Bankruptcy Terms
Automatic stay: An injunction that automatically stops lawsuits, foreclosure, garnishments and all collection activity against the debtor once a bankruptcy petition has been filed.
Bankruptcy: A legal procedure for dealing with the financial problems of individuals and companies. It refers to a case filed under the Bankruptcy Code or Title 11 of the United States Code.
Chapter 7: The chapter of the Bankruptcy Code that allows for ‘liquidation’ of all assets of the individual or company to clear debts. It is also known as straight bankruptcy.
Chapter 11: This is a reorganization bankruptcy. It is filed by companies or partnerships. A debtor filing for bankruptcy under Chapter 11 generally proposes a reorganization plan to keep the business alive and make it profitable and pay creditors over a period of time.
Chapter 12: The chapter of bankruptcy Code providing relief for debts of a ‘family farmer’.