Florida Business Bankruptcy Glossary – Key Terms & Definitions

Quick‑Look Table

🏛️ Bankruptcy Chapters (Federal)

Chapter 7 – Liquidation

• The business (corporation, LLC, partnership) ceases operations.
• A court‑appointed trustee sells non‑exempt assets and distributes proceeds to creditors.
• No discharge for the entity; the corporation is dissolved. U.S. Courts

Chapter 11 – Reorganization

• Business remains operational as a Debtor‑in‑Possession.
• Filing party proposes a repayment plan to restructure debt.
• Most common for large and mid‑size firms. IRS

Subchapter V – Small‑Business Streamline

• Applicable when total debt is < $7.5 million.
• Shorter deadlines, lower trustee fees, and a trustee is still appointed to assist the DIP.
• Created by the Small Business Reorganization Act of 2019. U.S. Trustee Program (DOJ)

Chapter 13 – Individual Repayment (Owner‑Focused)

• Used by sole‑proprietors or individual guarantors with regular income.
• Four‑to‑five‑year payment plan; excess debt may be discharged after completion.
• U.S. Courts

🔑 Core Bankruptcy Concepts

Automatic Stay

• Effective the instant a bankruptcy petition is filed.
• Stops lawsuits, foreclosures, repossessions, and most collection actions.
• Statutory basis: 28 U.S.C. § 362. Cornell Law

Bankruptcy Estate

• All legal and equitable interests of the debtor at filing.
• Managed by the trustee (Chapter 7) or the DIP (Chapter 11).
• Defined in 28 U.S.C. § 541. Cornell Law

Creditor

• Anyone to whom the debtor owes money or who holds a claim.
• May file a Proof of Claim to receive payment from the estate. Wikipedia

Debtor‑in‑Possession (DIP)

• Business retains control while restructuring under Chapter 11.
• Only replaced by a trustee if fraud or mismanagement is proven.
• Statute: 28 U.S.C. § 1101. Cornell Law

Discharge

• Court order releasing the debtor from personal liability for certain debts.
• Business Chapter 7 cases do **not** receive a discharge – the entity simply dissolves.
• Wikipedia

Proof of Claim

• Formal statement filed by a creditor stating the amount owed.
• Must be filed by the “bar date” to be considered for distribution.
• Official form: U.S. Courts Form 410

Trustee

• U.S. Trustee‑appointed official who oversees the case.
• In Chapter 7, the trustee liquidates assets; in Chapter 11, a trustee is appointed only for fraud or gross mismanagement.
• More info: U.S. Courts – Trustees

🌴 Florida‑Specific Terms

Florida Exemptions

• State statutes that protect certain personal property from the bankruptcy estate.
• The most notable is the **Florida Homestead Exemption**, which can shield a primary residence (subject to size and residency rules). Florida Bar

Secured Claim

• Debt backed by specific collateral (e.g., equipment, real estate).
• Creditor can enforce the lien and recover the collateral if the debt isn’t paid.
• Wikipedia

Unsecured Claim

• Debt with no specific collateral (e.g., trade payables, credit‑card balances).
• Typically paid only after secured claims are satisfied.
• Wikipedia

Preference

• Payment made to a creditor shortly before filing (usually 90 days for non‑insiders) that gives them more than other creditors.
• The trustee may “claw back” such payments into the estate. 28 U.S.C. § 547 (Cornell Law)

Fraudulent Transfer

• Asset transfer made with intent to hinder, delay or defraud creditors, or for less than reasonably equivalent value.
• Voidable if made within two years before the filing date. 28 U.S.C. § 548 (Cornell Law)

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