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Absolute priority
The order of payment to the different classes of creditors mandated by the Bankruptcy Code. In theory, claims with higher priority are paid in full before other claims receive anything
Debtor
The entity seeking protection from creditors under the bankruptcy laws.
Set-off
The ability to discharge or reduce a debt by applying a counter claim between the same parties.
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.)
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.
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
Liquidating reorganization
An informal term for a Chapter 11 proceeding when the company is essentially liquidated through one or more asset sales.
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.
Bankruptcy Court
The federal tribunal where cases under the Bankruptcy Code are litigated.
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