This is a situation in which a debtor is unable to pay his debts, the state or government through a trustee or other officer appointed for the purpose, takes possession of his property, which is then distributed among his creditors to satisfy their claims. This system has two fold purpose of:
- attaining an equitable distribution of the debtor’s property among his creditors.
- gives him (debtor) a chance to start life a new by declaring him free from the demand of his creditors.
Bankruptcy involves the creditor applying to the court who then declares the debtor bankrupt; takes possession of all his properties and assets of every kind and converts them to money and distributes them impartially among the creditors according to certain rules and at the joint expense of the creditors. The bankrupt will be asked to state what property he hand, where they are and give explanation of what had been cost recently to the court. It will be a crime for him to conceal or make away with any part of his property. The onus also lies on the creditors to show their title to a share by proving their debts. i.e. the creditor had to tender evidence that the debtor was actually owning them. In this manner the debtor is stripped of everything that he had that was saleable. He then gets a certificate that clears him past debts forever and he is allowed to face a New World.
Some of the defaults that render a debtor liable to be made bankrupt includes
- Assignment of property to trustee for the benefit of creditors.
- Fraudulent assignment of property
- Fraudulent preference of creditors
- Suffering an execution to be levied on his goods.
- Filing a declaration of his inability to pay debts to a court or presenting of a bankruptcy petition by the debtor against himself.
- Not complying with the requirement of a bankruptcy notice.
The court then follows its own discretion in the granting of the petition
Other definitions of bankruptcy on the Web:
- Bankruptcy is a legal declaration of the inability to repay debts. Bankruptcy should be viewed as a last resort. It will have a severe impact on a credit rating and will remain on a credit report for ten years. Furthermore, bankruptcy is not a solution in all cases. Federal student loans, Federal tax debt and child support are all exempt from bankruptcy protection. Bankruptcy agreements vary but there are two types of agreements that most people choose: 1-debt-consolidation-loans-and-services.org/glossary. html
- Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings – usdoj.gov/usao/eousa/kidspage/ glossary.html
- A proceeding in a federal court in which a debtor who owes more than his or her assets can receive debt relief by transferring his or her assets to a trustee or agreeing to reorganization of assets and liabilities. Usually, at least two years must elapse from the discharge of the bankruptcy before lenders will consider making a loan to someone who had declared bankruptcy – gehomebuyerresources.com/ Homebuyer/HomebuyerResources/ glossary.asp
- a state of complete lack of some abstract property; “spiritual bankruptcy”; “moral bankruptcy”; “intellectual bankruptcy” – cogsci.princeton.edu/cgi-bin/webwn
- inability to discharge all your debts as they come due; “the company had to declare bankruptcy”; “fraudulent loans led to the failure of many banks” – cogsci.princeton.edu/cgi-bin/webwn
- a legal process intended to insure equality among the creditors of a corporation declared in bankruptcy – cogsci.princeton.edu/cgi-bin/webwn
- A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee – nmmfa.org/consumer /consGlosary_of_Terms.htm
- A legal way to seek relief from creditors. Bankruptcy must be filed for in court, and has serious long-term financial implications for a person’s credit history. In bankruptcy proceedings, student loans less than five years old can be challenged by the lender – sfa.kent.edu/NEWsfa/frames/ Glossary.htm
- A tactic that individuals use to relieve themselves of debts and/or liabilities when they are no longer able to repay – americandreamaker.com/tools/glossary/
- A person’s legal declaration that he or she is legally insolvent. There are two types of bankruptcy: Involuntary Bankruptcy, where creditors or lenders file a petition against the debtor (person in debt), and Voluntary Bankruptcy, where the debtor files a petition claiming inability to meet creditors’ requirements. A court decides whether or not a debtor can declare bankruptcy – free-credit-report-free-credit-report.net/credit_glossary.htm
