Bankruptcy fraud

Bankruptcy fraud is a crime. While difficult to generalize across jurisdictions, common criminal acts under bankruptcy statutes typically involve concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing or redistribution arrangements. Falsifications on bankruptcy forms often constitutes perjury. Multiple filings are not in and of themselves criminal, but they may violate provisions of bankruptcy law. In the U.S., bankruptcy fraud statutes are particularly focused on the mental state of particular actions.

Bankruptcy fraud should be distinguished from strategic bankruptcy, which is not a criminal act, but may work against the filer.

The Origin of Life

Fundamental religious concepts center around special creation and belief in the infusion of life into inanimate substance by God or another superhuman entity. On the other hand, many scientists have hypothesized that during an early geological period there gradually formed in the atmosphere increasingly complex organic substances composed of available inorganic compounds and water, utilizing ultraviolet rays and electrical discharges as energy sources. At a certain stage they formed a diffuse solution of “nutrient broth.” Then in some way they were drawn together and developed the capacity for self-renewal and self-reproduction. In 1953, S. L. Miller synthesized several of the most basic amino acids in a glass flask by introducing an electrical discharge into an atmosphere of water vapor and some simple compounds thought to have been present naturally at the time when life first developed on earth. A more recent theory now widely held is that life originated in a volcanic setting more than 3.5 billion years ago, perhaps in hot deep-sea vents, utilizing a biochemistry based largely on sulfur and iron. The theory that life on earth came in a simple form from another planet has had small currency, although the discovery by Melvin Calvin of molecules resembling genetic material in meteors has given it some force.

History in Far East

Bankruptcy is also documented in the Far East. According to al-Maqrizi, the Yassa of Genghis Khan contained a provision that mandated the death penalty for anyone who became bankrupt three times.

History in The West

In the Old Testament of the Bible and Hebrew Scriptures, Moses' Laws prescribed that one "Holy Year" or "Jubilee Year" should take place every half century, when all debts are eliminated among Jews and all debt-slaves are freed, due to the heavenly command. [1]

Moreover, the Hebrew (or Jewish) law of debt forgiveness can be found in the Bible at Deuteronomy 15:1–2 which instructs a release of debt every seven years.

In ancient Greece, bankruptcy did not exist. If a father owed (since only locally born adult males could be citizens, it was fathers who were legal owners of property) and he could not pay, his entire family of wife, children and servants were forced into "debt slavery", until the creditor recouped losses via their physical labour. Many city-states in ancient Greece limited debt slavery to a period of five years and debt slaves had protection of life and limb, which regular slaves did not enjoy. However, servants of the debtor could be retained beyond that deadline by the creditor and were often forced to serve their new lord for a lifetime, usually under significantly harsher conditions.

The word bankruptcy is formed from the ancient Latin bancus (a bench or table), and ruptus (broken). A "bank" originally referred to a bench, which the first bankers had in the public places, in markets, fairs, etc. on which they tolled their money, wrote their bills of exchange, etc. Hence, when a banker failed, he broke his bank, to advertise to the public that the person to whom the bank belonged was no longer in a condition to continue his business. As this practice was very frequent in Italy, it is said the term bankrupt is derived from the Italian banco rotto, broken bank (see e.g. Ponte Vecchio). Others choose rather to deduce the word from the French banque, "table", and route, "vestigium, trace", by metaphor from the sign left in the ground, of a table once fastened to it and now gone. On this principle they trace the origin of bankrupts from the ancient Roman mensarii or argentarii, who had their tabernae or mensae in certain public places; and who, when they fled, or made off with the money that had been entrusted to them, left only the sign or shadow of their former station behind them.

Philip II of Spain had to declare four state bankruptcies in 1557, 1560, 1575 and 1596. Spain became the first sovereign nation in history to declare bankruptcy.

The characteristic discharge of debts was introduced to Anglo-American bankruptcy with the statute of 4 Anne ch. 17 in 1705, where the discharge of unpayable debts was offered as a reward to bankrupts who cooperated in the gathering of assets to pay what could be paid.

The Basis of Life

Much of the history of biology and of philosophy as related to biology has been marked by a division of thought between vitalistic (or animistic) and mechanistic (or materialistic) concepts. In the most antithetic interpretations of these concepts, the vitalistic school maintains that there is a vital force that distinguishes the living from the nonliving and the mechanistic school holds that there is no essential difference between the animate and inanimate and that all life can be explained by physical and chemical laws. Such diametrically opposed views have actually seldom been held by investigators of either school; elements of both are usually involved. The animistic school, largely predicated on the inexplicability of the basic phenomena of life, has been greatly overshadowed by the accumulating weight of scientific data. As more and more is learned of the minute details of the structure and composition of the substances that make up the cell (to the extent that some have been synthesized chemically), it has become increasingly apparent that living matter is made up of the same (and only those) elements found in inorganic material, except that they are differently organized.

Characteristics of Life

Organization is found in the basic living unit, the cell, and in the organized groupings of cells into organs and organisms. Metabolism includes the conversion of nonliving material into cellular components (synthesis) and the decomposition of organic matter (catalysis), producing energy. Growth in living matter is an increase in size of all parts, as distinguished from simple addition of material; it results from a higher rate of synthesis than catalysis. Irritability, or response to stimuli, takes many forms, from the contraction of a unicellular organism when touched to complex reactions involving all the senses of higher animals; in plants response is usually much different than in animals but is nonetheless present. Adaptation, the accommodation of a living organism to its present or to a new environment, is fundamental to the process of evolution and is determined by the individual's heredity. The division of one cell to form two new cells is reproduction; usually the term is applied to the production of a new individual (either asexually, from a single parent organism, or sexually, from two differing parent organisms), although strictly speaking it also describes the production of new cells in the process of growth.

Recent Developments in Federal Bankruptcy Law

Brought about by a surge in bankruptcy filings and public concern over inequities in the system, the Bankruptcy Reform Act of 1994 is one illustration of Congress's continuing effort to protect the rights of both debtors and creditors. Consistent with Congress's goal of promoting reorganization over liquidation, the legislation made it easier for individual debtors to qualify for chapter thirteen reorganization. Previously, individuals with more than $450,000 in debt were not eligible to file under chapter thirteen, and instead were forced to reorganize under the more complex and expensive chapter eleven or to liquidate under chapter seven. The 1994 amendments allow debtors with up to $1 million in outstanding financial obligations to reorganize under chapter thirteen.

The new law helps creditors by prohibiting the discharge of credit card debts used to pay federal taxes, or those exceeding $1,000 incurred within sixty days before the bankruptcy filing. In this way, the law deters debtors from shopping sprees and other abuses just before filing for bankruptcy. Creditors also benefit from new provisions that set forth additional grounds for obtaining relief from the automatic stay, and require speedier adjudication of requests for relief from the stay.

Procedures

Today, debtors file the vast majority of bankruptcy cases. A bankruptcy filing by a debtor is known as voluntary bankruptcy. The mere filing of a voluntary petition for bankruptcy operates as a judicial order for relief, and allows the debtor immediate protection from creditors without the necessity of a hearing or other formal adjudication.

Chapter seven and chapter eleven of the bankruptcy code allow creditors the option of filing for relief against the debtor, also known as involuntary bankruptcy. The law requires that before a debtor can be subjected to involuntary bankruptcy, there must be a minimum number of creditors or a minimum amount of debt. Further protecting the debtor is the right to file a response, or answer, to the allegations in the creditors' petition for involuntary bankruptcy. Unlike voluntary bankruptcies, which allow relief immediately upon the filing of the petition, involuntary bankruptcies do not provide creditors with relief until the debtor has had an opportunity to respond and the court has determined that relief is appropriate.

When the debtor timely responds to an involuntary bankruptcy filing, the court will grant relief to the creditors and formally place the debtor in bankruptcy only under certain circumstances, such as when the debtor generally is failing to pay debts on time. When, after litigation, the court dismisses an involuntary bankruptcy filing, the court may order the creditors to pay the debtor's attorney fees, compensatory damages for loss of property or loss of business, or punitive damages. This reduces the likelihood that creditors will file involuntary bankruptcy petitions frivolously or abusively.

One of the most important rights a debtor in bankruptcy receives is called the automatic stay. The automatic stay essentially freezes all debt-collection activity, forcing creditors and other interested parties to wait for the bankruptcy court to resolve the case equitably and evenhandedly. The relief is automatic, taking effect as soon as a party files a bankruptcy petition. In a voluntary chapter seven case, the automatic stay gives the trustee time to collect, and then distribute to creditors, property in the bankruptcy estate. In voluntary chapter eleven and chapter thirteen cases, the automatic stay gives the debtor time to establish a plan of financial reorganization. In involuntary bankruptcy cases, the automatic stay gives the debtor time to respond to the petition. The automatic stay terminates once the bankruptcy court dismisses, discharges, or otherwise terminates the bankruptcy case, but a party in interest (a party with a valid claim against the bankruptcy estate) may petition the court for relief from the automatic stay by showing good cause.

The bankruptcy code allows bankruptcy judges to dismiss bankruptcy cases when certain conditions exist. The debtor, the creditor, or another interested party may ask the court to dismiss the case. Petitioners — debtors in a voluntary case, or creditors in an involuntary case — may seek to withdraw their petitions. In some types of bankruptcy cases, a petitioner's right to dismissal is absolute; other types of bankruptcy cases require a hearing and judicial approval before the case is dismissed. Particularly with voluntary bankruptcies, creditors, the court, or the U.S. trustee has the power to terminate bankruptcy cases when the debtor engages in dilatory or uncooperative behavior, or when the debtor substantially abuses the rights granted under bankruptcy laws.

Define : Life

Although there is no universal agreement as to a definition of life, its biological manifestations are generally considered to be organization, metabolism, growth, irritability, adaptation, and reproduction. Protozoa perform, in a single cell, the same life functions as those carried on by the complex tissues and organs of humans and other highly developed organisms. The attributes of life are inherent in such minute structures as viruses, bacteria, and genes, just as they are in the whale and the giant sequoia. In seeking an understanding of life, scientists have broken down many barriers that once separated the physical sciences from the biological sciences; a result of the growth of biochemistry, biophysics, and other interrelated fields of study has been a better understanding of the composition and functioning of living tissues of all kinds.

Judges and Trustees

Pursuant to federal statute, U.S. courts of appeals appoint bankruptcy judges to preside over bankruptcy cases (28 U.S.C.A. § 152 [1995]). Bankruptcy judges make up a unit of the federal district courts called bankruptcy court. Actual jurisdiction over bankruptcy matters lies with the district court judges, who then refer the matters to the bankruptcy court unit and the bankruptcy judges.

A trustee is appointed to conduct an impartial administration of the bankrupt's nonexempt assets, known as the bankruptcy estate. The trustee represents the bankruptcy estate, which upon the filing of bankruptcy becomes a legal entity separate from the debtor. The trustee may sue or be sued on behalf of the estate. Other trustee powers vary depending on the type of bankruptcy, and can include challenging transfers of estate assets, selling or liquidating assets, objecting to the claims of creditors, and objecting to the discharge of debts. All bankruptcy cases except chapter eleven cases require trustees, who are most commonly private citizens elected by creditors or appointed by the U.S. trustee.

The office of the U.S. trustee, permanently established in 1986, is responsible for overseeing the administration of bankruptcy cases. The U.S. attorney general appoints a U.S. trustee to each bankruptcy region. It is the job of the U.S. trustee in some cases to appoint trustees, and in all cases to ensure that trustees administer bankruptcy estates competently and honestly. U.S. trustees also monitor and report debtor abuse and fraud, and oversee certain debtor activity such as the filing of fees and reports.

Federal Bankruptcy Jurisdiction and Procedure

Regardless of the type of bankruptcy and the parties involved, basic key jurisdictional and procedural issues affect every bankruptcy case. Procedural uniformity makes bankruptcies more consistent, predictable, efficient, and fair.

Family Farmers and Chapter Twelve

In 1986, responding to an economic farm crisis in the United States, Congress designed chapter twelve to apply to family farmers whose aggregate debts did not exceed $1.5 million. Congress passed the law to help farmers attain a financial fresh start through reorganization rather than liquidation. Before chapter twelve's existence, family farmers found it difficult to meet the prerequisites of bankruptcy reorganization under chapter eleven or chapter thirteen, often because they were unable to demonstrate sufficient income to make a reorganization plan feasible. Chapter twelve eased some requirements for qualifying farmers.

Congress created chapter twelve as an experiment, and scheduled its automatic repeal for 1993. Determining that additional time was necessary to evaluate the effectiveness of the law, Congress in 1993 voted to extend it until 1998. Should lawmakers decide the law is beneficial, they may grant an additional extension or make chapter twelve a permanent part of the bankruptcy code.

Dow Corning Corporation and Chapter Eleven

Dow Corning Corporation was a major manufacturer of silicone breast implants used in reconstructive and plastic surgeries. In 1991, after receiving thousands of complaints of health problems from women with silicone implants, the U.S. Food and Drug Administration banned the devices from widespread use. Women who had obtained the silicone implants in breast reconstruction or breast enlargement surgeries complained that the implants leaked, causing a variety of adverse conditions such as crippling pain, memory loss, lupus, and connective tissue disease. Dow Corning soon became a defendant in a worldwide product liability class action suit as well as at least nineteen thousand individual lawsuits.

Citing an inability to contribute $2 billion to a $4.2 billion settlement fund and pay for the defense of thousands of individual lawsuits, Dow Corning filed for chapter eleven bankruptcy protection in May 1995. The bankruptcy move halted new lawsuits and enabled the company to consolidate existing claims while preserving business operations. As a result of the filing, Dow Corning stalled its obligation to contribute to the settlement fund.

The Dow Corning strategy was similar to that employed in the mid-1980s by A. H. Robins Company, distributor of the Dalkon Shield intrauterine device for birth control. Like Dow Corning, A. H. Robins faced financial ruin owing to thousands of product liability lawsuits filed at the same time. Also like Dow Corning, A. H. Robins sought relief under chapter eleven of the bankruptcy code, which allowed the company time to formulate a plan to pay the many outstanding claims. A reorganization plan approved by the courts involved the merger of A. H. Robins with American Home Products Corporation, which agreed to establish a $2.5 billion trust fund to pay outstanding product liability claims (In re A. H. Robins Co., 880 F.2d 694 [4th Cir. 1989]).

On May 22, 1995, Dow Corning filed a request to stay all litigation against its parent companies, Dow Chemical Company and Corning Incorporated, so that company lawyers could concentrate on the bankruptcy reorganization. That move further threatened the chance of recovery for the plaintiffs seeking compensation for injury.