Bankruptcy Terms and Definitions

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

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

Chapter Twenty
An unofficial term describing the filing of a Chapter 7 proceeding followed by a Chapter 13.

Chapter Seven
Liquidation proceedings; generally assets are sold by a trustee and the company ceases operation. (Individuals may file Chapter 7 also.)

Chapter Twelve
Family farmer bankruptcies; created by Congress in 1986 (Chapter 12 became effective on November 26, 1986 and is now a permanent Chapter of the Bankruptcy Code); only a family owned farm business can qualify for Chapter 12

Skeleton filing
Term used at bankruptcy courts to describe a bankruptcy filing in which not all the necessary forms have been filed. Certain courts allow a case to commence if only certain important forms are filed so long as the balance of required forms are forthcoming within a certain period of time.

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.

Debtor-in-possession
The debtor which remains in control of operations; as opposed to having a trustee operate the company.

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.

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.