How Chapter 11 Works How to File a Claim Terms and Definitions

TERMS AND DEFINITIONS     Administrative Claim Generally includes all obligations incurred by a debtor after the commencement of its bankruptcy case. Administrative claims are entitled to payment priority and, for ordinary business expenses, are paid in the ordinary course of the debtor's business. Automatic Stay A federal injunction triggered by a Chapter 11 filing, which prevents most third parties from taking or continuing any formal, informal or other action to collect monies or property from the debtor or its estate. The "Automatic Stay" freezes all lawsuits against a company and prevents creditors from seizing a company's assets. Bankruptcy Code The collection of federal laws that govern issues having to do with corporate or personal bankruptcy. Bankruptcy Petition A legal document filed with the Bankruptcy Court that initiates a bankruptcy case. The petition contains the Debtor's supporting documentation including financial information. Bar Date This is the last date on which a proof of claim document can be filed. The Bankruptcy Court will establish the Bar Date followed by a notice and announcement of the Bar Date sent to creditors. Chapter 11 The part of the U.S. Bankruptcy Code that covers proceedings in which a company maintains control of the business while it reorganizes its debts, liabilities and finances. Claim Any debt or other payment obligation incurred prior to the bankruptcy filing date. Pre-petition claims typically cannot be paid pursuant to a plan of reorganization. Claims A creditor makes a claim against a debtor for money owed. Confirmation Confirmation is the official approval of the Plan of Reorganization by the Bankruptcy Court. Creditor An entity that has a claim against the debtor that arose prior to the date that the debtor filed for Chapter 11 protection. Creditor's Committee A group of creditors appointed by the U.S. Trustee to act on behalf of all creditors during the reorganization process. Debtor The debtor is the company or person seeking protection from creditors under the U.S. Bankruptcy Code. Debtor - In - Possession A debtor that continues to operate its business while retaining possession of its assets and property. Debtor - In - Possession (DIP) Financing A new credit line provided to a debtor after filing Chapter 11, which will help ensure that it meets its ongoing operating obligations. Discharge Discharge is the legal term for the elimination of the company's pre-petition liabilities or its debts through bankruptcy. Disclosure Statement A detailed document providing an overview of the debtors financial condition, business plan and outlook, which is used by creditors to help determine whether or not to approve a proposed plan of reorganization. Exclusivity Period The period during a Chapter 11 case in which the debtor has the exclusive right to submit a proposed plan of reorganization to the court. This period initially lasts 120 days (four months), but can be extended with the court's permission. Petition Date The date that a debtor commences a Chapter 11 case by filing a bankruptcy petition. Plan of Reorganization A formal document that describes how a debtor will satisfy the claims of all its creditors. Many plans call for a combination of cash, notes and/or equity to repay its creditors. Pre-Petition Before the date filing. Post-Petition After the date filing. Priority Claim Certain classes of claims are given priority over all other claims by the Bankruptcy Code, such as claims for unpaid wages or taxes. Claims must be paid in order of priority. Proof of Claim The Proof of Claim is the form filed with the Bankruptcy Court that provides the details of a Creditor's Pre-petition Claim. Reorganized Debtor Upon receiving approval of the Plan of Reorganization from the Bankruptcy Court, the plan becomes effective and the company emerges from Chapter 11. The company is then considered reorganized. Section 341 Meeting The first time that the company and its creditors formally meet after the filing. Secured Claim A creditor's claim that is backed by the pledge of some asset owned by a debtor. A mortgage on a building or warehouse is an example of a secured claim. United States Trustee An individual appointed by the U.S. Attorney General to supervise all bankruptcy cases filed in a particular district. The role of the United States Trustee is to interview the debtor shortly after the filing of the case, to schedule the first meeting of the creditors, to inform the debtor of its duties and responsibilities, to ensure that the debtor complies with its duties and responsibilities, to appoint a creditors' committee, to apply to the Bankruptcy Court for appropriate relief and to make recommendations to the Court. Unsecured Claim A creditor's claim that is not backed by any asset owned by the debtor.