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Related to Bankruptcy proceeding: Chapter 7 Proceedings


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 ?
This case emphasizes that a bankruptcy proceeding under Chapter 11 does not affect the S corporation status of an entity.
The business prospects and revenues also tend to degenerate with time, since some major customers still have a policy of not buying from companies in bankruptcy proceedings, and Savin's competitors liked nothing better than reminding prospects of Savin's unsettled future.
The Court, accordingly, found that removal of the various plans from the bankruptcy proceedings would disadvantage both the debtors and the creditors.
Obstacle: The IRS usually requires capitalization of fees incurred in connection with bankruptcy proceedings.
Relco had, in fact, submitted an offer about $1 million higher than the RR Property bid, but that offer was rejected - as not a qualifying bid - because it was contingent upon additional land acquisitions not covered by the bankruptcy proceedings.
In a chapter 7 bankruptcy proceeding, the Fifth Circuit in In re West Texas Marketing, 54 F3d 1194 (1995), reached a similar decision that unsecured interest was not deductible under Bkr.
If a business is in bankruptcy proceedings or is insolvent, the discount is excluded from income but, under Internal Revenue Code section 108(b), the business must reduce the size of its favorable tax "attributes" (such as net operating losses [NOLs], capital losses, credits and so forth).
Because the law regarding rent perfection prior to a bankruptcy filing varies from state to state, and the application of Federal bankruptcy standards to a particular situation is usually uncertain, Edelstein said, lenders rarely know with absolute certainty whether they will have an adequate claim to rents in a bankruptcy proceeding.
Hillsborough, the holding company for Walter Industries and 32 of its subsidiaries have been in Chapter 11 bankruptcy proceedings in Tampa for almost 5 years.
Nutri/System is currently operating in a Chapter XI bankruptcy proceeding.
The court has already approved the corporation's first day motions authorizing USG to continue to pay all employees and suppliers throughout the bankruptcy proceeding, and to continue to pay all employee and retiree benefits without interruption.
We are pleased with the recent developments that bring the company closer to emergence from a complex bankruptcy proceeding," said Federal-Mogul Chairman, President and Chief Executive Officer Jose Maria Alapont.