(redirected from Bankruptcies)
Also found in: Dictionary, Thesaurus, Medical, Legal, Financial.


in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most instances, to discharge the debtor from further liability. In the United States, bankruptcy is controlled by a federal law adopted in 1898 and amended several times, as by the Chandler Act (1938) and the Bankruptcy Reform Act (1978).

Bankruptcy proceedings may be voluntary (instituted by the debtor) or involuntary (instituted by creditors). The debtor may be insolvent—i.e., unable to pay all debts even if the full value of all assets were realized—or may become insolvent when current obligations mature. Bankruptcy is also permitted when the discharge of debts would otherwise be unduly delayed, e.g., if the debtor has fraudulently transferred property to put it out of a creditor's reach. When a person or corporation has declared or been adjudged bankrupt, preferred creditors (e.g., unpaid employees, or the federal government) are paid in full, and the other creditors share the proceeds of remaining assets.

The bankrupt individual receives more lenient treatment in the United States than in perhaps any other country, so that business initiative is not stifled by the threat of criminal or civil penalties following unintentional commercial failure. This ideal is evident in Chapter 11 of the bankruptcy code, which permits courts to reorganize the assets of failing businesses instead of ordering complete liquidation of these assets. The 1978 revision of the code made it easier for corporate management to remain in control of a company during reorganization. These more lenient provisions led to a rapid increase in filings in the 1980s and 1990s. In 2005 Congress passed a significant revision of the bankruptcy code affecting individuals, prompted in part by the increase in filings since 1978. Under the new law, it is harder for an individual to file a Chapter 7 bankruptcy, which extinguishes a person's debts, and it is easier for creditors to secure repayment of a debt over time. The changes were strongly supported by banks and credit card companies, but were also criticized by a number of bankruptcy experts for placing additional burdens on middle income families while not closing loopholes that benefit bankrupt corporations and wealthy individuals. Chapter 9 of the code provides for the reorganization of bankrupt municipalities.


See study by T. Jackson (1986).


See also Poverty.
Birotteau, César
ruined by bad speculations and dissipated life. [Fr. Lit.: Greatness and Decline of César Birotteau, Walsh Modern, 58]
Black Friday
day of financial panic (1869). [Am. Hist.: RHDC]
Black Tuesday
day of stock market crash (1929). [Am. Hist.: Allen, 238]
green cap
symbol of bankruptcy. [Eur. Hist.: Brewer Note-Book, 390–391]
Harland, Joe
drunk who loses fortune on Wall Street. [Am. Lit.: The Manhattan Transfer]
Hassan, Abu
pretends to be dead to avoid debts. [Ger. Opera: von Weber, Abu Hassan, Westerman, 138–139]
Henchard, Michael
loses business and social standing through bad financial planning. [Br. Lit.: Mayor of Casterbridge]
Lydgate, Tertius
driven deeper into debt on daily basis. [Br. Lit.: Middlemarch]
Panic of 1873
bank failures led to extended depression. [Am. Hist.: Van Doren, 267–268]
Queer Street
condition of financial insolvency. [Am. Usage: Misc.]
References in periodicals archive ?
Bankruptcies complicate carriers' dealings with credit card firms.
The BIA now has a part titled "International Insolvencies" dealing with foreign bankruptcies and Canadian assets.
Creditors have a high level of indifference to small business bankruptcies.
Karasik said his firm is seeing more Chapter 11 as well as other bankruptcies.
All these bankruptcies cost banks and other lenders an estimated $10 billion last year, a cost they passed on to their other customers in the form of higher interest rates.
The SOP's applicability to prepackaged chapter 11 bankruptcies.
Initial payments to essential vendors will probably increase, which means larger DIP loans, and creditors will have more power to demand information and to propose their own plans of reorganization, which could make Chapter 11 bankruptcies more contentious and difficult to resolve," said Greening.
Steve Smith, the trustee for the IFS related bankruptcies, has filed 105 lawsuits against individuals and companies that are affiliated with Hugo Pimienta seeking to recover damages in excess of $150 million.
By March, more than 60 percent of bankruptcy filings were chapter 7 cases (31,615) and not chapter 13 cases (19,481) for a total of 51,096 filings, more than twice as many total bankruptcies as were filed in January (25,005).
Also, under the new act, attorneys filing Chapter 7 bankruptcies will be held accountable for the accuracy of the consumer's information.
In particular, the Company's ability to access the markets for securitized receivables, its ability to manage credit risk related to consumer debt and the actual rate of bankruptcies experienced may cause the Company's actual results to differ from the forward looking statements.
The new law also has the potential to affect businesses contemplating bankruptcies adversely by creating much shorter and stringent deadlines when they try to "reorganize.