(redirected from Bankruptcy proceedings)
Also found in: Dictionary, Thesaurus, Legal, Financial.


bankruptcy, 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).

The Columbia Electronic Encyclopedia™ Copyright © 2022, Columbia University Press. Licensed from Columbia University Press. All rights reserved.


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.]
Allusions—Cultural, Literary, Biblical, and Historical: A Thematic Dictionary. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
Additionally, Professor Shi's Draft grants recognition of bankruptcy proceedings commenced only by the domiciliary court.
Under insolvency law, he would be entitled to keep the property - even if the rest of the pier remains in the council''s hands - if he was the occupant when the bankruptcy proceedings began.
Experts say that the problematic Macedonian bankruptcy proceedings, except in the sphere of the judiciary, rest in the lack of will with banks and other creditors to push for opening of a bankruptcy procedure in firms that are unable to settle their debts.
But if the special resolution is voted down, the banks will abandon out-of-court restructuring and pursue bankruptcy proceedings under the Corporate Rehabilitation Law, they said.
She admitted to hiding her earnings, gained from telling her story, from a continuing bankruptcy proceeding against her.
The Chrysler case has also been widely regarded as setting a precedent for General Motors, which also is using a similar quick-sale strategy in its bankruptcy proceedings.
The sales took place April 16 as part of an auction established during the company's Chapter 11 bankruptcy proceedings, according to the U.S.
There are two basic types of bankruptcy proceedings. A filing under Chapter 7 is called liquidation.
Some of those customers formed Customers of Eclipse Aviation to represent the interests of owners and position holders as the company works its way through bankruptcy proceedings. According to the group, "In terms of dollar amount, customers are likely the largest constituency in Eclipse's Chapter ii case." Eclipse delivered 259 aircraft and took deposits estimated at $300 million.
The newspaper's publisher, Jamil Mroue, says the paper is in the midst of bankruptcy proceedings and could be closed down for good.
Leah has worked in high-profile bankruptcy proceedings in such industries as telecommunications, Internet and technology, integrated communications providers, insurance companies, marketing, metals manufacturing, national restaurant chains and franchises and real estate.
Aetna also has a reinsurance recoverable worth $163 million from a Lehman Brothers affiliate which is not part of the firm's bankruptcy proceedings, and it has no reinsurance with AIG.