Bankruptcy Terms and Definitions

Asset
An economic resource or item owned by a business that is expected to benefit its future operations.

Chapter Ten
A new chapter of the bankruptcy code proposed in 1992 and pending in 1993. Chapter 10, like Chapter XI of the old code, is designed for small business reorganizations.

Bankruptcy Court
The federal tribunal where cases under the Bankruptcy Code are litigated.

Avoidance power
The power of the court to invalidate certain obligations or transactions undertaken by a debtor prior to filing bankruptcy.

Liquidation value
The aggregate value of a business if its assets are sold piecemeal.

Chapter Nine
Bankruptcies of municipalities; only a few of these are filed each year; over the period 1980 through 1988 there averaged about 4 Chapter 9 filings per year.

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.

Chapter Eleven
Reorganization proceedings, generally for business entities; the debtor maintains control of the business in Chapter 11 (unless the Court appoints a trustee).

Deed in Lieu of Foreclosure
If you will be unable to cure the default, and a private sale does not appear realistic, VA will consider accepting a deed in lieu of foreclosure. If there are no liens on the property, and VA agrees to accept a deed, you will have to sign legal papers making VA the owner of the property.

Trustee
An agent of the court who manages the property of the debtor for the benefit of the creditors. The court appoints a trustee in most Chapter 7 cases and in Chapter 11 cases when it determines that the debtor's management should not remain in control.