Definitions C-D

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Definitions C-D

***All definitions provided in this section are from "Bankruptcy and Debtor/Creditor, 7th Edition. Brian Blum and Samir Parikh. Wolters Kluwer.***

Cash Collateral- Cash or cash equivalent that is subject to an interest (such s a security interest) held by a person other than the estate (§363(a)).

Chapter 20- An unofficial name for the debtor's tactic of filing sequentially under Chs.7 and 13. A debtor may use this tactic to discharge personal liability on debts in Ch.7 case and thereafter prevent foreclosure of a lien on property (which is not discharged) by providing payment of it with installments under a Ch. 13 plan.

Claim- Any secured or unsecured right to payment arising in law or equity (§101(5)).

Claim bifurcation- Splitting of an unsecured debt into a secured claim to the extent of the collateral's value and an unsecured claim for the deficiency. This division is required under §506.

Class of claim or interests- Claims or interests that have been placed in the same category for treatment in bankruptcy, either because they fall within one of the statutory priority classifications or because the debtor has properly grouped them together under a Ch. 11 or 13.

Codebtors- Persons who are liable on the same debt (think husband and wife who take out a mortgage together for their home).

Collateral- The property subject to a lien or security interest.

Collective proceedings- General name for proceedings such as assignments for the benefit of creditors, compositions, and bankruptcy under which the claims of creditors are dealt with collectively to avoid disruption and inequality of the individual creditor action.

Common law lien- A lien arising by operation of common law, not dependent on agreement, statute, or judicial process. Common law liens are typically intended to provide security for the agreed or reasonable charges owing to a person who has repaired, improved, or preserved personal property or provided personal services at the owner's request. They are usually perfected by possession.

Composition- A contract between debtor and creditors, under which partial payment is promised and accepted in full settlement of claims. A composition may be combined with an extension- an agreement to extend the time in which to pay off the debt.

Confession of judgment- The debtor's waiver of the right to contest a collection suit, authorizing the creditor to obtain judgment by consent. A confession during the course of litigation (also called a "stipulation") is enforceable if freely made. However, a confession made before default, particularly one contained in the instrument of debt itself (called "warrant of attorney) is subject to particular scrutiny and is usually unenforceable in a consumer transaction.

Confirmation of a plan- The confirmation of plan under Ch. 11 or 13 is the court's determination that the plan meets the requirements of the Code, and that it will form the basis for the treatment of claims, disposition of estate property, and conduct of the estate's affairs.

Confirmation of a sale in execution- Where real property is sold in execution, state law usually requires that the court approves the sale.

Consensual lien- A lien granted in a contract between the lien holder and the debtor, such as a mortgage or a UCC article 9 security interest.

Consolidation of cases- Procedural consolidation is the consolidation of two separate petitions filed in relation to the same debtor. Substantive consolidation is the combination of the estates of two closely related debtors, so that assets are pooled and creditors of each become creditors of the combined case.

Construction Lien- See Mechanic's lien.

Constructive Fraud- Fraud established not by proof of actual dishonest intent but by facts that are, as a matter of legal policy, treated as giving rise to a rebuttable presumption of fraud.

Constructive Notice- See Notice.

Constructive trust- An equitable remedy under which a person who has acquired property by a wrongful act is deemed to hold property in trust for the victim of the wrong.

Consumer debt- A debt incurred by an individual primarily for personal, family or household purposes (§101(8)).

Contested matter- A proceeding within the bankruptcy case, initiated by motion or objection rather than filing a complaint.

Contingent claim- A claim in which the debtor's potential liability has been created (usually by a contract or a wrongful act), but actual liability will only arise upon the happening of a future event that may not occur.

Conversion of case- A change in the Code chapter governing the case, altering the form of bankruptcy relief sought. For example, a case originally field under Ch.13 may be converted into a liquidation under Ch.7 if the debtor's attempt at debt adjustment fails.

Conversion of nonexempt property- The realization of nonexempt property and the use of the proceeds to acquire exempt property. See also Prepetition planning.

Core proceeding- A proceeding in a bankruptcy case that involves the adjudication of rights created by the Code, or concerns issues that, by their nature, could only arise in a bankruptcy case. Because core proceedings involve substantive rights granted under the Code, thy ,ay be finally determined by the bankruptcy court itself.

Cramdown- The confirmation of a plan despite opposition from some creditors, where the plan satisfies the Code's prerequisites for nonconsensual confirmation (§§1129(b) and 1325).

Credit bid- The secured creditor bids at the foreclosure auction of its collateral, it sets off the debt against the price that it bid at auction.

Creditor's bill- An equitable suit available to a creditor for the purposes of locating and recovering executable property that has been concealed or wrongfully transferred by the debtor or for reaching assets that otherwise cannot be executed upon using procedures at law.

Creditor's committee-  A committee of creditors appointed by the U.S. Trustee in Ch. 11 cases, and sometimes Ch.7 cases, to represent the interests of the creditor body as a whole or, if more than one committee is appropriate, a class of creditors.

Creditor's meeting- The statutory meeting of creditors requires in all bankruptcy cases by §341. The meeting must be convened by the U.S. Trustee within a prescribed time following the order for relief. Its primary business is the examination of the debtor.

Cross-collateralization- In the the context of postpetition financing, a term in the financing contract under which collateral furnished by the estate to secure the new credit also covers an unsecured or undersecured prepetition claim of the lender.

Cure of Default- The payment of arrears or the rectification of any other breach of contractual obligations, so that the party's performance is brought into compliance with the terms of the contract.

Custodian- Any person appointed to take charge of the debtor's property under nonbankruptcy law, such as a receiver or an assigned for the benefit of creditors (§101(11)).

Debt- An obligation to pay money. In §101(12), "debt" is defined as liability on a "claim," which is defined in §101(5) as a right to payment.

Debt adjustment-  A case under Ch.13.

Debtor- In general, a person liable on a debt. In bankruptcy, the debtor is the person concerning whom the bankruptcy case was filed (§101(13)).

Debtor in possession- The new legal personality acquired by the debtor in a Ch.11 case, under which the debtor administers the estate and fulfills the role of trustee for most purposes (§§1101(1) and 1107).

Debtor's Equity- The debtor's unencumbered ownership interest in the property. 

Default- The debtor's material breach of contract, such as failure to pay a debt on the due date. Some contracts provide that the insolvency or bankruptcy of the debtor constitutes ipso fact default. Such a provision is not enforceable in bankruptcy.

Default Judgment- A judgment granted on application of the plaints when the defendant has failed to file an answer or other required pleading.

Deficiency- The shortfall that results when a debt is undersecured, that is, when the collateral securing the debt is worth less than the amount owing, so that the realization of the collateral does not fully satisfy the debt. See Equity cushion; surplus.

Delegation- See assignment.

Delivery bond- See redelivery bond.

Delivery of writ- The transmission of a write to the sheriff with instructions to execute.

Discharge- The debtor's release from liability for the unpaid balance of all debts that a provable in the bankruptcy and that are not excluded from discharge under the code.

Discharging/ dissolution bond- A bond posted by the debtor for the purpose of releasing property from attachment. The bond is an undertaking by the debtor, supported by a surety, to pay any judgment ultimately obtained by the creditor. Its effect is to terminate the attachment and restore the property to the debtor.

Disclosure statement- The statement required by §1123 to be disseminated by the proponent of a CH.11 plan, providing sufficient information on the plan to enable the holders of claims and interest to make an informed judgment on it.

Dismissal- The court's termination of the bankruptcy case upon voluntary withdrawal by the petitioner or on the motion of a party in interest to the court's own motion.

Disposable income test- A requirement for plan confirmation that the debtor must commit all his or her disposable income to payments under the plan for a period of three or five years. "Disposable income" is that portion of the debtor's income not reasonably necessary for the maintenance and support of the debtor or a dependent, and not necessary for the operation and preservation of any business in which the debtor is engaged. The test is only applied upon objection to the confirmation by a competent party.

Distress sale- A forced sale, such as an execution or foreclosure sale. Because of the circumstances of the sale, the price obtained for the property is usually depressed.

Dormant judgment- A judgment that has become unenforceable because it has not been executed upon within the prescribed time. it can be revived by application. 

"Drop-dead" clause- A provision in a contract or rehabilitation plan that requires exact compliance with the debtor's obligations and gives the creditor an immediate right of action in the even of default (i.e. acceleration or foreclosure).

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