Bankruptcy Terms and Definitions

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.

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

Voluntary bankruptcy
Bankruptcy filed by the debtor itself; data from the U.S. Administrative Office of the Courts subdivides bankruptcies into voluntary and involuntary.

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.

Cash collateral
Cash and cash equivalents held by the debtor in Chapter 11 subject to liens of other parties.

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.

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.

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.

Exclusivity (period of)
A debtor in Chapter 11 has the exclusive right to file a plan of reorganization for the first 120 days of its bankruptcy. Thereafter, unless the period of exclusivity is extended by the court, other parties may file reorganization plans.