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Bankruptcy 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 property available for payment.
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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." |
Bankruptcy History
The word bankruptcy 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.
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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.
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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).
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