BUNKRUPTCY NOTES - BANKRUPTCY The bankruptcy proceedings in Kenya are governed by the Kenya Bankruptcy Act(Cap 53 This Act is based on the English

BUNKRUPTCY NOTES - BANKRUPTCY The bankruptcy proceedings in...

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BANKRUPTCY The bankruptcy proceedings in Kenya are governed by the Kenya Bankruptcy Act (Cap 53). This Act is based on the English Bankruptcy Act, 1914. Definition According to Blackstone: Bankruptcy is a proceeding by which, when a debtor cannot pay his debts or discharge his liabilities or the persons to whom he owes money or has incurred liabilities cannot obtain satisfaction of their claims, the courts in certain circumstances take possession of his property by an officer appointed for the purpose, and such property is realized and distributed in equal proportions among the persons to whom the debtor owes money or has incurred pecuniary liabilities. In simple words, a person is insolvent or bankrupt who cannot pay his debts or discharge his liabilities on the due date. The creditors or the debtor himself may present a petition to the court that a receiving order should be made. The object of bankruptcy is twofold: 1. Protection of honest debtors and, 2. Safeguarding the interests of creditors by means of equitable distribution of the assets of an insolvent debtor among creditors. When a person is adjudicated bankrupt, all his assets are taken over by an officer of the court and distributed in equal proportions among his creditors. After the distribution is complete, the unpaid debts are cancelled and the bankrupt is allowed to engage in trade or service without any of his previous obligations. The creditors lose a part of their claims and debtor is free to make a new start in life. Who Can Be Made Bankrupt In general, any person capable of entering into a contract may be made bankrupt except: 1. Minors or Infants: it is only if an infant has incurred debts which are legally enforceable against him such as for the purchase of necessaries that he can be declared bankrupt. 2. Lunatics: a person of unsound mind may be made bankrupt if the act of bankruptcy was committed during a lucid interval. 3. Partners: A creditor may present a petition against two or more. 4. Corporations: No bankruptcy petition can be presented against any corporation or association or company registered under any enhancement. Thus a company registered under the companies Act cannot be made insolvent; it must ne wound up under the Act.
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