According to law, settlement of liabilities of creditors, including individuals or other companies for a person who is facing liquidation in part or whole in his transactions or running of business. Under these circumstances the court appoints a liquidator that fulfils his duties by duly ceasing the bankrupted person’s personal belongings, selling them and giving the creditors their due shares. In many other cases the company courts make it a point that the debtor is relieved from further more liability.
A person can by his own will, if he really is unable to repay debts might voluntarily consider himself insolvent, while in many other cases a person can be called upon for bankruptcy if creditors find him unable to repay debts. In some cases the debtor might still face insolvency even after selling all his assets, if they do not collect up to the amount he was suppose to repay, or when he is not able to pay might become insolvent as current obligations mature. Bankruptcy can also be filed by the creditor when it is feared that repayment would be delayed for undue reasons. For instance the debtor could illegally transfer property to protect it from being used to repay his dues. Upon being declared bankrupt a business or an individual has to pay his employees and federal government bodies for their dues and then only does it distribute the left over to the creditors through the selling of their assets.
Bankruptcy in Economic terms
When a corporation or any individual files bankruptcy, it is up to the company court to appoint an official liquidator to make a list of all the haves and have-nots in order to distribute the creditors their due share.
In some instances even individuals who cannot provide a specific resource or quality might be declared bankrupt.
Purpose of Bankruptcy Laws:
Primary purposes include, providing safe paths for those honest debtors unable to pay their dues and getting them to be relieved from many of the debts, hence providing a new dawn for them.
Repay creditors in chronological order out of the property available to them from the debtors end.
In 2004, before the bankruptcy law was modified in UK, the bearer had ample time to pay his dues using his/her own residence or maybe his/her spouse’s residence for the repayment of liabilities. The changes in these laws state that the trustee could keep his property for a period of maximum three years to get what he can to repay other wise use his asses.
Even then, if the Trustee has not realized the interest in the property, it will definitely be ploughed again on the bankrupt person.
These changes have however reduced the time factor for bankruptcy.
UK law however relieves the bankrupt person after a period of up to one year, whereas previously stated laws before the amendment would require a minimum of 2 and a maximum of up till 3 yrs that the individual or firm might be relieved. |
