An arrangement negotiated between a debtor and creditor as a way to take care of a debt, by paying it off or through loan forgiveness. Workouts are often created to avoid bankruptcy or foreclosure proceedings.
A bankruptcy case filed by the debtor. In contrast, an "involuntary bankruptcy" case is filed by the debtor's creditors.
1) The implementation of a business plan to restructure a corporation, which may include transfers of stock between shareholders of two corporations in a merger. 2) In bankruptcy, a corporation in deep financial trouble may be given time to restructure itself while protected from creditors by the bankruptcy court. The theory is that if the business is able to get on its feet and either survive or be able to sell itself for a good price, the creditors will eventually collect. (See also: Chapter 11 bankruptcy)
1) In Chapter 7 bankruptcy, when the debtor obtains legal title to collateral for a debt by paying the creditor the replacement value of the collateral in a lump sum. For example, a debtor may redeem a car note by paying the lender the amount a retail vendor would charge for the car, considering its age and condition. 2) In foreclosure, the homeowner's right (usually granted by state statute), for a certain period of time, to redeem the mortgage and keep the house by refinancing and paying off the original mortgage.
An agreement that a debtor and a creditor enter into after a debtor has filed for bankruptcy, in which the debtor agrees to repay all or part of an existing debt after the bankruptcy case is over. For instance, a debtor might make a reaffirmation agreement with the holder of a car note that the debtor can keep the car and must continue to pay the debt after bankruptcy.
In bankruptcy, money received through insurance coverage, arbitration, mediation, settlement, or a lawsuit to pay for exempt property that has been damaged or destroyed. For example, if a debtor had the right to use a $30,000 homestead exemption, but his or her home was destroyed by fire, the debtor may instead exempt $30,000 of the insurance proceeds.
A type of debt that is paid first if any creditors are paid in a Chapter 7 bankruptcy case, and must be paid in full in a Chapter 13 bankruptcy case. Priority debts include alimony and child support, wages owed to employees, and fees owed to the trustee and the debtor's bankruptcy attorney.
The right to be ahead of the rights or claims of others. In bankruptcy law, the right to collect before other creditors is given to taxing authorities, the holders of court judgments, secured creditors, bankruptcy trustees, and bankruptcy attorneys. The right can also apply to mortgages, deeds of trusts, or liens, which are given priority in the order they were recorded.
In a Chapter 7 bankruptcy, when the debtor's current monthly income exceeds the family median income for his or her state, and the debtor cannot pass the means test, the court will presume that the debtor has enough income to fund a Chapter 13 plan. In this situation, the debtor will not be allowed to proceed with a Chapter 7 bankruptcy unless the debtor can prove that he or she is not abusing the Chapter 7 bankruptcy remedy.