Definitions N-P

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Definitions N-P

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

Net result rule- A traditional but inaccurate name for the exception to the avoidance of transfers under §547(c)(4), which validates an otherwise avoidable transfer to the extent that the creditor-transferee gave new unsecured value to the debtor after receiving the transfer. 

New value exception-  An exception (or corollary) to the absolute priority rule that enables equity holders to retain their interests in the debtor, even though a senior nonaccepting class has not been paid in full, if the equity holders contribute new capital to the debtor equal to or greater than the value of their interests. 

No-asset case- A liquidation case in which there are insufficient assets to allow for a distribution to creditors.

Nonbankruptcy law- The term used in the Code to describe the entire body of law prevailing in the jurisdiction, both state and federal, apart from bankruptcy.

Nondischargeable debt-  A debt that is excluded from discharge under §523 or §1328. Unfortunately, the most common nondischargeable debt are student loans.

Nonrecourse secured debt- A secured debt for which the debtor has no liability beyond the value of the collateral, so that the debtor cannot be held responsible for any deficiency following foreclosure or surrender of the collateral. 

Notice- Information concerning a fact, whether deriving from a actual knowledge or imputed as a legal consequence of proper recording or other publicity. Imputes knowledge is called "constructive notice."

Notice and a hearing- When a Code provision states that particular action can only be taken after notice and a hearing, this means that appropriate notice must be given, but a hearing is only required if a party in interests requests it (§102(2)).

Objection- A written response required by the Bankruptcy Rules to challenge certain actions or assertions by another party, such as a claim, a claim exemption, a proposed plan, or the discharge of a debt.

Order for relief- In an involuntary case, the court's grant of the petition for bankruptcy relief. In a voluntary case, no actual adjudication of bankruptcy is required. The filing of the petition itself constitutes the order for relief.

Party in interest- Although used frequently in the Code, this term has no general statutory definition. It is described in §1109(b) for Ch. 11 purposes to include the debtor, trustee, creditors, equity security holders, and their committees. Courts usually treat the term as having the same meaning elsewhere in the Code. It is usually mentioned in the context of standing to initiate motions or other proceedings.

Perfection- The process of making a lien effective against other person other than the debtor, who may subsequently acquire rights in the collateral. Perfection is normally accomplished by an act of publicity such as recording the lien (in the applicable office i.e. Secretary of State, DMV, County Clerk's office etc.) or taking possession of the collateral.

Petition- The pleading filed to initiate a bankruptcy case. This is the formal paperwork submitted to the bankruptcy court and asks for an order of relief under the corresponding chapter (ie. Chapter 7, Chapter 11, Chapter 13). Petitions may be filed voluntarily, jointly, or involuntarily.

Plenary jurisdiction- Full jurisdiction over the subject matter of the case and the parties, as distinguished from the more limited "summary" jurisdiction of the bankruptcy court. These terms were used in connection with bankruptcy jurisdiction prior to 1978, but have become outmoded under the Code and the current jurisdictional provisions of Title 28.

Preference- An advantage given by the debtor to a creditor through payment or some other transfer that results in the creditor receiving preferential treatment over other similarly situated creditors. Although such preferential treatment is not normally avoidable outside of bankruptcy, the trustee has the power under §547 to avoid a preferential transfer in the repetition period if the requirements of §547 are satisfied.

Prejudgment remedy or process- Provisional and ancillary relief available to the plaintiff during the pendency of a civil case to prevent loss or harm before the case is finally resolved. Most prejudgment remedies aim at preservation of property that is claimed in the suit or may ultimately be sold in execution to satisfy the judgment. 

Prenegotiated or Prepackaged plan- A prenegotiated plan is one that is negotiated by the Ch.11 debtor and key creditors prior to the debtor filing a Ch.11 petition. By agreeing with key creditors on the crucial aspects of the plan before filing the petition, the debtor increases the prospects of creditors voting in favor of the plan after it has been filed. A prepackaged plan is one that has been wholly or substantially settled by the debtor and key creditors before the Ch. 11 is filed. The debtor makes all necessary disclosures repetition, and the requisite number and type of creditor classes have voted to approve the plan of reorganization. The approved plan and certification of creditor voted is invariably filed along with he bankruptcy petition.

Prepetition planning- The debtor's reordering of his or her affairs prior to filing a bankruptcy petition to maximize the benefits of bankruptcy. A common form of prepetition planning is the realization of nonexempt property and the use of the proceeds to acquire exempt property. See also Conversion of exempt property.

Present value- See Bests interests test.

Priming lien- A lien granted to secure post petition credit under §346(d) with priority over an existing lien in the property.

Priority- The ranking of liens and other interests in the same property.

Priority claim- An unsecured claim (or that portion of) that qualifies for inclusion in one of the categories entitled to precedence in payment under §507.

Proceeds- Any property or money received in exchange for an asset.

Proof of claim-  A creditor's formal submission of a claim against the estate under §501.

Purchase- the acquisition of rights in property by voluntary act. "Purchase" is not simply a synonym for "buy," but includes also the consensual acquisition of other rights, such as a security interest (§§101(43) and 101(54)).

Purchase-money security interest- A security interest in property, to the extent that it secures a loan or credit given to the debtor for the express purpose of acquiring the property and actually used by the debtor for that purpose.

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