Definitions E-H


Definitions E-H

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

Enabling loan- See purchase money security interest.

Encumbrance- A right to or interest in property, such as a lien, which diminished the extent of the owner's title.

Entity- A general term used in the Code to encompass a wide variety of legal persons, including individuals, corporations, and governmental units (§101(15)).

Equitable lien- A lien recognized under principles of equity in the absence of legal lien rights, in order to do justice between the parties and to provide effective relief to an otherwise unsecured creditor.

Equitable Subordination- See subordination.

Equity- The body of rules and principles to afford relief where remedies at law are inadequate. In addition "equity" is also referred to as as the debtor's unencumbered interest in property.

Equity cushion- The amount to equity held by the debtor in collateral in excess of the value of the claim of a lien holder and any encumbrances senior to the secured claim. This excess value in the collateral is called an "equity cushion" because it provides a margin of safety for the lien holder to cover an adverse change in the collateral-debt ratio caused by future depreciation of the property or the accumulation of interest or costs.

Equity of redemption- The mortgagor's right to save property from foreclosure by paying the mortgage debt before the foreclosure. The equity of redemption arises from principles of equity and applies only in the resale period. It must be distinguished from statutory redemption, which extends beyond the sale date and may be exercised against he purchaser of the property. See also Redemption.

Equity security- A share in a corporation or a limited partner's interest in a partnership (§101(16)).

Estate- In general terms, a person's estate is all the property held by that person. In the bankruptcy context, the estate is the legal entity created by the filing of the petition, which succeeds to the debtor's property rights under §541.

Exception to discharge- A debt that is excluded from the debtor's discharge on one of the grounds enumerated in §523 or §1328.

Exclusivity period- A period following the filing of a Ch. 11 petition, during which the debtor has the exclusive right to file a plan (§1121).

Executable property-  Property of the debtor that is not exempt or otherwise immune from execution, so that it can be subjected to the claims of creditors.

Execution- The enforcement of a judgment by the seizure and sale of nonexempt property of the debtor.

Executory contract-  In general, a contract is executory if it has not been fully performed. Upon the bankruptcy of one of the parties, a contract that qualifies as executory for bankruptcy purposes may be assumed by the estate. In bankruptcy, the most widely used test for deciding if a a contract is executory is whether the obligations of both parties are so far unperformed that the failure of either to complete performance would be a material breach. The trustee must elect to reject or assume the executory contract once §365.

Exemption-  A right granted by state to an individual debtor to hold specified property free from the claims of creditors §522.

Extension-  A contract between a debtor and a creditor or creditors, under which the debtor is allowed additional time in which to pay debts. See also Composition.

Fair and equitable standard- A Ch.11 plan can only be confirmed by the crackdown method if classes of claims and interests are treated in a fair and equitable manner. This requires not only fair treatment in the usual sense, but also that the specific requirements of §1129(b) (such s the absolute priority rule) are satisfied. 

Feasibility standard- The requirement for a plan confirmation that the debtor had demonstrated a reasonable prospect of being able to make payments and meet the rehabilitative goals se out in the plan.

Financing statement-  The document filed in public records to perfect a security interest under UCC Article 9.

First day motions-  Motions filed with a Ch.11 petition in which the debtor seeks various forms of immediate relief amassed at minimizing disruption to the debtor's business.

First-in-time rule- The general rules of priority under which an earlier perfected lien or interests in property takes precedence over a later one.

Floating lien- A security interest that extends to collateral of a specified type acquired by the debtor, or to advances made to the debtor after execution of the security agreement, or to both.

Foreclosure- The process whereby a lien holder enforces the lien following the debtor's default and subjects the collateral to satisfaction of the debt. Following seizure, te collateral is normally sold and its proceeds applied to payment of the debt. However, strict foreclosure (forfeiture of the property to the lien holder in full satisfaction of the debt) is permitted as an alternative in the case of some liens.

Fraudulent transfer/ conveyance-  A disposition of property by a debtor with the actual or constructive intent to defraud creditors, or to delay or hinder their collection efforts.

Fresh start- The rehabilitation of a debtor through the process of bankruptcy, achieved by the resolution and discharge of prepetition debt.

Future Advance- A loan or credit advanced to the debtor after a security interest has been created and secured by such preexisting security interest. See also Floating lien.

Gap Creditor- A person who extends credit or financing to the debtor during the period between two legally significant events, such as between attachment and perfection of a security interest or between the filing of an involuntary petition and the order of relief.

Garnishment- A creditor's levy on property of the debtor in the possession oa third party, or on a debt or obligation due by third party to the debtor.

Garnishment lien- A judicial lien that arises in property upon which garnishment has been levied.

Going concern value- The value of a business based on its sale as a continuing operation, rather than on the proceeds that would be realized upon the liquidation of its assets.

Good faith- Honesty, usually measured subjectively and put in context of adhering to and complying with the purpose of the Code.

Good Faith Purchaser- This term is sometimes used synonymously with bona fide purchaser. However, it is also sometimes used to denote a purchaser who acts honestly, but does not satisfy all of the other elements necessary to qualify as a bona fide purchaser.

Holder of a claim- A creditor of the debtor whose claim is provable in the estate.

Homestead exemption- An exemption granted under state law or §522(d)(1) in an individual debtor's interest in property in which the debtor or dependent resides. 

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