***All definitions provided in this section are from "Bankruptcy and Debtor/Creditor, 7th Edition. Brian Blum and Samir Parikh. Wolters Kluwer.***
Illiquid- Inability to convert assets into cash. See Insolvency.
Impaired class of claims or interests- In a Ch.11 case, a class is impaired unless the rights of each member are unaltered except for the sure of any default and declaration of the debt (§1124).
Improvement in position test- One of the requirements for the avoidance of a transfer under §547 is that the transfer enabled the creditor to improve on the position that it would have occupied without the transfer. Improvement in position occurs where the transfer has enabled the creditor to receive more own its claim than it would have been paid in a hypothetical Ch. 7 distribution in the absence of the transfer.
In custodia legis- Latin for "in the custody of the law." The retention of property for safe keeping by the sheriff, a receiver, or some other person with legal authority.
Individual- A natural person, as distinct from a corporate entity (which has been defined as "a person" for legal matters).
Indubitable equivalent- A broad standard for measuring adequate protection under §361(3). The court must be satisfied that a proposed method of protecting an interest in property will undoutednly provide the claimant with value equal to the value of the interest. The form of indubitable equivalence that courts are most likely to recognize is the existence of a substantial equity cushion. Indubitable equivalence is also used as a standard for determining whether a secured claim has been treated fairly and equitably in a crackdown confirmation (§1129(b)(2)(A)(iii)).
Insider- A person who has such a close relationship with another that he or she has received special access to information and opportunities for favorable treatment. Several provisions of the Code treat insiders of the debtor differently from other parties. "Insider' is defined in §101(31) to include relatives of an individual debtor and person in control of a corporate debtor.
Insolvency- Inability to pay debts, determined by one of two tests: inability to pay debts as they fall due (called the "Equity Test") or an excess of liabilities over assets (called the "bankruptcy" or "balance sheet" test) (§101(32)).
Interim trustee- A trustee appointed under §701 following the oder for relief under a Ch.7 case, to serve until the permanent trustee is appointed or elected at the meeting of creditors.
Involuntary case- A case under Ch.7 or Ch. 11initiated against the debtor by a creditor or creditors who qualify to seek bankruptcy relief (§303).
Ipso facto clause/ provision- In latin "By the fact itself," a provision in a contract or in a nonbankruptcy law under which the insolvency to bankruptcy of the debtor is treated as default.
Joint administration- The administration of estates of closely related debtors for the purpose of convenience and the reduction of administrative costs.
Joint case- A bankruptcy in which a single voluntary petition is filed by both spouses, placing both their estates in bankruptcy. Although the estates are administered jointly, their assets and liabilities are not consolidated unless appropriate.
Judgment lien- A judicial lien arising on all the real property owned by the debtor in the county in which the judgment is docketed or recorded. In some states, a judgment recorded in UCC filing records creates a judgment lien on the debtor's personal property.
Judicial lien- Any lien arising out of court proceedings (§101(36)).
Leverage- In negotiations, leverage is bargaining power or the ability to exert pressure on the other party to obtain a desired resolution. "Leverage" also has an alternative meaning that relates to debt; for example, the making of an investment consisting largely of borrowed funds or the use of borrowed funds instead of capital.
Leveraged buyout- The purchase of stock in a corporation with borrowed funds, financed by the corporation itself or secured by its assets.
Levy- The sheriff's seizure or taking control of property pursuant to a writ.
Lien- Used broadly, any charge against or interest in property to secure a creditor's right to payment, so that if the debt is not paid, the creditor may have recourse to the property to satisfy the debt. (See §101(32))> "Lien" is sometimes used more narrowly to denote only such interest that arise by operation of law or court order, as distinct from interests created by contract, called "security interests."
Lienholder/ Lienor- The holder of the lien.
Lien stripping- A strategy whereby the debtor attempts to peg an undersecured debt or a debt that has become undersecured at the value of the collateral as determined by the bankruptcy court, the lien (which survives bankruptcy) cannot extend to the increase in equity but is frozen at the bankruptcy valuation. Where the lien is undersecured, the fixing of the amount of the lien at the current value of the collateral is called "strip down." If the lien has become fully unsecured (because it is a junior lien, and the senior lien has taken up the full value of the collateral), the fixing of the lien value at zero is called "strip off."
Liquidating plan- A Ch.11 plant that provides for the liquidation of the debtor, rather than its rehabilitation.
Liquidation- The realization of the debtor's executable assets for the purpose of generating proceeds to be applied to the payment of debts.
Lis Pendens- Latin for "pending suit." The doctrine, deriving from common law, that a person who acquires an interest in realty while litigation is pending concerning title, possession or other rights to it, is bound by the court's ultimate resolution of the controversy. A party wishing to be protected by the doctrine must file a notice of tendency in the real estate records to give constructive notice of the litigation to any potential transferee.
Marshalling of assets- An equitable doctrine that applies when two creditors are competing for satisfaction of their claims from the same fund, and one of them has another fund available for application to its debt. Marshalling requires that the creditor (with the other fund available) resort to the other fund before having recourse to the shared fund.
Means test- A nonstatutory term describing the standard for dismissing a Ch. 7 consumer case on the grounds of abuse where the debtor's disposable income, calculated under the formula set out in §707(b), is deemed sufficient to support payments under a plan of rehabilitation. A version of the means test is also used to measure the debtor's disposable income in a Ch. 13 case.
Mechanic's lien- A statutory lien on real property available to a person who, at the request of the owner or the owner's agent, has furnished services or labor on credit in connection with he improvement of the property. The supplier of materials used in the construction may assert a similar statutory lien called a "materialman's lien." These traditional names for the liens have been abandoned in some states in favor of the more modern "construction lien."