Chapter One.A Short History of Bankruptcy After reading this chapter, you will be able to:

Define bankruptcy Understand why the United States Bankruptcy

Code emphasizes notions of both debtor relief and debt collection

Understand the foundational terms and concepts necessary to approach a study of the bankruptcy system

Bankruptcy Systems

Methods developed by societies to resolve the effects of financial crisis.

Common Reasons for Individual Bankruptcy Filings Death in the family Divorce Catastrophic illness Unanticipated unemployment Excessive credit card debt

Common Reasons for Business Bankruptcy Filings Obsolete products Failure to compete in the industry Mismanagement Sudden catastrophe Insider disputes Fraud A poor general economy

Debt Collection

The primary focus of the debt collection features of bankruptcy systems has always been to formulated a body of rules to provide for the collection of assets of a debtor and the equitable distribution of the proceeds of those assets among multiple creditors.

Debtor Relief

The primary focus of the debtor relief features of bankruptcy systems has vacillated throughout history from the extremes of punishment to forgiveness.

Discharge

Legal relief from debt

Exemption

Statutorily defined property that an individual debtor may protect from administration by a bankruptcy estate.

Exempt property is not available for liquidation to pay a dividend to creditors.

Exemptions are a primary element of debtor relief.

Liquidation

The sale of an estates assets to repay creditors.

Composition Agreement

An agreement between a debtor and multiple creditors for the repayment of debt.