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Automatic stay
The suspension of actions, such as debt collection or foreclosure, against the company in bankruptcy. Occurs automatically when the bankruptcy petition is filed.
Petition
The document that commences a bankruptcy proceeding. plan of reorganization - the document setting forth how a bankrupt company plans to satisfy its creditors.
Bankruptcy Court
The federal tribunal where cases under the Bankruptcy Code are litigated.
Default
The failure by an entity to abide by the covenants in a debt obligation or other agreement to which it is a party. The most common default is non-payment of interest or principal.
Chapter Seven
Liquidation proceedings; generally assets are sold by a trustee and the company ceases operation. (Individuals may file Chapter 7 also.)
Substantive consolidation
The combination of the estate of one debtor with the estate of one or more other debtors and the application of the combined estate to satisfy their combined liabilities.
Debtor
The entity seeking protection from creditors under the bankruptcy laws.
Bankruptcy Amendments of 1984
A set of amendments to the Bankruptcy Reform Act of 1978. It contains a number of provisions including: limiting the jurisdiction of the bankruptcy court.
Insolvency
Another term used to describe a firm that is failing; generally it means that a firm's liabilities exceed its assets or that it is unable to satisfy its obligations as they come due.
Small claims
Also sometimes called convenience claims - under a plan of reorganization or liquidation, claims that are small (e.g. in the hundreds or thousands of dollars range) and numerous are often grouped into a single class and settled for cash for administrative convenience.
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