University of Economic Studies Bucharest

Faculty of Business and Tourism

Bankruptcy
English Project

Professor
Dona Denise

Student

Avram Beatrice-Luminita
Grupa 350, Seria A, Anul III

Bucharest

2015
 Bankruptcy

Definition
A legal proceeding involving a person or business that is unable to repay outstanding
debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on
behalf of creditors (less common). All of the debtor's assets are measured and evaluated,
whereupon the assets are used to repay a portion of outstanding debt. Upon the successful
completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred
prior to filing for bankruptcy.

Bankruptcy is not the only legal status that an insolvent person or other entity may
have, and the term bankruptcy is therefore not a synonym for insolvency. In some countries,
including the United Kingdom, bankruptcy is limited to individuals, and other forms of
insolvency proceedings (such as liquidation and administration) are applied to companies. In
the United States, bankruptcy is applied more broadly to formal insolvency proceedings.

The word bankruptcy is derived from Italian banca rotta, meaning "broken bank",
which may stem from a custom of breaking a moneychanger's bench or counter to signify his
insolvency, or which may be only a figure of speech.

History
In Ancient Greece, 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 through their physical labour. Many city-states in ancient Greece limited debt slavery
to a period of five years; 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 by the
creditor and were often forced to serve their new lord for a lifetime, usually under
significantly harsher conditions. An exception to this rule was Athens, which by
the laws of Solon forbade enslavement for debt; as a consequence, most Athenian slaves were
foreigners (Greek or otherwise).

The Statute of Bankrupts1 of 1542 was the first statute under English law dealing with
bankruptcy or insolvency. Bankruptcy is also documented in East Asia. According to al-
Maqrizi, the Yassa of Genghis Khan contained a provision that mandated the death penaltyfor
anyone who became bankrupt three times.
A failure of a nation to meet bond repayments has been seen on many
occasions. Philip II of Spain had to declare four state bankruptcies 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 various defaults of

1
Act passed by the Parliament of England in 1542. It was the first statute under English law dealing
with bankruptcy or insolvency.
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.

Six things you need to know about bankruptcy

1. Bankruptcy is not an in and out process.
If you are inexperienced with how bankruptcy courts operate, you might think that bankruptcy
operates similar to small claims court, which concludes in one day. Chapter 7 bankruptcy, the
most common bankruptcy chapter for individuals, lasts an average of four months. The
processes for the second and third most frequently filed bankruptcy chapters, 13 and 11, can
last much longer. A Chapter 13 bankruptcy plan will last for three to five years. Similarly,
a Chapter 11 case may endure for two years or longer. You must be prepared to stick it out if
you want to obtain the coveted bankruptcy fresh start.

2. Bankruptcy opens your finances to public scrutiny.

Are you uncomfortable with merely discussing your salary with your friends and family? In
bankruptcy, you must be prepared to expose your financial life, mistakes and all, to the public.
If you file for bankruptcy protection, you will be required to attend a meeting of creditors.
During the meeting, the bankruptcy trustee will ask you probing questions in a public room.
One of your creditors can also question you at the meeting. This can be an extremely
uncomfortable and embarrassing process for many individuals. Be prepared to air your
financial dirty laundry.

3. Failure to disclose all of your financial information result in harsh penalties.

Total and complete honesty is of the utmost importance in bankruptcy. It is the position of
bankruptcy courts that only the honest debtor is entitled to a discharge of debt. This means
that you must list all of your property, debts, and creditors. If your lack of honesty is
discovered, not only may you lose the bankruptcy discharge, but you may face investigation
by the FBI. Dishonesty in bankruptcy is a serious federal crime.

4. Bankruptcy forms are complicated and require great attention.

Many people perceive bankruptcy as simple and straightforward, as it is mostly based on
forms. Unfortunately, bankruptcy forms are more like confusing tax returns than "check the
box" forms. The forms contain complex, seemingly trick questions about your financial
affairs. It is necessary to give yourself sufficient time to digest the bankruptcy forms before
filing for bankruptcy. The most critical forms include Schedules A through J and
theStatement of Financial Affairs.

5. The bankruptcy discharge is personal.

The discharge is the ultimate goal of bankruptcy. It bars your creditors from ever attempting
to collect debts from you. This means that the bankruptcy discharge is personal and only
protects you. It does not eliminate the debt itself. For example, if you are one of the co-signers
on a home loan and you file for bankruptcy, the debt is not wiped out. The lender can still
seek to collect the debt from the other co-signer on the loan. This is a particularly important
consideration if you are a co-signer with family members or friends that are not going to file
for bankruptcy.
6. Filing for bankruptcy is not cheap.
Although you may be in financial ruin, filing for bankruptcy can cost you a significant
amount of money. The amount largely depends upon whether or not you hire an attorney.
Retaining a bankruptcy attorney may cost anywhere from several hundred dollars to several
thousand dollars. However, even if you prepare and file your own bankruptcy case, the filing
fees alone are substantial. Destitute debtors may find relief from filing fees by petitioning the
bankruptcy court for a fee waiver. The court will base its waiver decision on your income,
which generally must not be greater than 150% of the federal poverty level.

Bankruptcy by country
The Bankruptcy Act 1966 (Commonwealth) is the legislation that governs bankruptcy
in Australia. Only individuals can become bankrupt; insolvent companies go
into liquidationor administration.

In Brazil, the Bankruptcy Law governs court-ordered or out-of-court receivership and

bankruptcy and only applies to public companies (publicly traded companies) with the
exception of financial institutions, credit cooperatives, consortia, supplementary scheme
entities, companies administering health care plans, equity companies and a few other legal
entities. It does not apply to state-run companies.

The People's Republic of China legalized bankruptcy in 1986, and a revised law that
was more expansive and complete was enacted in 2007.

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 the Provincial Insolvency Act.

Russian insolvency law is intended for a wide range of borrowers: individuals and
companies of all sizes, with the exception of state-owned enterprises, government agencies,
political parties and religious organizations. There are also special rules for insurance
companies, professional participants of the securities market, agricultural organizations and
other special laws for financial institutions and companies in the natural monopolies in the
energy industry.

Under Swiss law, bankruptcy can be a consequence of insolvency. 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.

In Sweden, bankruptcy (Swedish: konkurs) is a formal process that may involve a

company or individual. It is not the same as insolvency, which is inability to pay debts that
should have been paid. 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).
 Bankruptcy in the United Kingdom (in a strict legal sense) relates only to individuals
(including sole proprietors) and partnerships. Companies and other corporations enter into
differently named legal insolvency procedures: 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. To apply for bankruptcy in Scotland, an individual must have
more than 1500 of debt.

Bankruptcy in the United States is a matter placed under federal jurisdiction by

the United States Constitution (in Article 1, Section 8, Clause 4). Federal law is amplified by
state law in some places where Federal law fails to speak or expressly defers to state law.

Bibliography
1. http://bankruptcy.about.com/od/Bankruptcy-Basics/tp/Top-6-Things-To-Know-About-
Bankruptcy.htm
2. "Bankrupt"- Online Etymology Dictionary. Retrieved 22 April 2014.
3. https://en.wikipedia.org/wiki/Bankruptcy