Act of Bankruptcy Law and Legal Definition

Act of bankruptcy refers to behavior indicating that a person might be judged as bankrupt. It is an event such as a debtor's fraudulent conveyance of property, which triggers an involuntary bankruptcy proceeding against a debtor. However, an act of bankruptcy as a condition to an involuntary bankruptcy proceeding was abolished by Bankruptcy Reform Act of 1978. Since then, inability to pay bills on time is sufficient grounds for filing a creditor's petition.