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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).

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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 ?
With a bankruptcy filing, all or at least many of the creditors would have a potential fraudulent conveyance claim under [section] 523.
At least the garnishee knows that if the garnishee bought the thing from the debtor in good faith for value, the garnishee received the thing free and clear of a fraudulent conveyance right.
(66.) See generally Baird & Jackson, supra note 38 (arguing that the "inability of parties to opt out" of fraudulent conveyance law should limit its reach); Anthony Michael Sabino, Applying the Law of Fraudulent Conveyances to Bankrupt Leveraged Buyouts: The Bankruptcy Code's Increasing Leverage over Failed LBOs, 69 N.D.
(49) Fraudulent conveyance law is more complicated.
(294) These courts argue that a fraudulent conveyance claim can exist only if the conveyor is insolvent or imminently insolvent, and so the claim is "inextricably tied to the bankruptcy scheme." (295) These courts continue that, unlike Stern's counterclaim, which was not necessarily decided by adjudicating the underlying claim, a fraudulent conveyance claim is part of the process of deciding whether the creditor's proof of claim should be allowed.
The fraudulent conveyance remedy does not, however, quite fit the
If the company is solvent, then a constructively fraudulent conveyance action fails as a matter of law.
Fraudulent conveyance law may also apply even if you set things up before the big crash," says attorney David Genelly of Vanasco, Genelly and Miller, in Chicago.
Hy-Drive said it is the plaintiffs' position that CHEC's motion to stay the fraudulent conveyance is without merit since the existing legislation referred to by CHEC is based primarily on the assets alleged to have been fraudulently conveyed by Global Tech.
While the Sokols' premiss is the pervasiveness of law in Elizabethan England, Charles Ross's Elizabethan Literature and the Law of Fraudulent Conveyance has a narrower focus, arguing for the cultural dominance of a single law.
In Elizabethan Literature and the Law of Fraudulent Conveyance, Charles Ross offers a cogent, carefully researched contribution to this scholarship, exploring the reasons that laws about fraudulent conveyance dominated English legal and literary discourses between 1571 and 1601.
To avoid any allegation that a gift transfer violates a fraudulent conveyance statute, especially if the donor has current creditors, the gift must not render a donor insolvent.