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In the todays business world, more transactions are concluded on credit. Credit is when one company owes a payment to another party for goods or services that were supplied. Thus, generally there is a time period in which the credit should be settled. Bankruptcy occurs when an individual or an organization lawfully label their inability to settle to pay the creditors.


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Bankruptcy can be declared in two ways. The creditors have an choice to declare bankruptcy against the debtor, which is known as involuntary bankruptcy in order to seek to recoup at least a part of their credit. However, the bulk of the declared bankruptcies are willing bankruptcy which is lodged by the debtor. Currently, rather than eradicating the bankrupt business organisations, the laws and regulations regarding bankruptcy center primarily on reconstructing the financial pattern of the organization in order to provide the debtor a prospect to mend the business.

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It is essential to know that bankruptcy fraud is a serious crime. Although this may occur in numerous forms, the criminal acts which are declared by law are asset concealment, destruction or concealment of important financial documents, claims that are fraudulent, conflicts of interest, false declarations and fee fixing. In addition, providing wrong information for bankruptcy forms is often comprehended as perjury. Nonetheless, bankruptcy fraud should be clearly distinguished from strategic bankruptcy where a solvent company declares bankruptcy to receive some sort of benefit by using bankruptcy laws. Although this can be sometimes seen as a sort of productive business scheme, in certain instances, it could work against the initial claimer. Once a bankruptcy claim has been filed, all the assets belonging to the debtor should be announced, even though the debtor does not conceive the item to have a net value. As the creditors decide the value of the assets and not the debtor when a bankruptcy claim is filed, the asset proclamation should be done with forethought. The failure to disclose certain assets could ensue in heavy legal action against the particular debtor.

There are certain very renowned bankruptcy incidents in the United States where billions of dollars were involved. The single greatest bankruptcy incident in the United States was the bankruptcy declaration of Lehman Brothers Holdings Inc. on September 15, 2008 when over $639 billion were expressed in assets. Perhaps the most famous incident would be the Enron Corp. bankruptcy where $ 65 billion was involved and key people of the corporation was condemned to prison for felony charges.

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Bankruptcy laws and regulations exist to offer the creditors as well as the debtors some form of security. It is indeed a essential instrument in a global economy.

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