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.

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.

Liquidating reorganization
An informal term for a Chapter 11 proceeding when the company is essentially liquidated through one or more asset sales.

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

Core proceedings
Those proceedings that are inherent in and fundamental to the administration of a bankruptcy case.

Reorganization
The resolving of a Chapter 11 bankruptcy by the emergence of the debtor as a viable business. Generally, the company agrees with creditors on a plan for payment of their claims (plan of reorganization) and emerges from Chapter 11 after the plan is confirmed by the court.

Bankrupt
The entity that files a bankruptcy; the debtor; the insolvent entity. This is a non-technical term and is not used in the Bankruptcy Code.

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

Chapter Ten
A new chapter of the bankruptcy code proposed in 1992 and pending in 1993. Chapter 10, like Chapter XI of the old code, is designed for small business reorganizations.

Reverse leveraged buyout
When a company that was a leveraged buyout restructures its (usually unmanageable) debt by issuing new equity (usually in exchange for some or all of the outstanding debt incurred during the original leveraged buyout).