From Wikipedia, the free encyclopedia
Bankruptcy 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.
Purpose
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 the means
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."
History
This word is formed from
the ancient
Latin bancus (a bench or table),
and ruptus (broken).
Bank originally signified 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, 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, it is said the term bankrupt is derived from the
Italian banco rotto, broken bench (see e.g.
Ponte Vecchio). Others rather choose to deduce the
word from the
French banque, table, and route,
vestigium, trace, by metaphor from the sign left
in the ground, of a table once fastened to it and now gone.
On this principle they trace the origin of bankrupts from
the
ancient Roman mensarii or argentarii, who
had their tabernae or mensae in certain public
places; and who, when they fled, or made off with the money
that had been entrusted to them, left only the sign or
shadow of their former station behind them.
Bankruptcy fraud
Bankruptcy
fraud is a
business crime of filing for bankruptcy with criminal
intent, that is with the intention of evading payment for
goods even though the buyer has funds that could be used to
pay for them, or accepting payment for goods or services but
not supplying them. Common types of bankruptcy fraud include
petition mills, false
oath, concealment of assets, and
fraudulent conveyance.
Multiple filings are not per se fraudulent; as
with all things in the law, it depends on the circumstances.
Bankruptcy fraud should be distinguished from strategic
bankruptcy, which is not a
criminal act (but may prejudice a judge against the
filer if there is evidence that bankruptcy is being used
strategically).
Bankruptcy in Canada
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Main article:
Bankruptcy in Canada
Bankruptcy in Canada is
set out by
federal law, in the
Bankruptcy and Insolvency Act and is applicable to
businesses and individuals. The office of the
Superintendent of Bankruptcy, a
federal agency, is responsible for ensuring that
bankruptcies are administered in a fair and orderly manner.
Trustees in bankruptcy administer bankruptcy estates.
Duties of trustees
Some of the duties of the trustee in
bankruptcy are to:
- Prepare the bankruptcy documents that
assign the person into bankruptcy.
- Review the file for any fraudulent
preferences or reviewable transactions
- Chair meetings of creditors
- Sell any non-exempt assets
- Perform counselling for the debtors.
- Object to the bankrupt's discharge.
