| Insolvency - bankruptcy - is the inability of the debtor as recognized by the arbitration court to meet the requirements completely of creditors under liabilities and (or) to fulfill the liabilities regarding the payment of obligatory payments. For initiating the bankruptcy procedure, it is necessary that the debtor is either a corporate body or a citizen and had the signs of bankruptcy. For the citizen, these signs are the non-fulfillment of the specified requirements for a period of three months from the due date, at the same time his total monetary obligations should exceed the cost of the property belonging to him. For corporate bodies, such a sign is only the non-fulfillment of the obligations for a period of three months.
These days, bankruptcy is defined and regulated by the federal law. The law applies to all the corporate bodies, citizens, including individual businessmen, except for state enterprises, establishments, political parties and religious organizations.
The process of bankruptcy is started by applying in the court with a statement for recognizing the debtor as bankrupt. The statement can be submitted by the creditor, authorized body or by the debtor himself.
The procedures of bankruptcy, incorporated concerning the debtor: supervision, financial conditions, external management and bankruptcy proceedings.
For controlling the proceedings of bankruptcy, a board and a committee of creditors is formed, and an arbitration chairman is appointed. A register of creditors of the debtor is made.
Bankruptcy proceedings come to an end either with the liquidation of the debtor, or with the satisfaction of creditors (through the procedure of financial improvement, by finding- the sufficient funds of the debtor for payment to creditors, satisfaction of obligations of the debtor with shareholders or third parties).
The bankruptcy of some corporate bodies has its own features (in particular banks, townships, strategic, agricultural firms etc.)
The criminal code has the provision against responsibility for deliberate bankruptcy and fictitious bankruptcy.
There are two types of insolvencies:
* trading bankruptcy (debtors - businessmen)
* non-trading bankruptcy
The charter provides three reasons for bankruptcy:
* Accidental bankruptcy
* Reckless or simple bankruptcy
* Ill-intentioned bankruptcy
The accidental bankruptcy arises due to the reasons which are not controlled by the debtor: fire, force majeure, war etc. In this case the debtor is not taken into custody, and the debts which could not be paid after the liquidation of property are considered as settled.
Reckless or simple bankruptcy arises because of the debtor, without intention, or forgery. The debtor can be taken into custody for a term of up to two years. After imprisonment, he can be deprived of the right to do business. Subsequently, debts are recovered from the debtor.
Ill-intentioned bankruptcy has been connected with the intent, or the forgery of the debtor. Besides imprisonment and the auction of property, a criminal case for forgery can be registered against him.
The type of bankruptcy is defined by the board of creditors. After the declaration of bankruptcy only two procedures can be applied to the debtor:
* Administrative control (control of trustees). It can be introduced only if there is a possibility of settling at least 50% of the total debt.
* Competitive management
The decision about the type of bankruptcy taken by the board of creditors is affirmed by a special stock exchange decision. Only after that can bankruptcy proceedings be applied. Only that stock exchange in where the debtor is present can affirm the decisions of the Board of creditors. The stock exchange committee appoints the commission of six persons, who were never bankrupt, and the chairman of the exchange committee. The commission takes the decision about the appointment of the administration, or bankruptcy proceedings. The decision of the commission is transferred to the commercial court.
After the commercial court gives the decision about insolvency, advertisements are published three times in the newspapers. Advertisements warned against any deals with the property of the debtor.
Calculations with creditors were carried out in four stages:
* Debts of the church, taxes, salary to employees. The first stage was satisfied completely. Priority was given to church debts
* Public debts, indisputable private debts
* Doubtful debts that required judicial intervention
* Debts which were not demanded in due time.
Famous bankruptcies of the world
* 2008 Lehman Brothers (USA)
* 2005 Delphi Corporation (USA)
* 2005 Delta Airlines (USA)
* 2003 Parmalat (Italy)
* 2002 WorldCom (USA)
* 2002 K-Mart (USA)
* 2001 Enron (USA)
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Wall Street had its worst day since 9/11, shaken by the bankruptcy of Lehman Brothers - the biggest bankruptcy in history. Feds are injecting $70 billion into banking system, but it may not be enough to stop the credit crunch hitting hard the big names. Who's the next big company to go bust?
