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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 ?
Everything you need to know in 60 minutes about important insurance issues that could take center stage in your clients' bankruptcy proceedings this year
Provide technical support to the Ministries of Justice of RS and FBiH in preparation of the bankruptcy proceedings reports;
The Ministry of Economy says that the main reasons why firms are so long in receivership is the fact that the court procedures led by the bankruptcy trustees take very long, that there are no interested buyers for the bankrupt company's assets, that the bankruptcy judges and trustees are replaced very often and that the bankruptcy trustees are disinterested in seeing fast resolution of the bankruptcy proceedings.
The IRS reasoning is simple: A bankruptcy proceeding also is a corporate reorganization with future benefits to the taxpayer.
responded that the solution would be to assess which of the companies can be profitable and try to privatize them, while others should go into regulated bankruptcy proceedings in which the workers would be given redundancy pays.
The modifications, he said, set closely defined deadlines and stipulate that bankruptcy proceedings should only take about 18 months.
The Ritter Ranch project - envisioned as a state-of-the-art, master- planned community in the hills of west Palmdale, south of Elizabeth Lake Road - has been entangled for years in lawsuits and bankruptcy proceedings.
As a result, bankrupts are likely to find their NOLs largely or entirely absorbed by debt discharge income incurred during the bankruptcy proceeding.
Additionally, no assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to each of these constituencies.
PALMDALE - A Newport Beach company is positioning itself for a second try at taking over the stalled 7,200-home Ritter Ranch project, which has been mired for more than five years in lawsuits and bankruptcy proceedings.
However, creditors also can initiate bankruptcy proceedings.
Emerging is the subject of bankruptcy proceedings in Delaware and the U.