bankruptcy

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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.

Bibliography

See study by T. Jackson (1986).

Bankruptcy

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 ?
15 billion in exchange for liability releases--a significant recovery for a fraudulent conveyance claimant.
440) A different case is where the judgment creditor serves a third party's bank where the third party has not yet been held liable as the recipient of a fraudulent conveyance.
Fogelson, Toward a Rational Treatment of Fraudulent Conveyance Cases Involving Leveraged Buyouts, 68 N.
Consequently, veil-piercing and fraudulent conveyance laws provide remedies against corporate affiliates as well, and in our view, are generally appropriate to the same extent.
However, some courts holding that a fraudulent conveyance claim may be adjudicated by an Article I court do caution that, even if fraudulent conveyance claims are non-core, the bankruptcy court may make proposed findings of fact to the district court.
An attorney well-versed in fraudulent conveyance law can provide critical advice so as to maximize protection against a future avoidance action.
Spenser added the language of fraud and conveyancing to the images of magic in the story of Amoret and Scudamore in the 1596 edition of The Faerie Queene--thereby changing "Amoret's story from a mystical conception of marriage to a problem of fraudulent conveyances used to defeat purchasers" (79).
1] have no fraudulent conveyance rights for some reason.
If the very act considered a fraudulent conveyance is a permissible way to extinguish the CERCLA claim, it is difficult to say that government had a protected interest as a creditor of the grantor.
1940); Max Radin, Fraudulent Conveyances in California and the Uniform Fraudulent Conveyance Act, 27 CALIF.
Part I of this Note briefly examines the two theories of fraudulent conveyance recovery available to a bankruptcy trustee.
The section remained alert to oppose any attempts to reinstate bulk sales laws, which were replaced by fraudulent conveyance statutes several years ago, Murphy said, but no bills were introduced this year.