Understanding the Jingle Rule: A Key Concept in Partnership Law
Definition & Meaning
The Jingle Rule is a principle in partnership law that dictates how assets are distributed when a partnership faces financial obligations. According to this rule, the assets of the partnership are first allocated to its creditors. Only after satisfying the partnership's creditors can any distributions be made to the individual creditors of each partner. This means that a partner's personal creditors cannot claim the partnership's assets until the partnership's debts are settled. The Jingle Rule, also known as the Dual-Priorities Rule, was repealed by modern bankruptcy laws and the Revised Uniform Partnership Act, which now allows a partnership trustee to share in the distribution of a partner's estate without being subordinate to the partner's individual creditors.
Legal Use & context
The Jingle Rule is primarily relevant in the context of partnership law and bankruptcy. It is used to determine the order of asset distribution when a partnership is dissolved or liquidated. Legal practitioners may encounter this rule when advising partnerships on financial matters, especially in bankruptcy proceedings. Users can manage their partnership agreements and related documents using legal templates from US Legal Forms, which are drafted by experienced attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A partnership has $100,000 in assets and owes $80,000 to its creditors. Under the Jingle Rule, the partnership must pay its creditors first before any distributions can be made to the individual partners. If the partnership is liquidated, the creditors will receive the full $80,000 before any partner can access the remaining $20,000.
Example 2: (hypothetical example) If Partner A has personal debts of $30,000, they cannot claim any of the partnership's assets until the partnership's creditors are fully satisfied.
Relevant laws & statutes
The Jingle Rule is influenced by the following legal statutes:
- Revised Uniform Partnership Act
- 11 U.S.C. § 723, which allows a partnership trustee to share in the distribution of a partner's estate.