Bankruptcy represents a person inability to settle his debts. It has long been a custom in different civilizations to treat matter of debt non-payment differently. Sometimes it was in the form of slavery and sometimes it was even punishment of death. At certain occasions it was settlement by common consent.  With the passage of time the harsher side has vanished and laws are in force that settle issues related to bankruptcy with relative compassion to humanity.

Various countries of the world proceed with bankruptcy differently. In the United States of America there is even a bankruptcy institute which research and educate people regarding bankruptcy issues and credit management. Bankruptcy proceeding in the US start by attending a credit counseling session usually six months before filing a bankruptcy request. This is also known as “ticket-in” session.

After this the court of law uses a means test, which is basically a formula to ascertain whether a person is eligible to file bankruptcy or not. Bankruptcy in USA is divided into two types. They are known as Chapter 7 and Chapter 13 bankruptcy. Chapter 7 is straight liquidity bankruptcy and may result is sale of most of the assets except certain assets which are exempt by law, whereas, in the later a payment plan is given by the court and assets may be sold partially. Chapter 7 bankruptcy stays on a person’s credit report for a period of 10 years, whereas, Chapter 13 bankruptcy remains for a period of 7 years. Under the new law the closing step is the ticket-out which represents debtor’s education after bankruptcy has been finalized by the court of law.  A Chapter 11 bankruptcy deals with the companies and liquidation is carried out as per the procedures specified in the law.

On the contrary European bankruptcy laws are usually criticized for their flaws. In France mostly creditors are unhappy as they think that most of times they don’t get a substantial amount of their money back, whereas, in Britain usually one side tend to end happy.  However, the usual procedure for bankruptcy proceedings in Europe is the recognition by the competent Bankruptcy Court of the insolvency status of the entrepreneur. The debtor and the person who has started the bankruptcy procedure are summoned by the court, which analyze and checks documents, written statements and technical reports submitted by the parties. The  entrepreneur must deposit in the office of the court’s clerk all correspondence concerning financial and commercial relations of the previous three years, an assessment of his activities and the list of creditors. Bankruptcy is not allowed if the debt expired and unpaid (as established during the pre-insolvency proceedings) amounts to less than (i.e. does not exceed) 30,000 euros.

Bankruptcy laws in China are different in the sense that they apply to enterprises only. Individual cases of bankruptcy are unfamiliar. The governing law is known as
The Enterprise Bankruptcy Law of China. As per this law a bankruptcy administrator takes the decision regarding the bankruptcy of an enterprise and decides how it would pay its debts. This decision is taken after going through the financial and asset records of the enterprise. This law is also criticized for its delays and has been amended by the government from time to time. Bankruptcy laws in other countries like India and Pakistan are usually an extension of British laws and filing bankruptcy is these countries is a very tedious process.

Conclusively, the important thing is to keep an eye on one’s financial matters with reasonable prudence so that issues like insolvency can be avoided. After all once a person is declared bankrupt, the stigma stays forever, apart from social and financial problems.

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