a special process established in the law of the majority of capitalist states, initiated to provide just satisfaction of all claims by creditors in case a debtor is adjudged insolvent by a court.
In case of bankruptcy, a special body, known as a bankruptcy administration, is created to administer and dispose of the property of the insolvent debtor for the benefit of his creditors. The nature of the property (the bankrupt’s estate) that may be transferred to the bankruptcy administration and sold is variously defined in different countries. For example, in the Federal Republic of Germany the bankrupt’s estate consists only of property owned by the insolvent debtor at the moment of the initiation of the bankruptcy proceeding. In Great Britain, the USA, and France, property in the possession of the insolvent debtor at the time of the bankruptcy proceeding is also included. In the bankruptcy proceeding the amount and nature of the creditors’ claims are established, as is the order of priority for their satisfaction. High-priority claims are usually taxes, fees, wages, and the expenses connected with the bankruptcy proceeding. The remaining property is distributed in proportion to the amounts of claims accepted by the court. Proceeds from the sale of the property are distributed gradually as funds are accumulated. When the bankruptcy proceeding is complete, a judgment to that effect is passed by the court.