The following is a list of commonly used bankruptcy terms and their definitions. This list is provided to help you understand the terms associated with the bankruptcy process. Feel free to call our office for further explanations.


Automatic stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.


Bankruptcy: A federal legal procedure for addressing debt problems.

Bankruptcy estate: All legal or equitable interests of the debtor in property at the time of the bankruptcy filing.

Bankruptcy Petition: The document filed by the debtor (in a voluntary case) or by creditors (in an involuntary case), which creates a bankruptcy case.


Chapter 7: The chapter of the Bankruptcy Code providing for “liquidation.”

Chapter 13: The chapter of the Bankruptcy Code providing for a reorganization of debts of an individual.

Claim: A creditor’s assertion of a right to payment from the debtor or the debtor’s property.

Confirmation: Bankruptcy judges’ approval of a plan of reorganization or liquidation in chapter 11, or payment plan in chapter 12 or 13.

Creditor: One to whom the debtor owes money.

Credit counseling: Generally refers to two events in individual bankruptcy cases: (1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and (2) the “instructional course in personal financial management” in chapters 7 and 13 that an individual debtor must complete before a discharge is entered.


Debtor: A person who has filed a petition for relief under the Bankruptcy Code.

Discharge: A release of a debtor from personal liability for certain dischargeable debts set forth in the Bankruptcy Code.

Dischargeable debt: A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.


Equity: The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered.

Exemptions: Certain property owned by an individual debtor that the Bankruptcy Code or applicable state law permits the debtor to keep from unsecured creditors.


Fraudulent transfer: A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.


Joint petition: A single bankruptcy petition filed jointly by husband and wife. 


Lien: The right to take and hold or sell the property of a debtor as security or payment for a debt.

Liquidation: The sale of a debtor’s property.


Means test: Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case.


Non-dischargeable debt: A debt that cannot be eliminated in bankruptcy.


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. 

Petition preparer: A business not authorized to practice law that prepares bankruptcy petitions.

Plan: A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.

Preference or preferential debt payment: A debt payment made to a creditor in the 90-day period before a debtor files bankruptcy that gives the creditor more than the creditor would receive in the debtor’s chapter 7 case.

Priority: The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in which unsecured claims will be paid.

Priority claim: An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status.

Proof of claim: A written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money.

Property of the estate: All legal or equitable interests of the debtor in property as of the commencement of the case.


Reaffirmation agreement: An agreement by a chapter 7 debtor to continue paying a dischargeable debt after the bankruptcy.


Schedules: Detailed lists filed by the debtor along with the petition showing the debtor’s assets, liabilities, and other financial information.

Secured creditor: A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or all of the claim.

Secured debt: A debt backed by a lien.


Transfer: Any mode or means by which a debtor disposes of or parts with his/her property.

Trustee: The representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator.


Un-secured claim: A claim or debt for which a creditor holds no assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.


Voluntary transfer: A transfer of a debtor’s property with the debtor’s consent.

Please don’t hesitate to contact your Michigan bankruptcy lawyer at  248-825-8042 for further clarification.