Chapter 22 Vocabulary

Question 1

An initial cash payment made when an expensive item, such as a house, is purchased. The payment represents a percentage of the purchase price, and the remainder if financed.

Answer 1

Down Payment

Question 2

A written instrument that gives a creditor an interest in, or lien on, a debtor’s real property as security for a debt.

Answer 2

Mortgage

Question 3

A mortgage provision requiring the borrower to pay a penalty if the mortgage is repaid in full within a certain period.

Answer 3

Prepayment Penalty Clause

Question 4

A form of property insurance that protects the holder against damage or loss of the holder’s home.

Answer 4

Homeowner’s Insurance

Question 5

The legal process by which a lender repossesses and disposes of property that has secured a loan.

Answer 5

Foreclosure

Question 6

A postponement of part of all of the payments on a loan for a limited time.

Answer 6

Forbearance

Question 7

A contract that describes the respective rights and responsibilities of a borrower and a lender as they try to resolve the borrower’s default.

Answer 7

Workout Agreement

Question 8

A sale of mortgaged property for less than the balance due on the mortgage loan.

Answer 8

Short Sale

Question 9

The right of a mortgagor who has breached the mortgage agreement to redeem or purchase the mortgaged property prior to the foreclosure proceedings.

Answer 9

Equitable Right of Redemption

Question 10

A right provided by statute in some states under which mortgagors can redeem or purchase their property after a judicial foreclosure for a limited time period, such as one year.

Answer 10

Statutory Right of Redemption

Question 11

A law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy.

Answer 11

Homestead Exemption

Question 12

One whose debts result primarily from the purchases of goods for personal, family, or household use.

Answer 12

Consumer-Debtor

Question 13

The sale of the nonexempt assets of a debtor and the distribution of the funds received to creditors.

Answer 13

Liquidation

Question 14

A person appointed by the court to manage the debtor’s funds.

Answer 14

Bankruptcy Trustee

Question 15

The termination of a bankruptcy debtor’s obligation to pay debts.

Answer 15

Discharge

Question 16

The document that is filed with a bankruptcy court to initiate bankruptcy proceedings.

Answer 16

Petition in Bankruptcy

Question 17

A court’s grant of assistance to a complaint. In bankruptcy proceedings, the order relieves the debtor of the immediate obligation to pay the debts listed in the bankruptcy petition.

Answer 17

Order for Relief

Question 18

In bankruptcy proceedings, the suspension of almost all litigation and other action by creditors against the debtor’s property. The stay is effective the moment the debtor files a petition in bankruptcy.

Answer 18

Automatic Stay

Question 19

All of the property owned by a person, including real estate and personal property.

Answer 19

Estate in Bankruptcy

Question 20

In bankruptcy proceedings, a property transfer or payment made by the debtor that favors one creditor over others.

Answer 20

Preference

Question 21

In the context of bankruptcy, a creditor who has received a preferential transfer from a debtor.

Answer 21

Preferred Creditor

Question 22

An agreement between a debtor and a creditor in which the debtor voluntarily agrees to pay a debt dischargeable in bankruptcy.

Answer 22

Reaffirmation Agreement

Question 23

In Chapter 11 bankruptcy proceedings, a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations.

Answer 23

Debtor in Possession (DIP)

Question 24

A provision of the Bankruptcy code that allows a court to confirm a debtor’s Chapter 11 reorganization plan even through only one class of creditors has accepted it.

Answer 24

Cram-Down Provision