Bankruptcy
Overview
 
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor.

Bankruptcy is not the only legal status that an insolvent person or organisation may have, and the term bankruptcy is therefore not the same as insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

. In some countries, including the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, bankruptcy is limited to individuals, and other forms of insolvency proceedings, for example liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

 and administration, are applied to companies.
Encyclopedia
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor.

Bankruptcy is not the only legal status that an insolvent person or organisation may have, and the term bankruptcy is therefore not the same as insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

. In some countries, including the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, bankruptcy is limited to individuals, and other forms of insolvency proceedings, for example liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

 and administration, are applied to companies. In the United States the term bankruptcy is applied more broadly to formal insolvency proceedings.

Etymology

The word bankruptcy is formed from the ancient Latin
Latin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...

 bancus (a bench or table), and ruptus (broken). A "bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...

" originally referred to a bench, which the first bankers had in the public places, in markets, fairs, etc. on which they tolled their money, wrote their bills of exchange
Negotiable instrument
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...

, etc. Hence, when a banker failed, he broke his bank, to advertise to the public that the person to whom the bank belonged was no longer in a condition to continue his business. As this practice was very frequent in Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...

, it is said the term bankrupt is derived from the Italian
Italian language
Italian is a Romance language spoken mainly in Europe: Italy, Switzerland, San Marino, Vatican City, by minorities in Malta, Monaco, Croatia, Slovenia, France, Libya, Eritrea, and Somalia, and by immigrant communities in the Americas and Australia...

 banca rotta, broken bank (see e.g. Ponte Vecchio
Ponte Vecchio
The Ponte Vecchio is a Medieval stone closed-spandrel segmental arch bridge over the Arno River, in Florence, Italy, noted for still having shops built along it, as was once common. Butchers initially occupied the shops; the present tenants are jewellers, art dealers and souvenir sellers...

).

History

In Ancient Greece
Ancient Greece
Ancient Greece is a civilization belonging to a period of Greek history that lasted from the Archaic period of the 8th to 6th centuries BC to the end of antiquity. Immediately following this period was the beginning of the Early Middle Ages and the Byzantine era. Included in Ancient Greece is the...

, bankruptcy did not exist. If a man owed and he could not pay, he and his wife, children or servants were forced into "debt slavery", until the creditor recouped losses via their physical labour
Manual labour
Manual labour , manual or manual work is physical work done by people, most especially in contrast to that done by machines, and also to that done by working animals...

. Many city-states in ancient Greece limited debt slavery to a period of five years and debt slaves had protection of life and limb, which regular slaves did not enjoy. However, servants of the debtor could be retained beyond that deadline
Time limit
A time limit or deadline is a narrow field of time, or particular point in time, by which an objective or task must be accomplished.In project management, deadlines are most often associated with milestone goals....

 by the creditor and were often forced to serve their new lord for a lifetime, usually under significantly harsher conditions.

In the Torah
Torah
Torah- A scroll containing the first five books of the BibleThe Torah , is name given by Jews to the first five books of the bible—Genesis , Exodus , Leviticus , Numbers and Deuteronomy Torah- A scroll containing the first five books of the BibleThe Torah , is name given by Jews to the first five...

, or Old Testament
Old Testament
The Old Testament, of which Christians hold different views, is a Christian term for the religious writings of ancient Israel held sacred and inspired by Christians which overlaps with the 24-book canon of the Masoretic Text of Judaism...

, every seventh year is decreed by Mosaic Law as a Sabbatical year
Sabbatical year
Sabbatical or a sabbatical is a rest from work, or a hiatus, often lasting from two months to a year. The concept of sabbatical has a source in shmita, described several places in the Bible...

 wherein the release of all debts that are owed by members of the community is mandate
Mandate (theology)
In Christian theology, a mandate is an order given from God that must be obeyed without question. For example, the mandate given to Abraham to offer his son Isaac as a sacrifice to God....

d, but not of "foreigners". The seventh Sabbatical year, or forty-ninth year, is then followed by another Sabbatical year known as the Year of Jubilee
Jubilee (Biblical)
The Jubilee year is the year at the end of seven cycles of Sabbatical years , and according to Biblical regulations had a special impact on the ownership and management of land in the territory of the kingdoms of Israel and of Judah; there is some debate whether it was the 49th year The Jubilee...

 wherein the release of all debts is mandated, for fellow community members and foreigners alike, and the release of all debt-slaves is also mandated. The Year of Jubilee is announced in advance on the Day of Atonement
Day of Atonement
Day of Atonement may refer to:*Yom Kippur, the Jewish Day of Atonement* Day of Atonement , a national day established in 1995 by the Nation of Islam...

, or the tenth day of the seventh Biblical month
Hebrew calendar
The Hebrew calendar , or Jewish calendar, is a lunisolar calendar used today predominantly for Jewish religious observances. It determines the dates for Jewish holidays and the appropriate public reading of Torah portions, yahrzeits , and daily Psalm reading, among many ceremonial uses...

, in the forty-ninth year by the blowing of trumpets throughout the land of Israel.

In Islamic teaching, according to the Qur'an
Qur'an
The Quran , also transliterated Qur'an, Koran, Alcoran, Qur’ān, Coran, Kuran, and al-Qur’ān, is the central religious text of Islam, which Muslims consider the verbatim word of God . It is regarded widely as the finest piece of literature in the Arabic language...

, an insolvent person was deemed to be allowed time to be able to pay out his debt. This is recorded in the Qur'an's second chapter (Sura
Sura
A sura is a division of the Qur'an, often referred to as a chapter. The term chapter is sometimes avoided, as the suras are of unequal length; the shortest sura has only three ayat while the longest contains 286 ayat...

 Al-Baqara
Al-Baqara
Sura al-Baqarah is the second and longest chapter of the Qur'an. It is a Medinan sura and comprises 286 verses, including the single longest verse in the Qur'an...

), Verse 280, which notes: "And if someone is in hardship, then let there be postponement until a time of ease. But if you give from your right as charity, then it is better for you, if you only knew."

The Statute of Bankrupts
Statute of Bankrupts Act 1542
The Statute of Bankrupts was an Act passed by the Parliament of England in 1542. It was the first statute under English law dealing with bankruptcy or insolvency...

 of 1542 was the first statute under English law
English law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...

 dealing with bankruptcy or insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

. Bankruptcy is also documented in East Asia
East Asia
East Asia or Eastern Asia is a subregion of Asia that can be defined in either geographical or cultural terms...

. According to al-Maqrizi
Al-Maqrizi
Taqi al-Din Ahmad ibn 'Ali ibn 'Abd al-Qadir ibn Muhammad al-Maqrizi ; Arabic: , was an Egyptian historian more commonly known as al-Maqrizi or Makrizi...

, the Yassa
Yassa
Yassa was a secret written code of law created by Genghis Khan. It was the principal law under the Mongol Empire even though no copies were made available...

 of Genghis Khan
Genghis Khan
Genghis Khan , born Temujin and occasionally known by his temple name Taizu , was the founder and Great Khan of the Mongol Empire, which became the largest contiguous empire in history after his death....

 contained a provision that mandated the death penalty
Capital punishment
Capital punishment, the death penalty, or execution is the sentence of death upon a person by the state as a punishment for an offence. Crimes that can result in a death penalty are known as capital crimes or capital offences. The term capital originates from the Latin capitalis, literally...

 for anyone who became bankrupt three times.

A failure of a nation to meet bond repayments has been seen on many occasions. Philip II
Philip II of Spain
Philip II was King of Spain, Portugal, Naples, Sicily, and, while married to Mary I, King of England and Ireland. He was lord of the Seventeen Provinces from 1556 until 1581, holding various titles for the individual territories such as duke or count....

 of Spain
Spanish Empire
The Spanish Empire comprised territories and colonies administered directly by Spain in Europe, in America, Africa, Asia and Oceania. It originated during the Age of Exploration and was therefore one of the first global empires. At the time of Habsburgs, Spain reached the peak of its world power....

 had to declare four state bankruptcies
Sovereign default
A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full. It may be accompanied by a formal declaration of a government not to pay or only partially pay its debts , or the de facto cessation of due payments...

 in 1557, 1560, 1575 and 1596. According to Kenneth S. Rogoff, "Although the development of international capital markets was quite limited prior to 1800, we nevertheless catalog the numerous defaults of France, Portugal, Prussia, Spain, and the early Italian city-states. At the edge of Europe, Egypt, Russia, and Turkey have histories of chronic default as well."

Modern law and debt restructuring

The principal focus of modern insolvency legislation and business debt restructuring
Debt restructuring
Debt restructuring is a process that allows a private or public company – or a sovereign entity – facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its...

 practices no longer rests on the elimination of insolvent entities but on the remodeling of the financial and organisational structure of debtors experiencing financial distress
Financial distress
Financial distress is a term in Corporate Finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. Sometimes financial distress can lead to bankruptcy...

 so as to permit the rehabilitation and continuation of their business.

For private households, it is argued to be insufficient to merely dismiss debts after a certain period. It is important to assess the underlying problems and to minimise the risk of financial distress to re-occur. It has been stressed that debt advice, a supervised rehabilitation period, financial education and social help to find sources of income and to manage household expenditures better need to be equally provided during this period of rehabilitation (Reifner et al., 2003; Gerhardt, 2009; Frade, 2010). In most EU Member States, debt discharge is conditioned by a partial payment obligation and by a number of requirements concerning the debtor’s behavior. In the United States (US), discharge is conditioned to a lesser extent. Nevertheless, it should be noted that the spectrum is broad in the EU, with the UK coming closest to the US system (Reifner et al., 2003; Gerhardt, 2009; Frade, 2010). Other Member States do not provide the option of a debt discharge. Spain, for example, passed a bankruptcy law (ley concursal) in 2003 which provides for debt settlement plans that can result in a reduction of the debt (maximally half of the amount) or an extension of the payment period of maximally five years (Gerhardt, 2009); nevertheless, it does not foresee debt discharge.

Fraud

Bankruptcy fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...

 is a white-collar crime
White-collar crime
Within the field of criminology, white-collar crime has been defined by Edwin Sutherland as "a crime committed by a person of respectability and high social status in the course of his occupation" . Sutherland was a proponent of Symbolic Interactionism, and believed that criminal behavior was...

. While difficult to generalise across jurisdictions, common criminal acts under bankruptcy statutes typically involve concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing
Fee fixing scandal
In September 2005, fifty British Independent schools were found guilty of operating a fee-fixing cartel by the Office of Fair Trading. The OFT found that the schools had exchanged details of their planned fee increases over three academic years between 2001-02 and 2003-04, in breach of the...

 or redistribution arrangements. Falsifications on bankruptcy forms often constitute perjury
Perjury
Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...

. Multiple filings are not in and of themselves criminal, but they may violate provisions of bankruptcy law. In the U.S., bankruptcy fraud statutes are particularly focused on the mental state
Mens rea
Mens rea is Latin for "guilty mind". In criminal law, it is viewed as one of the necessary elements of a crime. The standard common law test of criminal liability is usually expressed in the Latin phrase, actus non facit reum nisi mens sit rea, which means "the act does not make a person guilty...

 of particular actions. Bankruptcy fraud is a federal crime
Federal crime
In the United States, a federal crime or federal offense is a crime that is made illegal by U.S. federal legislation. In the United States, criminal law and prosecution happen at both the federal and the state levels; thus a “federal crime” is one that is prosecuted under federal criminal law, and...

 in the United States.

Bankruptcy fraud should be distinguished from strategic bankruptcy
Strategic bankruptcy
A strategic bankruptcy may occur when an otherwise solvent company makes use of the bankruptcy laws for some specific business purpose. For example, in 2002 Kmart filed chapter 11 for protection from creditors; however one of the main problems affecting Kmart's cash flow and therefore liquidity...

, which is not a criminal
Crime
Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...

 act, but may work against the filer.

All assets must be disclosed in bankruptcy schedules whether or not the debtor believes the asset has a net value. This is because once a bankruptcy petition is filed, it is for the creditors, not the debtor to decide whether a particular asset has value. The future ramifications of omitting assets from schedules can be quite serious for the offending debtor. A closed bankruptcy may be reopened by motion of a creditor or the U.S. trustee if a debtor attempts to later assert ownership of such an "unscheduled asset" after being discharged of all debt in the bankruptcy. The trustee may then seize the asset and liquidate it for the benefit of the (formerly discharged) creditors. Whether or not a concealment of such an asset should also be considered for prosecution as fraud and/or perjury
Perjury
Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...

 would then be at the discretion of the judge and/or U.S. Trustee.

Australia

The Bankruptcy Act 1966 (Commonwealth) is the legislation that governs bankruptcy in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

. Only individuals can become bankrupt; insolvent companies go into liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

 or administration (see administration (insolvency)
Administration (insolvency)
As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions. It functions as a rescue mechanism for insolvent entities and allows them to carry on running their business. The process – an alternative to liquidation – is often known as going...

). There are three "parts" of the act under which the vast majority of "acts of bankruptcy" fall. Part IV (Full Bankruptcy), Part IX Debt Agreements and Part X Personal Insolvency Agreements. Agreements refer specifically to arrangements between creditors and debtors, whereas Part IV relates to full bankruptcy and is generally synonymous with "bankruptcy".

A person or debtor can declare himself or herself bankrupt by lodging a debtor's petition with the Official Receiver, which is the Insolvency and Trustee Service Australia (ITSA). A person can also be made bankrupt after a creditor's petition results in the making of a sequestration order
Sequestration (law)
Sequestration is the act of removing, separating, or seizing anything from the possession of its owner under process of law for the benefit of creditors or the state.-Etymology:...

 in the Federal Magistrates Court. To declare bankruptcy or for a creditors petition to be lodged, a minimum debt of $5,000 is required.

All bankrupts are required to lodge a Statement of Affairs document with ITSA, which includes important information about their assets and liabilities. A bankruptcy cannot be annulled until this document has been lodged.

Ordinarily, a Part IV bankruptcy lasts three years from the filing of the Statement of Affairs with ITSA. In the case of a debtor's petition, the Statement of Affairs is filed with the petition and the three year period commences immediately. However, in the case of a creditor's petition, the Statement of Affairs will rarely be filed on the same day the court order is made. If the bankrupt fails to lodge the document within a certain period of time, he or she can be prosecuted and fined.

A Bankruptcy Trustee (in most cases this is the Official Receiver) is appointed to deal with all matters regarding the administration of the bankrupt estate. The Trustee's job includes notifying creditors of the estate and dealing with creditor inquiries; ensuring that the bankrupt complies with his or her obligations under the Bankruptcy Act; investigating the bankrupt's financial affairs; realising funds to which the estate is entitled under the Bankruptcy Act and distributing dividends to creditors if sufficient funds become available.

For the duration of their bankruptcy, all bankrupts have certain restrictions placed upon them under the Act. For example, a bankrupt must obtain the permission of his or her trustee to travel overseas. Failure to do so may result in the bankrupt being stopped at the airport by the Australian Federal Police. Additionally, a bankrupt is required to provide his or her Trustee with details of income and assets. If the bankrupt does not comply with the Trustee's request to provide details of income, the Trustee may have grounds to lodge an Objection to Discharge, which has the effect of extending the bankruptcy for a further five years.

The realisation of funds usually comes from two main sources: the bankrupt's assets and the bankrupt's wages. There are certain assets that are protected, referred to as "protected assets". These include household furniture and appliances, tools of the trade and vehicles up to a certain value. All other assets of value will be sold. If a house or car is above a certain value, the bankrupt can buy the interest back from the estate in order to keep the asset. If the bankrupt does not do this, the interest vests in the estate and the trustee is able to take possession of the asset and sell it.

The bankrupt will have to pay income contributions if his or her income is above a certain threshold. The threshold is indexed biannually in March and September, and varies according to the number of dependents the bankrupt has. The income contributions liability is calculated by halving the amount of income that exceeds the threshold. If the bankrupt fails to pay the contributions due, the Trustee can issue a notice to garnishee the bankrupt's wages. If that is not possible, the Trustee may lodge an Objection to Discharge, effectively extending the bankruptcy for a further five years.

Bankruptcies can be annulled prior to the expiration of the normal three year period if all debts are paid out in full. Sometimes a bankrupt may be able to raise enough funds to make an Offer of Composition to creditors, which would have the effect of paying the creditors some of the money they are owed. If the creditors accept the offer, the bankruptcy can be annulled after the funds are received.

After the bankruptcy is annulled or the bankrupt has been automatically discharged, the bankrupt's credit report status will be shown as "discharged bankrupt" for some years. The number of years varies depending on the company issuing the report, but the report will eventually cease to record that information.

Certain limited information on Bankruptcy Law in Australia can be found at the ITSA web site.

Brazil

In Brazil, the Bankruptcy Law (11.101/05) disciplines judicial or extrajudicial recuperation & Bankruptcy and is only applicable to private companies, except for financial institutions, credit cooperatives, consortia, entity of supplementary schemes, societies operating health care plan, society of capitalisation and other entities legally treated as issues. This is not applicable to public companies.

Current law covers three legal proceedings. The first one is bankruptcy itself ("Falência"). Bankruptcy is the judicial liquidation procedure for an insolvent merchant that promotes the removal of the debtor from its activities, aiming to preserve and optimise productive use of assets, assets and productive resources, including intangible assets, of the company. The final goal of bankruptcy is to liquidate company assets and debtors payment.

The second one concerns Judicial Recuperation ("Recuperação Judicial"). Its goal is to allow the overcoming of the economic-financial crisis situation of the debtor, in order to allow the continuation of the source producer, the employment of workers and the interests of creditors, promoting, thus, the preservation of the company, its social function and stimulate the economic activity. It's a judiciary procedure required by the debtor who exercice its activities more than 2 years and have to be approval by the judge.

The Extrajudicial Recuperation ("Recuperação Extrajudicial") is a private negotiation that involves creditors and debtors and, as the judicial recuperation, also have to be approved by Judiciary power.

Canada

Bankruptcy in Canada is governed by the Bankruptcy and Insolvency Act and is applicable to businesses and individuals. The office of the Superintendent of Bankruptcy
Superintendent of Bankruptcy
Superintendent of Bankruptcy The role of the Superintendent of Bankruptcy is to ensure that bankruptcies and insolvencies in Canada are conducted in a fair and orderly manner.As stated on the :...

, a federal agency, is responsible for ensuring that bankruptcies are administered in a fair and orderly manner. Trustees in bankruptcy
Trustee in bankruptcy
A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate.- United States :In the United States, a Trustee in Bankruptcy is a person who is appointed by the United States Department of Justice or by the creditors involved in a bankruptcy case.In a...

 administer bankruptcy estates.

Bankruptcy is filed when a person or a company becomes insolvent and cannot pay their debts as they become due.

Duties of trustees

Some of the duties of the trustee in bankruptcy are to:
  • Review the file for any fraudulent preferences or reviewable transactions
  • Chair meetings of creditors
  • Sell any non-exempt assets
  • Object to the bankrupt's discharge
  • Distribute funds to creditors

Creditors' meetings

Creditors become involved by attending creditors' meetings. The trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...

 calls the first meeting of creditors for the following purposes:
  • To consider the affairs of the bankrupt
  • To affirm the appointment of the trustee or substitute another in place thereof
  • To appoint inspectors
  • To give such directions to the trustee as the creditors may see fit with reference to the administration of the estate.

Consumer proposals in Canada

In Canada, a person can file a consumer proposal as an alternative to bankruptcy. A consumer proposal is a negotiated settlement between a debtor and their creditors.

A typical proposal would involve a debtor making monthly payments for a maximum of five years, with the funds distributed to their creditors. Even though most proposals call for payments of less than the full amount of the debt owing, in most cases, the creditors will accept the deal, because if they do not, the next alternative may be personal bankruptcy, where the creditors will get even less money. The creditors have 45 days to accept or reject the consumer proposal. Once the proposal is accepted the debtor makes the payments to the Proposal Administrator each month (or as otherwise stipulated in their proposal), and the creditors are prevented from taking any further legal or collection action. If the proposal is rejected, the debtor is returned to his prior insolvent state and may have no alternative but to declare personal bankruptcy.

A consumer proposal can only be made by a debtor with debts to a maximum of $250,000 (not including the mortgage on their principal residence). If debts are greater than $250,000, the proposal must be filed under Division 1 of Part III of the Bankruptcy and Insolvency Act
Bankruptcy and Insolvency Act (Canada)
The Bankruptcy and Insolvency Act is the statute that regulates the law on bankruptcy and insolvency in Canada. It governs bankruptcies, consumer and commercial proposals, and receiverships in Canada....

. The assistance of a Proposal Administrator is required. A Proposal Administrator is generally a licensed trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...

 in bankruptcy, although the Superintendent of Bankruptcy
Superintendent of Bankruptcy
Superintendent of Bankruptcy The role of the Superintendent of Bankruptcy is to ensure that bankruptcies and insolvencies in Canada are conducted in a fair and orderly manner.As stated on the :...

 may appoint other people to serve as administrators.

In 2006, there were 98,450 personal insolvency filings in Canada: 79,218 bankruptcies and 19,232 consumer proposals.

Ireland

Bankruptcy in Ireland applies only to natural person
Natural person
Variously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...

s. Other insolvency processes including liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

 and examinership
Examinership
Examinership is a process in Irish law whereby the protection of the Court is obtained to assist the survival of a company. It allows a company to restructure with the approval of the High Court....

 are used to deal with corporate insolvency.

Irish bankruptcy law has been the subject of significant recent comment, from both government sources and the media, as being in need of reform. Part 7 of the Civil Law (Miscellaneous Provisions) Act 2011 has started this process and the government has commited to further reform.

India

India does not have a clear law on corporate bankruptcy even though individual bankruptcy laws have been in existence since 1874. The current law in force was enacted in 1920 called Provincial Insolvency Act.

Legal meaning of the terms bankruptcy, insolvency, liquidation and dissolution are contested in the Indian legal system. There is no regulation or statute legislated upon bankruptcy which denotes a condition of inability to meet a demand of a creditor as is common in many other jurisdictions.

Winding up of companies is in the jurisdiction of the Courts which can take a decade even after the Company has actually been declared
insolvent. On the other hand, supervisory restructuring at the behest of The Board of Industrial and Financial Reconstruction is generally undertaken using receivership by a Public Finance Institution.

The Netherlands

The Dutch bankruptcy law is governed by the Dutch Bankruptcy Code ("Faillissementswet"). The code covers three separate legal proceedings. The first is the bankruptcy ("Faillissement"). The goal of the bankruptcy is the liquidation of the assets of the company. The bankruptcy applies to individuals and companies. The second legal proceeding in the Faillissementswet is the "Surseance". The Surseance only applies to companies. Its goal is to reach an agreement with the creditors of the company. The third proceeding is the "Schuldsanering". This proceeding is designed for individuals only.

Switzerland

Under Swiss
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....

 law, bankruptcy can be a consequence of insolvency
Insolvency
Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

. It is a court-ordered form of debt enforcement proceedings that applies, in general, to registered commercial entities only. In a bankruptcy, all assets of the debtor are liquidated under the administration of the creditors, although the law provides for debt restructuring options similar to those under Chapter 11 of the U.S. Bankruptcy code.

Sweden

In Sweden, bankruptcy (Swedish: konkurs) is a process that may involve a company or individual. A creditor or the company itself can apply for bankruptcy. An external bankruptcy manager will take over the company or the assets of the person, trying to sell as much as possible. A person or a company in bankruptcy can not access its assets (with some exceptions).

The formal bankruptcy process is rarely carried out for individuals. Creditors can claim money through the Enforcement Administration anyway, and creditors do not usually benefit from the bankruptcy of individuals because there are costs of a bankruptcy manager which has priority. Unpaid debts remain after bankruptcy for individuals. People who are deeply in debt can obtain a debt arrangement procedure (Swedish:skuldsanering). On application, they obtain a payment plan under which they pay as much as they can for five years, and then all remaining debts are cancelled. Debts that are derived from being subjected to a ban on business operations (issued by court, commonly for tax fraud and/or fraudulent business practices) or owed to a crime victim as compensation for damages are exempted from this and like before this process was introduced in 2006 will remain life-long. The most common reasons for personal insolvency in Sweden are illness, unemployment, divorce or company bankruptcy, not the reckless spending claimed by politicians and debt collection agencies when they describe the problem with deep personal debts.

United Kingdom

In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

, bankruptcy (in a strict legal sense) relates only to individuals (including sole proprietors
Sole Trader Insolvency
According to the Office for National Statistics, sole proprietors represented 23.8% of all UK enterprise in 2010. Of that number, more than half a million sole traders were operating via the PAYE or VAT system alone. Sole traders are a distinct legal entity, operating as one type of UK business...

) and partnerships. Companies and other corporations enter into differently-named legal insolvency procedures: liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

 and administration (administration order and administrative receivership). However, the term 'bankruptcy' is often used when referring to companies in the media and in general conversation. Bankruptcy in Scotland is referred to as sequestration
Sequestration (law)
Sequestration is the act of removing, separating, or seizing anything from the possession of its owner under process of law for the benefit of creditors or the state.-Etymology:...

. To apply for your own bankruptcy in Scotland you must have more than £1500 of debt.

A trustee in bankruptcy
Trustee in bankruptcy
A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate.- United States :In the United States, a Trustee in Bankruptcy is a person who is appointed by the United States Department of Justice or by the creditors involved in a bankruptcy case.In a...

 must be either an Official Receiver
Official Receiver
An officer of the Insolvency Service of the United Kingdom, the Official Receiver is an officer of the court to which he is attached. The OR is therefore answerable to the courts for carrying out the courts' orders and for fulfilling his duties under law...

 (a civil servant) or a licensed insolvency practitioner
Insolvency practitioner
In the United Kingdom, only an authorised or licensed Insolvency Practitioner may be appointed in relation to formal insolvency procedures.Quite often IPs have an accountancy background...

. Current law in England and Wales derives in large part from the Insolvency Act 1986
Insolvency Act 1986
The Insolvency Act 1986 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.-History:...

. Following the introduction of the Enterprise Act 2002
Enterprise Act 2002
The Enterprise Act 2002 is an Act of the Parliament of the United Kingdom which made major changes to UK competition law with respect to mergers and also changed the law governing insolvency bankruptcy.-Structure:*Part 1 The Office of Fair Trading...

, 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 was expected that the UK Government's liberalisation of the UK bankruptcy regime would increase the number of bankruptcy cases; the Insolvency Service statistics appear to bear this out:
UK Bankruptcy statistics
Year Bankruptcies IVAs Total
2004 35,989 10,752 46,741
2005 47,291 20,293 67,584
2006 62,956 44,332 107,288
2007 64,480 42,165 106,645
2008 67,428 39,116 106,544


After the increase in 2005 and 2006 the figures have remained stable.

Bankruptcy and pensions in the UK

The UK bankruptcy law was changed in May 2000, effective May 29, 2000. Debtors may now retain occupational pensions while in bankruptcy, except in rare cases.

Proposed bankruptcy reform in the UK

The Government are currently considering legislation to 'streamline' the bankruptcy process in the UK. Under the new proposals, struggling borrowers may be able to apply for bankruptcy without necessarily having to go to court, except where a disagreement exists between the debtor and their creditors.

United States

Bankruptcy in the United States is a matter placed under Federal jurisdiction by the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...

 (in Article 1, Section 8, Clause 4), which allows Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 to enact "uniform laws on the subject of bankruptcies throughout the United States." The Congress has enacted statute law governing bankruptcy, primarily in the form of the Bankruptcy Code, located at Title 11 of the United States Code
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...

. Federal law is amplified by state law in some places where Federal law fails to speak or expressly defers to state law.

While bankruptcy cases are always filed in United States Bankruptcy Court
United States bankruptcy court
United States bankruptcy courts are courts created under Article I of the United States Constitution. They function as units of the district courts and have subject-matter jurisdiction over bankruptcy cases. The federal district courts have original and exclusive jurisdiction over all cases arising...

 (an adjunct to the U.S. District Courts), bankruptcy cases, particularly with respect to the validity of claims and exemptions, are often dependent upon State law. State law therefore plays a major role in many bankruptcy cases, and it is often not possible to generalise bankruptcy law across state lines.

Generally, a debtor declares bankruptcy to obtain relief from debt, and this is accomplished either through a discharge of the debt or through a restructuring of the debt. Generally, when a debtor files a voluntary petition, his or her bankruptcy case commences.

Chapters

There are six types of bankruptcy under the Bankruptcy Code
Bankruptcy Code
Bankruptcy Code may refer to:*Bankruptcy in Canada*Bankruptcy in the United States or Title 11 of the United States Code *Bankruptcy in China*Bankruptcy in the United Kingdom...

, located at Title 11 of the United States Code
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...

:
  • Chapter 7
    Chapter 7, Title 11, United States Code
    Chapter 7 of the Title 11 of the United States Code governs the process of liquidation under the bankruptcy laws of the United States...

    : basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available
  • Chapter 9
    Chapter 9, Title 11, United States Code
    Chapter 9, Title 11 of the United States Code is a chapter of the United States Bankruptcy Code, available exclusively to municipalities and assists them in the restructuring of debts...

    : municipal bankruptcy; a federal mechanism for the resolution of municipal debts
  • Chapter 11
    Chapter 11, Title 11, United States Code
    Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to every business, whether organized as a corporation or sole proprietorship, and to individuals, although it is most...

    : rehabilitation or reorganisation, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganisation which typically allows companies to continue to function while they follow debt repayment plans
  • Chapter 12
    Chapter 12, Title 11, United States Code
    Chapter 12 of Title 11 of the United States Code, or simply chapter 12, is a chapter of the Bankruptcy Code. It is similar to Chapter 13 in structure, but it offers additional benefits to farmers and fishermen in certain circumstances, beyond those available to ordinary wage earners...

    : rehabilitation for family farmers and fishermen;
  • Chapter 13
    Chapter 13, Title 11, United States Code
    Chapter 13 of the United States Bankruptcy Code, codified under Title 11 of the United States Code, governs a form of bankruptcy in the United States that allows individuals to undergo a financial reorganization supervised by a federal bankruptcy court. The goal of Chapter 13 is to enable...

    : rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
  • Chapter 15
    Chapter 15, Title 11, United States Code
    Chapter 15, Title 11, United States Code is a section of the United States bankruptcy code that deals with jurisdiction. Under Chapter 15 a representative of a corporate bankruptcy proceeding outside the U.S. can obtain access to the United States courts...

    : ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.


The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases. Corporations and other business forms file under Chapters 7 or 11.

In Chapter 7, a debtor surrenders his or her non-exempt property to a bankruptcy trustee who then liquidates the property and distributes the proceeds to the debtor's unsecured creditors. In exchange, the debtor is entitled to a discharge of some debt; however, the debtor will not be granted a discharge if he or she is guilty of certain types of inappropriate behavior (e.g. concealing records relating to financial condition) and certain debts (e.g. spousal and child support, student loans, some taxes) will not be discharged even though the debtor is generally discharged from his or her debt. Many individuals in financial distress own only exempt property (e.g. clothes, household goods, an older car) and will not have to surrender any property to the trustee. The amount of property that a debtor may exempt varies from state to state. Chapter 7 relief is available only once in any eight year period. Generally, the rights of secured creditors to their collateral continues even though their debt is discharged. For example, absent some arrangement by a debtor to surrender a car or "reaffirm" a debt, the creditor with a security interest
Security interest
A security interest is a property interest created by agreement or by operation of law over assets to secure the performance of an obligation, usually the payment of a debt. It gives the beneficiary of the security interest certain preferential rights in the disposition of secured assets...

 in the debtor's car may repossess the car even if the debt to the creditor is discharged.

The 2005 amendments to the Bankruptcy Code introduced the "means test" for eligibility for chapter 7. An individual who fails the means test will have his or her chapter 7 case dismissed or may have to convert his or her case to a case under chapter 13.

Generally, a trustee will sell most of the debtor’s assets to pay off creditors. However, certain assets of the debtor are protected to some extent. For example, Social Security payments, unemployment compensation, and limited values of equity in a home, car, or truck, household goods and appliances, trade tools, and books are protected. However, these exemptions vary from state to state.

In Chapter 13, the debtor retains ownership and possession of all of his or her assets, but must devote some portion of his or her future income to repaying creditors, generally over a period of three to five years. The amount of payment and the period of the repayment plan depend upon a variety of factors, including the value of the debtor's property and the amount of a debtor's income and expenses. Secured creditors may be entitled to greater payment than unsecured creditors.

Relief under Chapter 13 is available only to individuals with regular income whose debts do not exceed prescribed limits. If you are an individual or a sole proprietor, you are allowed to file for a Chapter 13 bankruptcy to repay all or part of your debts. Under this chapter, you can propose a repayment plan in which to pay your creditors over three to five years. If your monthly income is less than the state's median income, your plan will be for three years unless the court finds "just cause" to extend the plan for a longer period. If your monthly income is greater than your state's median income, the plan must generally be for five years. A plan cannot exceed the five-year limitation.

In contrast to Chapter 7, the debtor in Chapter 13 may keep all of his or her property, whether or not exempt. If the plan appears feasible and if the debtor complies with all the other requirements, the bankruptcy court will typically confirm the plan and the debtor and creditors will be bound by its terms. Creditors have no say in the formulation of the plan other than to object to the plan, if appropriate, on the grounds that it does not comply with one of the Code's statutory requirements. Generally, the payments are made to a trustee who in turn disburses the funds in accordance with the terms of the confirmed plan.

When the debtor completes payments pursuant to the terms of the plan, the court will formally grant the debtor a discharge of the debts provided for in the plan. However, if the debtor fails to make the agreed upon payments or fails to seek or gain court approval of a modified plan, a bankruptcy court will often dismiss the case on the motion of the trustee. Pursuant to the dismissal, creditors will typically resume pursuit of state law remedies to the extent a debt remains unpaid.

In Chapter 11, the debtor retains ownership and control of assets and is re-termed a debtor in possession ("DIP"). The debtor in possession runs the day to day operations of the business while creditors and the debtor work with the Bankruptcy Court in order to negotiate and complete a plan. Upon meeting certain requirements (e.g. fairness among creditors, priority of certain creditors) creditors are permitted to vote on the proposed plan. If a plan is confirmed the debtor will continue to operate and pay its debts under the terms of the confirmed plan. If a specified majority of creditors do not vote to confirm a plan, additional requirements may be imposed by the court in order to confirm the plan.

Chapter 7 and Chapter 13 are the efficient bankruptcy chapters often used by most individuals. The chapters which almost always apply to consumer debtors are chapter 7, known as a "straight bankruptcy", and chapter 13, which involves an affordable plan of repayment. An important feature applicable to all types of bankruptcy filings is the automatic stay. The automatic stay means that the mere request for bankruptcy protection automatically stops and brings to a grinding halt most lawsuits, repossessions, foreclosures, evictions, garnishments, attachments, utility shut-offs, and debt collection activity.

Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)

The Bankruptcy Abuse Prevention and Consumer Protection Act
Bankruptcy Abuse Prevention and Consumer Protection Act
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 , is a legislative act that made several significant changes to the United States Bankruptcy Code...

 of 2005, Pub. L. No. 109-8, 119 Stat. 23 (April 20, 2005) ("BAPCPA"), substantially amended the Bankruptcy Code. Many provisions of BAPCPA were forcefully advocated by consumer lenders and were just as forcefully opposed by many consumer advocates, bankruptcy academics, bankruptcy judges, and bankruptcy lawyers. The enactment of BAPCPA followed nearly eight years of debate in Congress. Most of the law's provisions became effective on October 17, 2005. Upon signing the bill, then President Bush stated:
It was widely claimed by advocates of BAPCPA that its passage would reduce losses to creditors such as credit card companies, and that those creditors would then pass on the savings to other borrowers in the form of lower interest rates. These claims turned out to be false. After BAPCPA passed, although credit card company losses decreased, prices charged to customers increased, and credit card company profits soared.

Among its many changes to consumer bankruptcy law, BAPCPA enacted a "means test", which was intended to make it more difficult for a significant number of financially distressed individual debtors whose debts are primarily consumer debts to qualify for relief under Chapter 7 of the Bankruptcy Code. The "means test" is employed in cases where an individual with primarily consumer debts has more than the average annual income for a household of equivalent size, computed over a 180 day period prior to filing. If the individual must "take" the "means test", their average monthly income over this 180 day period is reduced by a series of allowances for living expenses and secured debt payments in a very complex calculation that may or may not accurately reflect that individual's actual monthly budget. If the results of the means test show no disposable income(or in some cases a very small amount) then the individual qualifies for Chapter 7 relief. If a debtor does not qualify for relief under Chapter 7 of the Bankruptcy Code, either because of the Means Test or because Chapter 7 does not provide a permanent solution to delinquent payments for secured debts, such as mortgages or vehicle loans, the debtor may still seek relief under Chapter 13 of the Code. A Chapter 13 plan often does not require repayment to general unsecured debts, such as credit cards or medical bills.

BAPCPA also requires individuals seeking bankruptcy relief to undertake credit counseling
Credit counseling
Credit counseling is a process that involves offering education to consumers about how to avoid incurring debts that cannot be repaid through establishing an effective Debt Management Plan and Budget...

 with approved counseling agencies prior to filing a bankruptcy petition and to undertake education in personal financial management from approved agencies prior to being granted a discharge of debts under either Chapter 7 or Chapter 13. Some studies of the operation of the credit counseling requirement suggest that it provides little benefit to debtors who receive the counseling because the only realistic option for many is to seek relief under the Bankruptcy Code.

Europe in general

During 2004, the number of insolvencies reached all time highs in many European countries. In France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

, company insolvencies rose by more than 4%, in Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...

 by more than 10%, and in Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....

 by more than 20%. The increase in the number of insolvencies, however, does not indicate the total financial impact of insolvencies in each country because there is no indication of the size of each case. An increase in the number of bankruptcy cases does not necessarily entail an increase in bad debt write-off rates for the economy as a whole.

Bankruptcy statistics are also a trailing indicator. There is a time delay between financial difficulties and bankruptcy. In most cases, several months or even years pass between the financial problems and the start of bankruptcy proceedings. Legal, tax, and cultural issues may further distort bankruptcy figures, especially when comparing on an international basis. Two examples:
  • In Austria
    Austria
    Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...

    , more than half of all potential bankruptcy proceedings in 2004 were not opened, due to insufficient funding.
  • In Spain
    Spain
    Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...

    , it is not economically profitable to open insolvency/bankruptcy proceedings against certain types of businesses, and therefore the number of insolvencies is quite low. For comparison: In France
    France
    The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

    , more than 40,000 insolvency proceedings were opened in 2004, but under 600 were opened in Spain. At the same time the average bad debt write-off rate in France was 1.3% compared to Spain with 2.6%.


The insolvency numbers for private individuals also do not show the whole picture. Only a fraction of heavily indebted households will decide to file for insolvency. Two of the main reasons for this are the stigma of declaring themselves insolvent and the potential business disadvantage.

See also

  • Bankruptcy alternatives
    Bankruptcy alternatives
    Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. In most cases personal bankruptcy is initiated by the bankrupt individual. Bankruptcy is a legal process that discharges most debts, but has the disadvantage of making it...

  • Creditor's rights
    Creditor's rights
    Creditor's rights is a legal term used to describe the set of procedural provisions designed to protect the ability of creditors - persons who are owed money - to collect the money that they are owed...

  • Debt consolidation
    Debt consolidation
    Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan....

  • Debt relief
    Debt relief
    Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particular agricultural debts and freeing of debt slaves...

  • Debt restructuring
    Debt restructuring
    Debt restructuring is a process that allows a private or public company – or a sovereign entity – facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its...

  • Debtor in possession
    Debtor in possession
    A debtor in possession in United States bankruptcy law is a person or corporation who has filed a bankruptcy petition, but remains in possession of property upon which a creditor has a lien or similar security interest...

  • Default
    Default (finance)
    In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...

  • DIP Financing
  • Distressed securities
    Distressed securities
    Distressed securities are securities of companies or government entities that are either already in default, under bankruptcy protection, or in distress and heading toward such a condition. The most common distressed securities are bonds and bank debt...

  • Financial distress
    Financial distress
    Financial distress is a term in Corporate Finance used to indicate a condition when promises to creditors of a company are broken or honored with difficulty. Sometimes financial distress can lead to bankruptcy...

  • Insolvency
    Insolvency
    Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts.Business insolvency is defined in two different ways:...

  • Judicial estoppel
    Judicial estoppel
    In the practice of law, judicial estoppel is an estoppel which precludes a party from taking a position in a case which is contrary to a position they have taken in earlier legal proceedings...

  • Liquidation
    Liquidation
    In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...

  • List of business failures
  • Sole Trader Insolvency
    Sole Trader Insolvency
    According to the Office for National Statistics, sole proprietors represented 23.8% of all UK enterprise in 2010. Of that number, more than half a million sole traders were operating via the PAYE or VAT system alone. Sole traders are a distinct legal entity, operating as one type of UK business...

     (UK)
  • Stalking Horse Agreement
  • Tools of trade
    Tools of trade
    Tools of trade is a term generally used in bankruptcy law to determine what property a person would commonly use for the purpose of making a living, as items that are tools of trade are separately exempt from attachment with an additional amount above that normally given for a person's...

  • Turnaround ADR
    Turnaround ADR
    , also known as Business Revitalization ADR, is a process increasingly used by companies in Japan to adjust their debt. This out-of-court procedure was established in Japan in 2007 and is based on Japanese Law, specifically the Special Measures Law for Industrial Revitalization and Rebirth of Japan...



External links

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