DEFINITION of 'Forfeiture'

The loss of any property without compensation as a result of defaulting on contractual obligations, or as a penalty for an illegal conduct. Forfeiture, under the terms of a contract, refers to the requirement by the defaulting party to give up ownership of an asset, or cash flows from an asset, as compensation for the resulting losses to the other party. When mandated by law, as a punishment for criminal activity or prohibited activities, forfeiture proceedings may be either criminal or civil. The process of forfeiture often involves legal proceedings in a court of law.

BREAKING DOWN 'Forfeiture'

Forfeitures can be considered controversial, especially when exercised by governments for illegal activity, such as drug-related offenses in the United States. Supporters of such forfeitures credit them for hampering criminal activity by curbing their financial resources. However, detractors claim that the increasing level of government forfeiture violates constitutional rights, notably the right to due process of law.

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