What is BANKRUPT LAW? Definition of BANKRUPT LAW in Black's Law Dictionary - Legal dictionary - Glossary of legal terms.
A law for benefit and relief of creditors and their debtors in cases in which the latter are unable or unwilling to pay their debts. Campbell v. Alleghany Corporation, C.C. A.Md., 75 F.2d 947, 951.
A bankrupt law is distinguished from the ordinary law between debtor and creditor, as involving these three general principles : (1) A summary and immediate seizure of all the debtor's property; (2) a distribution of it among the creditors in general, instead of merely applying a portion of it to the payment of the individual complainant; and (3) the discharge of the debtor from future liability for the debts then existing.
The leading distinction between a bankrupt law and an insolvent law, in the proper technical sense, consists in the character of the persons upon whom it is designed to operate,—the former contemplating as its objects bankrupts only, that is, traders of a certain description; the latter; insolvents in general, or persons unable to pay their debts. This has led to a marked separation between the two systems, in principle and in practice, which in England has always been carefully maintained, although in the United States it has of late been disregarded. A bankrupt law, moreover, in its proper sense, is a remedy intended primarily for the benefit of creditors; it is set In motion at their instance, and operates upon the debtor against his will, (in invitum,) although in its result it effectually discharges him from his debts. An insolvent law, on the other hand, is chiefly intended for the benefit of the debtor, and' is set in motion at his instance, though possibly less effective as a discharge in its final result. Sturges v.Crowninshield, 4 Wheat. 194, 4 L.Ed. 529; Vanuxen v. Hazlehursts, 4 N.J.Law, 192, 7 Am.Dec. 582; Adams v. Storey, 1 Paine, 79, 1 Fed.Cas. 142; Kunzler v. Kohaus, 5 Hill (N.Y.) 317.
The only substantial difference between a strictly bankrupt law and an insolvent law lies in the circumstance that the former affords relief upon the application of the creditor, and the latter upon the application of the debtor. Martin v. Berry, 37 Cal. 222.
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