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Simple English definitions for legal terms
dual-priorities rule
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A quick definition of dual-priorities rule:
The dual-priorities rule is a principle that says that if a partnership goes bankrupt, the creditors of the partnership have the first right to the partnership's assets, while the creditors of individual partners have the first right to the personal assets of those partners. This rule used to be followed, but now bankruptcy laws and the Revised Uniform Partnership Act have changed it. Now, partnership creditors can access all assets of bankrupt partners, not just what's left after individual creditors have been paid. This rule is also called the jingle rule.
A more thorough explanation:
The dual-priorities rule is a principle that states that partnership creditors have priority for partnership assets, while individual creditors have priority for a partner's personal assets. This means that if a partnership goes bankrupt, the partnership's creditors will be paid first from the partnership's assets, and if there is any money left over, the individual creditors will be paid from the partner's personal assets.
For example, if John and Jane are partners in a business, and the business goes bankrupt, the partnership's creditors will be paid first from the business's assets. If there is any money left over, John's personal creditors will be paid from his personal assets, and Jane's personal creditors will be paid from her personal assets.
However, this rule has been abandoned by the bankruptcy laws and the Revised Uniform Partnership Act. The Bankruptcy Code now allows partnership creditors access to all assets of bankrupt partners, not just those remaining after payment to individual creditors. This means that if John and Jane's business goes bankrupt, all of their assets will be used to pay off the partnership's creditors, regardless of whether they are personal or partnership assets.