Bankruptcy

It is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. A declared state of bankruptcy can be requested by creditors in an effort to recoup a portion of what they are owed; however, in the overwhelming majority of cases, the bankruptcy is initiated by the bankrupt individual or organization.

The primary purpose of the laws of bankruptcy are: (1) to give an honest debtor a "fresh start" in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has property available for payment.

Bankruptcy allows debtors to resolve debts through the division of non-exempt assets among creditors. Additionally the declaration of bankruptcy allows debtors to be discharged of most of the financial obligations, after their non-exempt assets are distributed, even if their debts have not been paid in full. During the pendency of a bankruptcy proceeding, the "Debtor" is protected from extra-Bankruptcy action by creditors by a legally imposed "stay."

Bankruptcy in the United Kingdom

In the United Kingdom (UK), bankruptcy (in a strict legal sense) relates only to individuals and partnerships. Companies and other corporations enter into differently-named legal insolvency procedures: liquidation, administration and administrative receivership. However, the term 'bankruptcy' is often used (incorrectly) when referring to companies in the media and in general conversation.

A Trustee in bankruptcy must be either an Official Receiver (a civil servant) or a licensed insolvency practitioner.
Following the introduction of the Enterprise Act 2002, a UK bankruptcy will now normally last no longer than 12 months and may be less, if the Official Receiver files in Court a certificate that his investigations are complete.

It is expected that the UK Government's liberalisation of the UK bankruptcy regime will massively increase the number of bankruptcy cases; initial Government statistics appear to bear this out. It remains to be seen whether the leash has been loosened too far and whether the legislation will need reviewing if the system becomes too overheated with "debt-dumping" debtors.

Bankruptcy in the United States

Bankruptcy in the United States is a matter placed under Federal jurisdiction by the United States Constitution (in Article 1, Section 8), which allows Congress to enact "uniform laws on the subject of Bankruptcy throughout the United States." Its implementation, however, is found in statute law. The relevant statutes are incorporated within the Bankruptcy Code, located at Title 11 of the United States Code, and amplified by state law in the many places where Federal law either fails to speak or defers expressly to state law.

While bankruptcy cases are always filed in United States Bankruptcy Court (an adjunct to the U.S. District Courts), bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often highly dependent upon State law. State law therefore plays a major role in many bankruptcy cases, and it is often quite unwise to generalize bankruptcy issues across state lines.

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Also see:
Finance
Personal finance
Debt consolidation


• Debt
• Credit Report
• Unclaimed Money
• Structured Settlement
• Creditworthiness
• What is a Loan
• Annual Percentage Rate
• Origination Fee
• Point in a Mortgage
• Bankruptcy
• Foreclosure

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Bankruptcy ".