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Simple English definitions for legal terms
race of diligence
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A quick definition of race of diligence:
Term: Race of Diligence
Definition: When a company goes bankrupt, all of its assets are sold off to pay its debts. The race of diligence is a rule that says whoever gets to the assets first gets to buy them. It's like a race to see who can buy the assets before anyone else. This means that if you're not quick enough, you might miss out on buying the assets you want.
A more thorough explanation:
Definition: A legal term used in bankruptcy proceedings where the first person to claim assets is the first to receive them.
Example: Imagine a company goes bankrupt and owes money to multiple creditors. The court will use the race of diligence to determine who gets paid first. The creditor who files their claim first and shows the most diligence in pursuing their claim will be the first to receive payment from the company's assets.
Another example: If a person dies without a will, their assets will be distributed according to the race of diligence. The first person to claim the assets and show diligence in pursuing their claim will receive the assets.
The race of diligence ensures that those who act quickly and diligently are rewarded in bankruptcy proceedings or when distributing assets without a will.