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Simple English definitions for legal terms
gap period
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A quick definition of gap period:
Gap period: The time between when someone asks a court to declare a person or company bankrupt and when the court actually makes the decision. This time is called the gap period or gap for short.
A more thorough explanation:
Definition: The gap period in bankruptcy refers to the time between the filing of an involuntary bankruptcy petition and the entry of the order for relief.
For example, if a company is facing financial difficulties and creditors file an involuntary bankruptcy petition against it, there will be a gap period before the court decides whether to grant the petition and enter an order for relief. During this time, the company may continue to operate and manage its affairs.
The gap period is important because it allows the court to review the petition and determine whether the debtor is eligible for bankruptcy protection. It also gives the debtor time to prepare for the bankruptcy process and potentially negotiate with creditors.