased or furnished, held for sale or lease, or to be furnished under a contract for
service, raw materials, work in process, or materials used or consumed in a business, including farm products such as crops or
livestock, held for sale or lease;
– (2) “new value” means money or money’s worth in goods, services, or new credit, or release by a transferee of property
previously transferred to such transferee in a transaction that is neither void nor voidable by the debtor or the trustee under
any applicable law, including proceeds of such property, but does not include an obligation substituted for an existing
obligation;
– (3) “receivable” means right to payment, whether or not such right has been earned by performance; and
– (4) a debt for a tax is incurred on the day when such tax is last payable without penalty, including any extension.
(b) Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property—
– (1) to or for the benefit of a creditor;
– (2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
– (3) made while the debtor was insolvent;
– (4) made—
• (A) on or within 90 days before the date of the filing of the petition; or
• (B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such
transfer was an insider; and
– (5) that enables such creditor to receive more than such creditor would receive if—
• (A) the case were a case under chapter 7 of this title;
• (B) the transfer had not been made; and
• (C) such creditor received payment of such debt to the extent provided by the provisions of this title.

18. (c) The trustee may not avoid under this section a transfer—
– (1) to the extent that such transfer was—
• (A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous
exchange for new value given to the debtor; and
• (B) in fact a substantially contemporaneous exchange;
– (2) to the extent that such transfer was in payment of a debt incurred by the debtor in the ordinary course of business or
financial affairs of the debtor and the transferee, and such transfer was—
• (A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or
• (B) made according to ordinary business terms;
– (3) that creates a security interest in property acquired by the debtor—
• (A) to the extent such security interest secures new value that was—
– (i) given at or after the signing of a security agreement that contains a description of such property as collateral;
– (ii) given by or on behalf of the secured party under such agreement;
– (iii) given to enable the debtor to acquire such property; and
– (iv) in fact used by the debtor to acquire such property; and
• (B) that is perfected on or before 30 days after the debtor receives possession of such property;
– (4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of
the debtor—
• (A) not secured by an otherwise unavoidable security interest; and
• (B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of
such creditor;
– (5) that creates a perfected security interest in inventory or a receivable or the proceeds of either, except to the extent that the
aggregate of all such transfers to the transferee caused a reduction, as of the date of the filing of the petition and to the
prejudice of other creditors holding unsecured claims, of any amount by which the debt secured by such security interest
exceeded the value of all security interests for such debt on the later of—
• (A)
• (i) with respect to a transfer to which subsection (b)(4)(A) of this section applies, 90 days before the date of the filing of
the petition; or
• (ii) with respect to a transfer to which subsection (b)(4)(B) of this section applies, one year before the date of the filing of
the petition; or
• (B) the date on which new value was first given under the security agreement creating such security interest;

19. – (6) that is the fixing of a statutory lien that is not avoidable under section 545 of this title;
– (7) to the extent such transfer was a bona fide payment of a debt for a domestic support obligation;
– (8) if, in a case filed by an individual debtor whose debts are primarily consumer debts, the aggregate value of all
property that constitutes or is affected by such transfer is less than $600; or
– (9) if, in a case filed by a debtor whose debts are not primarily consumer debts, the aggregate value of all property
that constitutes or is affected by such transfer is less than $5,000.
(d) The trustee may avoid a transfer of an interest in property of the debtor transferred to or for the benefit of a surety to
secure reimbursement of such a surety that furnished a bond or other obligation to dissolve a judicial lien that would
have been avoidable by the trustee under subsection (b) of this section. The liability of such surety under such bond or
obligation shall be discharged to the extent of the value of such property recovered by the trustee or the amount paid to
the trustee.
(e)
– (1) For the purposes of this section—
• (A) a transfer of real property other than fixtures, but including the interest of a seller or purchaser under a
contract for the sale of real property, is perfected when a bona fide purchaser of such property from the
debtor against whom applicable law permits such transfer to be perfected cannot acquire an interest that is
superior to the interest of the transferee; and
• (B) a transfer of a fixture or property other than real property is perfected when a creditor on a simple
contract cannot acquire a judicial lien that is superior to the interest of the transferee.
– (2) For the purposes of this section, except as provided in paragraph (3) of this subsection, a transfer is made—
• (A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is
perfected at, or within 30 days after, such time, except as provided in subsection (c)(3)(B);
• (B) at the time such transfer is perfected, if such transfer is perfected after such 30 days; or
• (C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of—
– (i) the commencement of the case; or
– (ii) 30 days after such transfer takes effect between the transferor and the transferee.
– (3) For the purposes of this section, a transfer is not made until the debtor has acquired rights in the property
transferred.

20. (f) For the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days
immediately preceding the date of the filing of the petition.
(g) For the purposes of this section, the trustee has the burden of proving the avoidability of a transfer under
subsection (b) of this section, and the creditor or party in interest against whom recovery or avoidance is
sought has the burden of proving the nonavoidability of a transfer under subsection (c) of this section.
(h) The trustee may not avoid a transfer if such transfer was made as a part of an alternative repayment
schedule between the debtor and any creditor of the debtor created by an approved nonprofit budget
and credit counseling agency.
(i) If the trustee avoids under subsection (b) a transfer made between 90 days and 1 year before the date of
the filing of the petition, by the debtor to an entity that is not an insider for the benefit of a creditor that
is an insider, such transfer shall be considered to be avoided under this section only with respect to the
creditor that is an insider.
http://uscode.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000547----000-.html

21. Glossary of Common Bankruptcy Terms
• 341 meeting – (see first meeting of creditors)
• 363 sale – the sale of corporate assets under Section 363 of the Bankruptcy Code. Under Section 363(f), a bankruptcy
trustee or debtor-in-possession may sell the bankruptcy estate's assets "free and clear of any interest in such property."
• absolute priority – the order of payment to the different classes of creditors mandated by the Bankruptcy Code. Claimants
with higher priority are paid in full before other claims receive anything. Junior creditors and shareholders are paid after
senior creditors. Specifically, the usual order is: first, administrative claims; second, statutory priority claims such as tax
claims, rent claims, consumer deposits, and unpaid wages and benefits from before the filing; third, secured creditors'
claims; fourth, unsecured creditors' claims and fifth, equity claims.
• 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.
• administrative claim (or administrative expense claim) – debt incurred by the debtor, with court approval, after the
bankruptcy filing including: necessary costs of preserving the estate, wages, salaries, court costs, lawyers' fees,
accountants' fees, trustees' expenses, etc.
• adversary proceeding – a lawsuit arising in or related to a bankruptcy case that is commenced by filing a complaint with
the bankruptcy court.
• allowed claim (or allowed interest) – a claim of a creditor (or an equity interest) that is approved by the court under the
plan of reorganization.
• arrangement – may refer to a variety of formal or informal agreements concerning the conditions under which a bankrupt
company may operate; often, it refers to an extension of time in which debt can be paid off. This was the term used under
the old Chapter XI.
• assume – an agreement to continue performing duties under a contract or lease.
• automatic stay – the suspension of actions, such as debt collection or foreclosure, against the company in bankruptcy.
This occurs automatically when a bankruptcy petition is filed. This action protects the debtor from creditors seeking to
seize its assets. It protects some creditors in that it prevents one creditor from obtaining an excessive share of the assets
of the bankrupt company to the exclusion of the other creditors.
• avoidance power – the power of the court to invalidate certain obligations or transactions undertaken by a debtor prior to
filing bankruptcy. It is generally intended to reverse transfers of property that favor one creditor over another.
• ballot date –the date and time when all votes for accepting or rejecting the plan of reorganization must be received.
• 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.
• bankruptcy – (see also failure and insolvency) a legal procedure for dealing with debt problems of individuals and
business. A non-technical term for a legal state of insolvency.

22. • Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 – This legislation primarily affects consumer filings,
making it more difficult for a person or estate to file for Chapter 7 bankruptcy. The BAPCPA impacts business filers as well--with the
heaviest impact on smaller (those listing less than $2 million in debt) businesses. On October 17, 2005 the BAPCPA became effective.
• Bankruptcy Act of 1898 – the basis of the federal bankruptcy statutes used until the Bankruptcy Reform Act of 1978. It provided
primarily for liquidation of companies; reorganization could be affected indirectly under the 1898 Act through equity receiverships
(these were used to keep creditors from seizing the assets of distressed companies).
• Bankruptcy Act of 1933 – a statutory expansion of reorganization for companies (see Section 77). The Bankruptcy Act of 1933 and the
Bankruptcy Act of 1934 were superseded by the Chandler Act of 1938.
• Bankruptcy Act of 1934 – a further statutory expansion of reorganization for companies; (see Section 77B); the Bankruptcy Act of
1933 and the Bankruptcy Act of 1934 were superseded by the Chandler Act of 1938.
• bankruptcy administrator – an officer of the judiciary serving the judicial districts of Alabama and North Carolina who, like a United
States trustee, is responsible for supervising the administration of bankruptcy cases, estates and trustees; monitoring plans and
disclosure statements, creditor committees and fee applications and performing other statutory duties.
• Bankruptcy Amendments of 1984 – a set of amendments to the Bankruptcy Reform Act of 1978. The Amendments contain a number
of provisions including: limiting the jurisdiction of the bankruptcy court, limiting the right of companies to invalidate labor contracts
while in bankruptcy and providing for the prevention of "substantial abuse."
• Bankruptcy Code – the name given to the statutory body of bankruptcy laws after the Bankruptcy Reform Act of 1978.
• Bankruptcy Court – the federal tribunal where cases under the Bankruptcy Code are litigated.
• bankruptcy estate – all legal or equitable interests of the debtor in property at the time of the bankruptcy filing. The estate includes all
property in which the debtor has an interest, even if it is owned or held by another person.
• bankruptcy judge – a judicial officer of the United States district court with decision-making power over federal bankruptcy cases.
• bankruptcy mill – a business not authorized to practice law that provides bankruptcy counseling and prepares bankruptcy petitions.
• bankruptcy petition – the document filed with the court to initiate a bankruptcy proceeding.
• Bankruptcy Reform Act of 1994 – the most comprehensive piece of bankruptcy legislation since the Bankruptcy Reform Act of 1978. It
was signed into law on October 22, 1994 with most provisions effective immediately. Included in the 1994 Act are the following
provisions to expedite bankruptcy proceedings, provisions to standardize fees, provisions to encourage individual debtors to use
Chapter 13 to reschedule their debts rather than use Chapter 7 to liquidate, provisions to aid creditors in recovering claims against
bankrupt estates, and creation of a National Bankruptcy Commission to investigate further changes in bankruptcy law; etc.

23. • Bankruptcy Reform Act of 1978 – the first substantive bankruptcy code revision since the Chandler Act of 1938. It took effect on
October 1, 1979 and some of the major elements of this act were as follows: upgrading the jurisdiction of the U.S. bankruptcy courts
to deal with cases handled by other courts (subsequently modified); allowing the filing of a single joint petition of bankruptcy by
husband and wife; reorganizing the Chapters of bankruptcy; in particular, concerning business reorganization, Chapters X, XI and XII of
the old code are replaced by Chapter 11; expanding the number of people eligible and the type of relief available to people in a new
Chapter 13, wage-earner reorganization bankruptcy; altering the appellate procedure allowing direct appeal to the U.S. courts of
appeal (subsequently modified); and generally, making federal exemption provisions and options for debtors more extensive.
• Bankruptcy Rule 2004 – a provision of the Bankruptcy Code that allows one party in a bankruptcy proceeding to compel discovery or
other examination against another party.
• Bankruptcy Tax Act of 1980 – the Bankruptcy Reform Act of 1978 did not specify how certain tax matters concerning bankruptcies
should be handled. The Bankruptcy Tax Act of 1980 was passed to specify the tax treatment of bankruptcy tax issues. It specifies the
tax treatment of, among other things, tax loss carry-forwards and exchanges of equity for debt.
• bar date – the last date that creditors may file a claim against the debtor.
• business bankruptcy – a bankruptcy case in which the debtor is a business or an individual with business related debt. Data from the
U.S. Administrative Office of the Courts subdivides bankruptcies into business and non-business.
• business failure – (see failure)
• cash collateral – cash and cash equivalents held by the debtor in Chapter 11 subject to liens of other parties.
• Chandler Act of 1938 – legislation providing substantial modifications to the Bankruptcy Act of 1898.
• Chapter – the Bankruptcy Code is organized into Chapters. Except for Chapter 12, the Chapters of the present code are all odd-
numbered and are enumerated with Arabic numerals. (Before the Bankruptcy Reform Act of 1978, the Chapters were numbered with
Roman numerals.) Chapters 1, 3, and 5 cover matters of general application. Chapters 7, 9, 11, 12, 13 and 15 concern, respectively:
liquidation (business or non-business), municipality bankruptcy; business reorganization, family farm debt adjustment, wage-earner or
personal (i.e. non-business) reorganization and multi-national bankruptcies.
• Chapter 7 – liquidation proceedings; generally assets are sold by a trustee and the company ceases operation. Individuals may file
Chapter 7 also.
• Chapter 7 Trustee – a person appointed in a Chapter 7 case to represent the interests of the bankruptcy estate and the unsecured
creditors.
• Chapter 9 – bankruptcies of municipalities; only a few of these are filed each year.
• Chapters X, XI and XII – before Chapter 11 of the Bankruptcy Reform Act of 1978, these three chapters of bankruptcy existed for
company bankruptcies that involved reorganization. Chapter X involved reorganization for larger companies that held public debt or
equity. Chapter XI was for readjustment of debts of smaller, non-publicly held companies, and Chapter XII was for companies with
extensive holdings of real property.

24. • Chapter 11 – reorganization proceedings, generally for business entities. The debtor maintains control of the business in Chapter 11, unless the
Court appoints a trustee.
• Chapter 12 – family farmer bankruptcies. This was created by Congress in 1986 (Chapter 12 became effective on November 26, 1986). Only a
family-owned farm business can qualify for Chapter 12 and it must have debt less than $1.5 million and have 50% of its income from farming
operations.
• Chapter 13 – 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), Chapter 13 is referred to as wage earner bankruptcy, personal
bankruptcy or consumer bankruptcy, Chapter 13 cannot be used by a partnership or a corporation; it can be used by a sole proprietorship. Chapter
13 allows a debtor to keep property and pay debts over time, usually three to five years.
• Chapter 15 – the chapter of the Bankruptcy Code dealing with cases of cross-border insolvency. It was formerly known as Section 304.
• "Chapter 20" – an unofficial term describing the filing of a Chapter 7 proceeding followed by a Chapter 13. The Chapter 7 filing eliminates
unsecured debts while the Chapter 13 filing handles continuing liens.
• "Chapter 22" – an unofficial term describing a company that has filed for Chapter 11 twice.
• "Chapter 33" – an unofficial term describing a company that has filed for Chapter 11 three times.
• 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. (See priority of claims.)
• class – each of the different categories of claims against a debtor.
• complaint – the initiatory document in a lawsuit that notifies the court and the defendant of the grounds claimed by the Plaintiff for an award of
money or other relief against the defendant.
• confirmation – the final approval by the bankruptcy court of a debtor's plan of reorganization. Confirmation takes place after the plan has been
approved by creditors.
• contested matter – a dispute among the parties to a bankruptcy proceeding, instituted by the filing of a motion of the court.
• contingent claim – a claim that may be owed by the debtor under certain circumstances. For example, where the debtor is a cosigner on another
person’s loan and that person fails to pay.
• convenience claims – (see small claims)
• conversion – changing chapters in bankruptcy (e.g., converting from Chapter 11 to Chapter 7 or vice-versa).
• core proceedings – those proceedings that are inherent in and fundamental to the administration of a bankruptcy case. Core proceedings are
subject to the jurisdiction of the bankruptcy court. Non-core proceedings may be conducted outside the jurisdiction of the bankruptcy court.
• cramdown – confirmation of a plan of reorganization over the objections of one or more classes of creditors.
• creditor – a person to whom or business to which the debtor owes money or that claims to be owed money by the debtor.
• creditors' committee – a committee of representatives of a debtor's creditors appointed by the U.S. Trustee. The committee acts on behalf of all
creditors on negotiating a plan of reorganization and other major actions. In large, complex cases, there may be more than one such committee.

25. • debtor – the entity seeking protection from creditors under the bankruptcy laws.
• debtor in possession – the debtor which remains in control of operations, as opposed to having a trustee operate the company.
• 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.
• discharge (of indebtedness) – the satisfaction or elimination of the debts of the debtor by the bankruptcy court.
• dischargeable debt – a debt for which the bankruptcy code allows the debtor’s personal liability to be eliminated.
• disclosure statement – a comprehensive disclosure document sent to creditors when they are asked to vote on a plan of reorganization in
Chapter 11.
• discovery procedures – used to obtain disclosure of evidence before trial.
• dismissal – the termination of a bankruptcy proceeding. The bankruptcy court can dismiss a case if it deems that the debtor or three creditors
should not have filed or that a plan can never be formulated.
• distressed – used to describe securities, companies and related items in or near bankruptcy or insolvency. The term does not have a strict,
technical or legal definition. For example, a distressed security might be a security where the issuer has defaulted or a security that is selling at a
substantially discounted price where a default is expected in the future.
• docket – the schedule on which the clerk of the court records all motions, pleadings, memoranda, orders and all other court filings.
• effective date – the date on which a plan of reorganization is implemented. It usually occurs after all the conditions to a plan of reorganization
have been satisfied.
• ECF or Electronic Case Filing – ECF is a comprehensive case management system that allows courts to maintain electronic case files and offer
electronic filing over the Internet. Courts make all case information immediately available electronically through the Internet.
• equitable subordination – the lowering of priority of a claim because the holder of the claim is found to be guilty of some kind of improper
conduct.
• equity – the value of the debtor’s interest in property that remains after the liens and other creditor’s interests are considered.
• examiner – a professional appointed by the bankruptcy court to investigate and oversee certain aspects of the debtor or the proceedings. (By
way of comparison, the role of the trustee is to operate the business of the debtor whereas the role of the examiner is to investigate and report
to the court.)
• exchange offer – an offer by an issuer of debt securities to exchange new securities with less onerous provisions for currently outstanding
securities. Companies often make exchange offers in an attempt to avoid bankruptcy.
• exclusivity (period of) – a debtor in Chapter 11 has the exclusive right to file a plan of reorganization for the first 120 days of its bankruptcy.
Thereafter, unless the period of exclusivity is extended by the court, other parties may file reorganization plans.
• executory contract – a contract in which some or all of the obligations of each party have not yet been completed. The debtor-in-possession (or
trustee) is allowed to reject unilaterally certain executory contracts.
• exemptions – this refers to assets or properties owned by the debtor that cannot be recovered by creditors.
• failure – (see also bankruptcy and insolvency) an economic assessment of the viability of a business, it means that a firm is either not earning
what is expected (i.e. it has a below normal rate of return) or is not meeting its obligations. It is not synonymous with bankruptcy because
bankruptcy is more of a formal and legal definition. A failing company is not necessarily a bankrupt company and vice-versa.

26. • fee examiner – appointed by the court to monitor fees paid to professionals in bankruptcy cases.
• filing fees – as of January 1, 2007, for Chapter 7 the fee is $299, for Chapter 11 it is $1,039, for Chapter 12 it is $239 and for Chapter 13
it is $274.
• first meeting of creditors (341 meeting) – a mandatory meeting between creditors and the debtor. It is usually held within a month of
the filing of bankruptcy but often occurs later when the debtor has filed its schedules of financial information.
• fraudulent conveyance – the transfer of valuable assets from a company which i) occurs when the company is technically insolvent, ii)
renders the company insolvent, or iii) is made for less than adequate consideration. The spate of leveraged buyouts and other highly
leveraged transactions in the 1980s has spurred a number of fraudulent conveyance allegations in recent years.
• fresh start – informal term for the new accounting rules applicable to bankrupt companies. For companies that either filed for Chapter
11 after January 1991 or emerged from Chapter 11 after June 1991, assets are valued at market value rather than at historical cost.
• gap period – the period between the filing of an involuntary petition and the dismissal of the petition, the entry of an order for relief
or the filing of a voluntary petition (whatever the outcome).
• going concern value – what a company is worth if sold as a continuing business, as opposed to its liquidation value.
• impairment – when a plan of reorganization alters the contractual rights of a class of holders of claims, that class is deemed to be
impaired. A class that is unimpaired is deemed to automatically accept a plan of reorganization.
• insolvency – (see also bankruptcy and failure) 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.
• insider (of corporate debtor) – a director, officer or person in control of the debtor or a partnership in which the debtor is a general
partner; a general partner of the debtor or a relative of a general partner, director, officer or person in control of the debtor.
• interests – the equity interests of stockholders are often referred to in bankruptcy documents merely as "interests."
• interim order – a temporary order of the court pending a hearing, trial, a final order or while awaiting an act by one of the parties.
• involuntary bankruptcy – a bankruptcy initiated by at least three creditors holding unsecured claims aggregating at least $5,000
against the debtor. Data from the U.S. Administrative Office of the Courts subdivides bankruptcies into voluntary and involuntary.
• joinder – joinder in civil law falls under two categories: joinder of claims, and joinder of parties. Joinder of claims is addressed in U.S.
law by the Federal Rules of Civil Procedure No. 18(a). That Rule allows claimants to consolidate all claims that they have against an
individual who is already a party to the case. Claimants may bring new claims even if these new claims are not related to the claims
already stated. Note that joinder of claims is never compulsory (i.e., joinder is always permissive), and that joinder of claims requires
that the court's subject matter jurisdiction requirements regarding the new claims be met for each new claim.
• joint administration – the combining of two or more bankruptcy proceedings for administrative convenience. Frequently, the cases of
affiliated entities are jointly administered. Joint administration does not necessarily result in substantive consolidation. (See
substantive consolidation.)
• lien – a charge upon a specific property designed to secure payment of a debt or performance of an obligation.

27. • liquidated claim – a creditor’s claim for a fixed amount of money,
• liquidating reorganization – an informal term for a Chapter 11 proceeding when the company is essentially liquidated
through one or more asset sales.
• liquidation – the dissolution of a company, or individual; usually operations cease and assets are sold by auction; Chapter
7 is usually employed for liquidations, businesses or individuals.
• liquidation value – the aggregate value of a business if its assets are sold piecemeal.
• matrix – a mailing list of creditors of the debtor. Done as part of the forms filled out for a Chapter 11 case.
• motion to lift automatic stay – a request by a creditor to allow the creditor to take an action against a debtor or the
debtor’s property that would otherwise be prohibited by the automatic stay.
• NOL (net operating loss) – (see tax loss carry-forward)
• non-business bankruptcy – a bankruptcy categorized by the U.S. courts as a non-business bankruptcy. The debtor in a
non-business bankruptcy is usually either an individual or a family farm. Data from the U.S. Administrative Office of the
Courts subdivides bankruptcies into business and non-business. nondischargeable debt – a debt that cannot be eliminated
in bankruptcy.
• nunc pro tunc – latin for "now for then" this refers to changing back to an earlier date of an order, judgment or filing of a
document. Such a retroactive re-dating requires a court order which can be obtained by a showing that the earlier date
would have been legal, and there was error, accidental omission or neglect which had caused a problem or inconvenience
which can be cured.
• omnibus hearing – an omnibus hearing is a Court hearing at which the Court may hear a variety of different matters
relating to one particular case. PACER (Public Access to Court Electronic Records) – a service provided by the court system
that gives case filing information.
• party in interest – a party who has standing to be heard by the court in a matter to be decided in the bankruptcy case. The
debtor, the U.S. trustee or bankruptcy administrator, the case trustee and creditors are parties in interest for most
matters.
• period of exclusivity – (see exclusivity)
• personal bankruptcy – filed by an individual and also called a household bankruptcy, consumer bankruptcy or wage-
earner bankruptcy. (see Chapter 13 and also Chapter 12).
• petition – (or bankruptcy petition or petition for relief) - the document that comm-ences a bankruptcy proceeding.
• petition preparer – a business not authorized to practice law that prepares bankruptcy petitions.
• plan of reorganization – the document setting forth how a bankrupt company plans to satisfy its creditors. The plan of
reorganization is the cornerstone of a successful Chapter 11 bankruptcy.
• plaintiff – a person or business that files a formal complaint with the court.
• post-petition – occurs after the filing of a petition.
• preference – a payment by a debtor made during a specified period (90 days or one year) prior to the filing that favors one
creditor over others. Preference payments can usually be recovered and returned to the debtor's estate.

28. • prepackaged bankruptcy – a situation where a company and its creditors agree to a plan of reorganization before the company files a
bankruptcy petition. In a true prepackaged bankruptcy, a plan of reorganization is circulated and approved by creditors before the petition is
filed. The court then confirms the plan and the company emerges from bankruptcy quickly.
• pre-petition – occurring before the filing of a bankruptcy petition.
• priority claims – administrative expenses and salaries, wages, employee benefits, customer deposits and taxes which occurred pre-petition.
• pro rata – proportionately.
• proof of claim – form filed by a creditor setting out its claims against a bankruptcy debtor.
• receiver – particularly in foreign proceedings, or state court proceedings, a person appointed by the court to take custody of a debtor's property.
• 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.
• restructuring – a general term applied to an out-of-court attempt to reorganize and satisfy debts. Also, see workout.
• Retired Benefits Bankruptcy Protection Act – passed June 16, 1988. This allows the debtor to continue to pay insurance premiums for
employees during the course of a bankruptcy.
• 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).
• Rule 2004 – (see Bankruptcy Rule 2004)
• schedules – list submitted by the debtor along with the petition (or shortly thereafter) showing the debtor’s assets, liabilities, and other financial
information.
• Section 77 (of 1933 Act) – provided for reorganization of railroads. (During the 1930's a large number of railroads experienced extreme financial
difficulty.) (See also Section 77B).
• Section 77B – followed Section 77 and provided for reorganization of companies other than railroads.
• Section 304 – the former section of the U.S. Bankruptcy code that handled multi-national bankruptcies only a few of which were filed each year.
This section no longer exists; it has been replaced by Chapter 15.
• secured creditors – one of two general types of creditors of a company. Secured creditors have a lien on property of the company.
• secured debt – debt backed by a mortgage, pledge of collateral or other lien. It is debt for which the creditor has the right to pursue specific
pledged property upon default.
• set-off – the ability to discharge or reduce a debt by applying a counter claim between the same parties. For example, a bank which has lent
money to a debtor may attempt to satisfy some or all of the loan by seizing the debtor's deposits at the bank.
• skeleton filing – term used in 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.

29. • 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.
• stalking horse – this is the name given to the party submitting the first bid to purchase assets. The stalking horse bid can be used to solicit
interest from other bidders and also acts as an indicator for what will be realized on the auction floor.
• straight bankruptcy – an informal term for a Chapter 7 bankruptcy or liquidation; used more commonly to describe liquidation before the
Bankruptcy Reform Act of 1978.
• substantial abuse – a term that refers to the abuse of the privilege to file a petition. It usually describes fraud in cases of personal bankruptcy.
• 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. Substantive consolidation is often considered in the case of parent/subsidiary debtors
and other affiliated entities.
• super-priority claim – an administrative claim that will be paid ahead of other administrative and priority claims.
• tax loss carry-forward – losses, for tax purposes, that can be carried forward and applied to reduce taxable income in future years. The Tax
Reform Act of 1986 imposed stringent restrictions on the use of tax loss carry-forwards.
• tranches – a piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same
time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice."
• 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 their control. This type of
trustee should be distinguished from the U.S. Trustee, who plays an administrative role in all bankruptcy cases.
• 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, appointing trustees and examiners, scrutinizing bankruptcy documents, etc. The
United States Trustee Program began in 1979. Presently, it covers all federal judicial districts except for North Carolina and Alabama, which
were originally scheduled to be included in October of 2002, but whose inclusion Congress has extended indefinitely.
• unsecured claim – a claim or debt for which a creditor holds no special assurance of payment; a debt for which credit was extended based
solely upon the creditor’s assessment of the debtor’s future ability to pay.
• unsecured creditor – a creditor who extended credit to a debtor without collateral security. If the debtor files for bankruptcy or is levied upon,
the unsecured creditors are paid on a pro-rata basis only after the claims of all secured creditors are satisfied.
• unliquidated claim – a claim for which a specific value has not been determined
• VCIS (Voice Case Information System) – a touchtone telephone service provided by the court system that gives case filing information.
• voluntary bankruptcy – bankruptcy filed by the debtor itself; data from the U.S. Administrative Office of the Courts subdivides bankruptcies
into voluntary and involuntary.
• vulture funds – (also referred to as vulture capitalists or vulture investors) - investment groups that actively participate in the restructuring of
financially distressed and bankrupt companies usually by the buying or selling of large pieces of the distressed company's debt and/or equity.
• wage-earner bankruptcy – (see Chapter 13 and personal bankruptcy)
• workout – an arrangement, outside of bankruptcy, by a debtor and its creditors for payment or re-scheduling of payments of the debtor's
obligations. Usually applies to an informal agreement between a business and its creditors, although it can be a formal agreement and it can
also apply to consumer debtors.