The Main Criteria Of Bankruptcy.
Criteria of Bankruptcy. There are two types of them: a) lack of equipment, known as yet unpaid is ensured, fixed excess of liabilities over assets of the debtor’s property, and b) a payment failure (insolvency), the estimated excess of liabilities over assets.
For ascertaining the fact of impossibility to pay it is necessary to analyze assets and liabilities of the debtor’s property. Assets are property of a business entity, which includes fixed assets, other long-term investments (including intangible assets), current assets, and financial assets. Liabilities are the debtor’s obligations, consisting of loans and borrowed funds, including accounts payable. In this sense, understanding of the assets and liabilities of property is no different from the classical civil-law approach.
Impossibility to pay as a criteria of insolvency is a termination of debtor payments to their own contractors, partners. Here, assets and liabilities of the property is not matched, at least such a comparison is not included in the list of conditions for the opening of insolvency (bankruptcy).
Lack of property, expressing the essence of economic insolvency, on the one hand, more closely corresponds to the first appointment of a legal institution of bankruptcy – establishment of special-order uniform distribution of the debtor’s property among all his creditors, because in excess of the asset over liabilities need to apply special rules for the distribution of the debtor’s property among his creditors no (active enough to meet all creditors). But the obvious difficulties of practical implementation of this criterion in respect of debtors – owners of the complex composition of the asset and the many creditors as well as any large business entities, largely outweigh the advantages mentioned. In addition, the foundation of irredeemable not fully take into account such problems the legislation on insolvency (bankruptcy) as the provision of (incentive) payment discipline, financial rehabilitation of participants of economic circulation and protection of creditors from the actions of unscrupulous debtors to conceal assets in anticipation of financial disaster.
On the contrary the criterion for failure of payment does not encounter the difficulties of practical application, which are typical for impossibility to pay, and allows you to establish external monitoring and control over property of a defaulter more quickly, which may significantly affect the attempt to restore the solvency of the debtor, or at the size of the meet, which will be creditors in the event of liquidation procedures. In addition, the person carrying out its business in terms of incorporating into national legislation established a payment failure, will know what to ignore, even if temporary, individual obligations may lead to his ouster from the management of property and even a change of ownership, that will certainly stabilize the status of settlements in the national economy. That is why the criterion of failure of payment the most in demand in the world design of insolvency laws.
Almost all of us still remember the times when one could easily buy something even if one hadn’t got enough money. Credit was a simple way out. No wonder that now many of those who hunted for a loan, are looking around for how to avoid bankruptcy.
People who happened to get into the situation when their expenses exceed their earnings, definitely must search for ways to avoid bankruptcy.
If facing such difficulties it is wise to use any ways to get over it. Avail yourself of such great chance as the Internet technologies. Using them at full capacity can give great results. Working with search engines, forums, social networks,web sites one can find lots of tips to avoid bankruptcy and a great deal of other important info. Also subscribing to RSS on this blog will assist to be aware of new publications and tips on the topic.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment