Contemplation of Bankruptcy Law and Legal Definition

Contemplation of Bankruptcy refers to the thought of declaring bankruptcy because of the inability to continue current financial operations. This is often coupled with actions which are designed to thwart the distribution of assets in a bankruptcy proceeding.

The following are a few case laws on Contemplation of Bankruptcy:

Failure of the government to show that the defendant was contemplating a bankruptcy or intended to defeat the bankruptcy laws can result in a reversal of a conviction for transferring property in contemplation of bankruptcy. [United States v. Tashjian, 660 F.2d 829, 842 (1st Cir. Mass. 1981)] However, the jury can "put two and two together" to decide how far back defendant actually contemplated bankruptcy. For example, the jury found a contemplation of bankruptcy at the time defendant started trying to generate a greater cash flow in United States v. Haymes, 610 F.2d 309 (5th Cir. Fla. 1980).

Circumstantial evidence of pre-petition activity such as secret deals among officers and the weak financial condition of a company can be used to show that the defendant's acts were in contemplation of bankruptcy.[United States v. Martin, 408 F.2d 949 (7th Cir. Wis. 1969)]