Bankruptcy Terms and Definitions

Liquidation value
The aggregate value of a business if its assets are sold piecemeal.

Asset
An economic resource or item owned by a business that is expected to benefit its future operations.

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).

Disclosure statement
A comprehensive disclosure document sent to creditors when they are asked to vote on a plan of reorganization in Chapter 11.

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.

Chapter Eleven
Reorganization proceedings, generally for business entities; the debtor maintains control of the business in Chapter 11 (unless the Court appoints a trustee).

Bankruptcy Court
The federal tribunal where cases under the Bankruptcy Code are litigated.

Secured creditors
One of two general types of creditors of a company. Secured creditors have a lien on property of the company.

Adversary proceeding
Litigation within a bankruptcy proceeding instituted by the filing of a complaint.

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.