Adversary proceeding– A lawsuit arising in or related to a bankruptcy case that begins by filing a complaint with the court, that is, a “trial” that takes place within the context of a bankruptcy case.
Affidavit– A written or printed statement made under oath.
Assets– Property of all kinds, including real and personal, tangible and intangible.
Assume– An agreement to continue performing duties under a contract or lease. For example, a person might “assume” a friend’s lease agreement.
Automatic Stay of Bankruptcy– An injunction that automatically stops lawsuits, foreclosure, garnishments, and most collection activity against the debtor the moment a bankruptcy petition is filed.
Bankruptcy code– The informal name for title 11 of the United States Code (11 U.S.C. §§ 101-1330), the federal bankruptcy law.
Bankruptcy estate– All interests of the debtor in property at the time of the bankruptcy filing. The estate technically becomes the temporary legal owner of all of the debtor’s property.
Bankruptcy judge– A judicial officer of the United States district court who is the court official with decision-making power over federal bankruptcy cases.
Bankruptcy petition– A formal request for the protection of the federal bankruptcy laws.
Bankruptcy trustee– A private individual appointed in all Chapter 7 and 13 cases to represent the interests of the bankruptcy estate and the debtor’s creditors.
Belongings– (Compare with Personal Property. See below).
Builder’s risk insurance is a type of insurance that covers residential and commercial structures while they are under construction or being remodeled, or renovated. Builder’s risk insurance is “coverage that protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.”
Business bankruptcy– A bankruptcy case in which the debtor is a business or an individual involved in business and the debts are for business purposes.
Case Law– The law as established in previous court decisions. A synonym for legal precedent. Akin to common law, which springs from tradition and judicial decisions.
Cash on Hand– This is a term used in bankruptcy cases. Cash on hand is any money in a bank account, safety deposit box, wallet, under the mattress, etc.
Chapter 7 trustee– A person appointed in a Chapter 7 case to represent the interests of the bankruptcy estate and the creditors. The trustee’s responsibilities include reviewing the debtor’s petition and schedules, liquidating the property of the estate, and making distributions to creditors. The trustee may also bring actions against creditors or the debtor to recover property of the bankruptcy estate.
Chapter 11– A reorganization bankruptcy, usually involving a corporation or partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.
Clerk of Court– The court officer who oversees administrative functions, especially managing the flow of cases through the court. The clerk’s office is often called a court’s central nervous system.
Collateral– Property that is promised as security for the satisfaction of a debt.
Commercial Leases– Are treated differently than residential leases and are controlled by different statutes. Click HERE for an in-depth look at commercial leases in Arizona.
Consumer bankruptcy– A bankruptcy case filed to reduce or eliminate debts that are primarily consumer debts.
Consumer debts– Debts incurred for personal reasons, as opposed to business, needs.
Contingent Claim– A claim that may be owed by the debtor under certain circumstances, e.g., where the debtor is a cosigner on another person’s loan and that person fails to pay.
Deposition– a deposition is the oral testimony of a witness taken under oath before trial at which time most of the objections available at trial do not apply; the basic rule being that the questions asked need only address themselves to information that is relevant to the case or to discovering relevant facts. Anything said at the deposition can be used as evidence at trial.
Discharge– A release of a debtor from personal liability for certain dischargeable debts. Notable exceptions to dischargeability are taxes and student loans. A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor or the debtor’s property to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including through telephone calls, letters, and personal contact.
Dischargeable Debt– A debt for which the Bankruptcy Code allows the debtor’s personal liability to be eliminated.
Disposable income– Income not reasonably necessary for the maintenance or support of the debtor or dependents. If the debtor operates a business, disposable income is defined as those amounts over and above what is necessary for the payment of ordinary operating expenses.
Docket– A log containing the complete history of each case in the form of brief chronological entries summarizing the court proceedings.
Credit Counseling Courses– Generally refers to two events in individual bankruptcy cases: 1) the “individual or group briefing” from a nonprofit budget and credit counseling agency that individual debtors must attend prior to filing under any chapter of the Bankruptcy Code; and 2) the “instructional course in personal financial management” in chapter 7 and 13 that an individual debtor must complete before a discharge is entered.
Equity– The value of a debtor’s interest in property that remains after liens and other creditors’ interests are considered. Example: If a house valued at $60,000 is subject to a $30,000 mortgage, there is $30,000 of equity.
Exempt assets– Property that a debtor is allowed to retain–during and after bankruptcy, free from the claims of creditors who do not have liens on the property.
Exemptions, exempt property– Certain property owned by an individual debtor that the Bankruptcy Code or applicable state laws permits the debtor to keep from unsecured creditors. For example, in some states the debtor may be able to exempt all or a portion of the equity in the debtor’s primary residence (homestead exemption), or some or all “tools of the trade” used by the debtor to make a living (i.e., auto tools for an auto mechanic or dental tools for a dentist). The availability and amount of property the debtor may exempt depends on the state the debtor lives in.
Emergency Petition– A bankruptcy case filed either without schedules or with incomplete schedules listing few creditors and debts. Emergency filings are often made for the purpose of delaying an eviction or foreclosure.
Felony– A serious crime, usually punishable by at least one year in prison.
Fraudulent transfer– A transfer of a debtor’s property made with intent to defraud or for which the debtor receives less than the transferred property’s value.
Fresh start– The characterization of a debtor’s status after bankruptcy, i.e., free of most debts.
Insider– Any relative or close friend of a debtor who has filed bankruptcy.
Interrogatories– A form of discovery consisting of written questions to be answered in writing and under oath.
Joint Petition– A bankruptcy petition that is filed by both a husband and wife.
Joint and Several Liability– Joint and several liability occurs when multiple parties are held 100% liable for the same event or act. In cases of joint and several liability, the party harmed by several parties could recover damages from any one, several, or all of the liable parties.
The liable parties would be required to pay the entire judgment, which could be split among multiple parties or could come from just one party. Each party is liable for ALL of the damages, or up to as much as all of the damages.
Joint Pre-Trial Statement– This is a document created by opposing attorneys as part of discovery in a case that is being litigated.
Judgment– The official decision of a court finally resolving the dispute between the parties to the lawsuit. In many instances, a judgment requires the losing party to reimburse the victor for all of their attorneys’ fees and costs.
Jurisdiction– The legal authority of a court to hear and decide a certain type of case. It also is used as a synonym for venue, meaning the geographic area over which the court has territorial jurisdiction to decide cases.
Lawsuit– A legal action started by a plaintiff against a defendant based on a complaint that the defendant failed to perform a legal duty which resulted in harm to the plaintiff.
Lien– A charge on specific property that is designed to secure payment of a debt or performance of an obligation. A debtor may still be responsible for a lien after a discharge.
Lis Pendens– Is an official notice to the public that a lawsuit involving a claim on a specific real property has been filed. Lis pendens is connected to the concept that a property buyer must assume any litigation that exists pertaining to the property. A lis pendens can only be filed if a lawsuit has already been filed. the lis pendens should be recorded with the appropriate county recorder.
Litigation– A case, controversy, or lawsuit. Participants—plaintiffs and defendants—in lawsuits are called litigants.
Liquidation– A sale of a debtor’s property with the proceeds to be used for the benefit of creditors.
Liquidated claim– A creditor’s claim for a fixed amount of money.
Means test– Section 707(b)(2) of the Bankruptcy Code applies a “means test” to determine whether an individual debtor’s chapter 7 filing is presumed to be an abuse of the Bankruptcy Code requiring dismissal or conversion of the case (generally to chapter 13). The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income.
Moot– Not subject to a court ruling because the controversy has not actually arisen, or has ended.
Motion– A request by a litigant to a judge for a decision on an issue relating to the case.
Motion to lift the Automatic Stay– A request by a creditor to allow the creditor to take action against the debtor or the debtor’s property that would otherwise be prohibited by the automatic stay.
Motion for Summary Judgment– A pleading filed with the Arizona court where one party is asking the judge to rule in the case without having a trial. In order for summary judgment to be granted, there must be “no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law”. This means that the undisputed facts presented entitle one side to win because of the existing law relating to that issue.
No-asset case– A Chapter 7 case in which there are no assets available to satisfy any portion of the creditors’ unsecured claims.
Nondischargeable debt– A debt that cannot be eliminated in bankruptcy. Examples include a home mortgage, debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution of a criminal fine included in a sentence on the debtor’s conviction of a crime. Some debts, such as debts for money or property obtained by false pretenses and debts for fraud may be declared nondischargeable only if a creditor timely files and prevails in a nondichargeability actions.
Nonexempt assets– Property of a debtor that can be liquidated to satisfy claims of creditors.
Objection to exemptions– A trustee’s or creditor’s objection to the debtor’s attempt to claim certain property as exempt from liquidation by the trustee to creditors.
Opinion– A judge’s written explanation of the decision of the court.
Personal Property– movable property; belongings exclusive of land and buildings. Compare with Real Property.
Petition– The document that initiates the filing of a bankruptcy proceeding, setting forth basic information regarding the debtor, including name, address, chapter, and estimated amount of assets and liabilities.
Plan– A debtor’s detailed description of how the debtor proposes to pay creditors’ claims over a fixed period of time.
Preferential debt payment– A debt payment made to a creditor in the 90-day period before filing bankruptcy (or within one year if the creditor was an insider) if it gives the creditor more than the creditor would have received in the debtor’s chapter 7 case.
Priority– The Bankruptcy Code’s statutory ranking of unsecured claims that determines the order in a chapter 13 case in which unsecured claims will be paid if there is not enough money to pay all unsecured claims in full.
Priority claim– An unsecured claim that is entitled to be paid ahead of other unsecured claims that are not entitled to priority status. Priority refers to the order in which these unsecured claims are to be paid.
Pro Per or Pro Se– A slang expression sometimes used to refer to a pro se litigant. It is a corruption of the Latin phrase “in propria persona”.
Probate– Used to establish the validity of a will.
Property of the Estate– All legal or equitable interests of the debtor in property as of the commencement of the case.
Punitive Damages– Punitive damages are considered punishment and are typically awarded at the court’s discretion when a defendant’s behavior is found to be especially harmful. Punitive damages are normally not awarded in the context of a breach of contract claim.
In the case of tort liability, courts may choose to apply punitive damages. However, they will typically only do so if the plaintiff can prove that the defendant engaged in an intentional tort and/or engaged in wanton and willful misconduct.
In National By-Products Inc. v. Searcy House Moving Co., the Arkansas Supreme Court found that awarding punitive damages requires evidence that the defendant proceeded intentionally with an unlawful action after knowing that the act was likely to cause injury.
With regard to a principal-agent relationship, courts are reluctant to award punitive damages on the principal for the reckless actions of the agent. One exception to this preference is when the principal encourages or causes the agent’s recklessness.
Distinguishing Punitive Damages in Contract Law
Some contracts will list certain “liquidated damages” as a consequence of a breach. A court, however, may choose to ignore this clause if the liquidated are actually punitive damages. There is a 2-part test that courts will typically use to determine whether to apply a liquidated damages clause:
- The agreed damages must be a reasonable forecast of just compensation for the harm that is caused by the breach
- The harm must be incapable of accurate estimation
If the clause meets both of these elements, then the court will typically apply the clause, finding no evidence of punitive damages.
Applying Punitive Damages
Courts apply punitive damages in about 5% of verdicts. Recently, courts have begun to evaluate the appropriateness of assigning punitive damages in comparison to the amount of compensatory damages assigned. While the Supreme Court has not assigned a particular test to use when courts consider punitive damages, in State Farm v. Campbell (2003), the Court wrote that lower courts should focus on reprehensibility and acceptable punitive-to-compensatory damage ratios. Further Reading. For more on punitive damages, see this Yale Law Journal note and this University of Minnesota Law Review note.
Real Property– Fixed property, principally land and buildings.
Reaffirmation Agreement– An agreement by a debtor to continue paying a dischargeable debt after the bankruptcy, usually for the purpose of keeping collateral or mortgaged property that would otherwise be subject to repossession.
Schedules– Lists submitted by the debtor along with the petition showing the debtor’s assets, liabilities, and other financial information.
Secured creditor– A secured creditor is an individual or business that holds a claim against the debtor that is secured by a lien on property of the estate. The property subject to the lien is the secured creditor’s collateral.
Secured debt– Debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.
Service of Process– The delivery of writs or summonses to the appropriate party.
Settlement– parties to a lawsuit resolve their dispute without having a trial. Settlements often involve the payment of compensation by one party in at least partial satisfaction of the other party’s claims, but usually do not include the admission of fault.
Statement of financial affairs– A series of questions filed with the original bankruptcy concerning sources of income, transfers of property, lawsuits by creditors, etc.
Statement of intention– A declaration made concerning plans for dealing with consumer debts that are secured by property of the estate.
Statute– A law passed by a state of federal legislature.
Statute of Limitations– The time within which a lawsuit must be filed or a criminal prosecution begun. The deadline can vary, depending on the type of civil case or the crime charged.
Summary judgment– A decision made on the basis of statements and evidence presented for the record without a trial. It is used when it is not necessary to resolve any factual disputes in the case. Summary judgment is granted when—on the undisputed facts in the record—one party is entitled to judgment as a matter of law.
Tenancy at Sufferance– Is the period of time after a lease has expired during which a tenant does not have tenancy because the landlord has not given permission for the tenant to possess the property.
Undersecured claim– A debt secured by a property that is worth less than the amount of the debt.
United States Bankruptcy Trustee– An officer of the U.S. Department of Justice responsible for supervising the administration of bankruptcy cases, estates, and trustees; monitoring plans and disclosure statements; monitoring creditors’ committees; monitoring fee applications; and performing other statutory duties.
Unliquidated claim– A claim for which a specific value has not been determined.
Unscheduled debt– A debt that should have been listed by the debtor in the schedules filed with the court but was not.
Unsecured claim– A claim or debt for which a creditor holds no special assurance of payment, such as a mortgage or lien; a debt for which credit was extended based solely upon the creditor’s assessment of the debtor’s future ability to pay.
Voir dire– is a legal phrase that refers to a variety of procedures connected with jury trials. It originally referred to an oath taken by jurors to tell the truth, i.e., to say what is true, what is objectively accurate or subjectively honest, or both.
Wage garnishment– A non-bankruptcy legal proceeding whereby a plaintiff or creditor seeks to subject to his or her claim the future wages of a debtor. In other words, the creditor seeks to have part of the debtor’s future wages paid to the creditor for a debt to the creditor.
Writ– A written court order directing a person to take, or refrain from taking, a certain act.
341 hearing– (Pronounced three forty-one) In a bankruptcy proceeding, a meeting of creditors at which the debtor is questioned under oath by creditors, a trustee, an examiner, or the U.S. Trustee about his or her financial affairs.
2004 Exam– Provides parties with the opportunity to conduct an examination (similar to a deposition) of a person and/or documents, even though an adversary proceeding has not been filed. A subpoena is typically issued to appear and/or provide documents.
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