The act of being bankrupt. This usually refers to the legal proceeding which relieves debtors from responsibility of debt payments who cannot meet them and also provides protection while attempting to repay the debts. Bankruptcy proceedings take on two forms: (i) liquidation, where debts are discharged or canceled completely and which is also known as Chapter 7 of the Bankruptcy Code, and (ii) reorganization, where the debtor must provide the court with a plan as to how the debtor intends to repay the debts. Chapter 13 of the Bankruptcy Code refers to reorganization for consumers and Chapter 11 usually for businesses.
Law Dictionary – Alternative Legal Definition
1. The state or condition of one who is a bankrupt; amenability to the bankrupt laws; the condition of one who has committed an act of bankruptcy, and is liable to be proceeded against by his creditors therefor, or of one whose circumstances are such that he is entitled, on his voluntary application, to take the benefit of the bankrupt laws. The term is used in a looser sense as synonymous with “insolvency,” inability to pay one’s debts; the stopping and breaking up of business because the trader is broken down, insolvent, ruined. Phipps v. Harding, 70 Fed. 468, 17 C. O. A. 203, 30 L. R. A. 613; Arnold v. Maynard, 2 Story, 354, Fed. Oas. No. 561; Bernhardt v. Curtis, 109 La. 171, 33 South. 125, 94 Am. St Rep. 445. 2. The term denotes the proceedings taken under the bankrupt law, against a person (or firm or company) to have him adjudged a bankrupt, and to have his estate administered for the benefit of the creditors, and divided among them. 3. That branch of jurisprudence, or system of law and practice, which is concerned with the definition and ascertainment of acts of bankruptcy and the administration of bankrupts’ estates for the benefit of their creditors and the absolution and restitution of bankrupts. As to the distinction between bankruptcy and insolvency, it may be said that insolvent laws operate at the instance of an imprisoned debtor; bankrupt laws, at the instance of a creditor. But the line or partition between bankrupt and insolvent laws is not so distinctly marked as to define what belongs exclusively to the one and not to the other class of laws. Sturges v. Orown inshield, 4 Wheat. 122, 4 L. Ed. 529. Insolvency means a simple inability to pay. as debts should become payable, whereby the debtor’s business would be broken up; bankruptcy means the particular legal status, to be asaertained and declared by a judicial decree. In re Black, 2 Ben. 196, Fed. Cas. No. 1,457. Classification. Bankruptcy (in the sense of proceedings taken under the bankruptcy law) is either voluntary or involuntary; the former where the proceeding is initiated by the debtor’s own petition to be adjudged a bankrupt and have the benefit of the law (In re Murray [D. C] 96 Fed. 600; Metsker v. Bonebrake, 108 U. S. 66, 2 Sup. Ct. 351, 27 L. Ed. 654), the latter where he is forced into bankruptcy on the petition of a sufficient number of his creditors. Act of bankruptcy, see Act. Adjudication of bankruptcy. The judgment or decree of a court having jurisdiction, that a person against whom a petition in bankruptcy has been filed, or who has filed his voluntary petition, be ordered and adjudged to be a bankrupt. Bankruptcy courts. Courts for the administration of the bankrupt laws. The present English bankruptcy courts are the London bankruptcy court, the court of appeal, and the local bankruptcy courts created by the bankruptcy act, 1869. Bankruptcy proceedings. The term includes all proceedings in a federal court having jurisdiction in bankruptcy, founded on a petition in bankruptcy and either directly or collaterally involved in the adjudication and discharge of the bankrupt and the collection and administration of his estate. Kidder v. Horro bin, 72 N. Y. 167.