/banking/Bankruptcy One Of

Bankruptcy One Of

/banking/Bankruptcy, one of several legal processes aimed at enabling an unfortunate but honest debtor to escape from a dead-weight of debts he could never repay and start afresh. It also punishes the dishonest debtor and divides his property among his creditors. The test of insolvency in English law is whether the debtor is unable to pay his debts when they become due; whether assets exceed liabilities is generally irrelevant. Insolvent corporate bodies are dealt with under separate legislation.

Statistics of bankruptcy and the liquidation of corporate bodies are sometimes used as a measure of business failures, but they may be misleading. The Bankruptcy Acts extend to persons who are not engaged in business on their own account; and some bankruptcies are due to private claims arising outside business activity. Bankruptcy among small firms is a means of removing inefficiency from the economy.

Banks, Clearing, the eleven banks that are members of the London Bankers' Clearing House. They do most of the banking business of England and Wales. Banks present claims against one another as a result of their daily transactions; instead of settling them in currency they draw a cheque on their balances at the Bank of England; if in a day's 'clearing' one of the banks owes to others, the balance is conveniently settled by cheque rather than by cash. In Britain the main economic importance of these banks is their behaviour as joint-stock banks.

Banks, Industrial, comparatively recent name in Britain for firms that finance hire purchase. Members of the Industrial Bankers' Association hold at least 75 per cent of their assets in the form of hire-purchase 'paper', claim to act as bankers because they receive money on deposit account from the public and use it to give credit in the form of hire-purchase finance. The security for their advances lies in their ownership of the goods named in the hire-purchase agreement. The number of such banks is large, but most are relatively small, with offices outside London. Unlike joint-stock banks proper, they do not hold deposits on demand or short notice or provide short-term credit or other banking services but use fairly long-notice deposits to supply medium-term credit that is repaid by the hire purchasers more or less regularly so that there is a constant return of funds.

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