Act of Bankruptcy

Behavior indicating that a person might be judged as bankrupt. Examples of such behavior include transferring property title to another with the intent to delay or defraud creditors, and admitting that one is bankrupt.

Behavior deemed an admission of bankruptcy-generally the failure to pay obligations when due. The Bankruptcy Reform Act of 1978 simplified the filing of involuntary petitions by eliminating specific tests of bankruptcy, such as transferring assets to defraud creditors. Since then, inability to pay bills on time is sufficient grounds for filing a creditor's petition. See also Creditors' Committee.