Perfection
When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after
perfection. A mortgage is perfected by recording it with the county recorder; a lien in personal property is perfected
by filing a financing statement with the secretary of state. An unperfected lien is valid between the debtor and the
secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An
unperfected lien can be avoided by the trustee.
Personal Property
Property that is not real property or affixed to real property, such as cars, stock, furniture, etc.
Petition
The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes
the automatic stay. Events are frequently described as "prepetition", happening before the bankruptcy petition was
filed, and "post petition", after the bankruptcy.
Preference
A transfer to a creditor in payment of an existing debt made within certain time periods before the commencement of
the case. Preferences may be recovered by the trustee for the benefit of all creditors of the estate.
Pre-petition
Claims or events arising before the commencement of the bankruptcy case, that is, before the filing of the bankruptcy
petition. Generally only pre petition debts may be discharged in a bankruptcy proceeding.
Priority
The Bankruptcy Code establishes the order in which claims are paid from the bankruptcy estate. All claims in a higher
priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority share
pro rata. Claims are paid in this order: 1) costs of administration 2) priority claims and 3) general unsecured claims.
Secured claims are paid from the proceeds of liquidating the collateral which secured the claim.