why bankruptcy is good

Who is protected by bankruptcy laws

In my law practice I have represented debtors and creditors and for a time even worked for the bankruptcy courts.  I think I have a good idea of all the different parties in the process and where they are coming from generally.  In bankruptcy it is my observation that each side thinks the laws are on the books to protect the other guy.  I guess that’s good if you step back and look at it from a distance – it means each side feels that the other is protected at different point in the process.

Bankruptcy laws were developed so people can be get some relief of the excessive burden of debt.  Debt has a way of destroying almost everything it comes in contact with.  I have seen the effects of debts on relationships both personal and financial, on marriages, on religious beliefs, on individuals health, and on peoples futures.  So we as  a community decided to create a social safety valve to the pressure cooker that is debt in the form of the legal process we call bankruptcy.

Bankruptcy laws protect the debtor when they are unable to pay your debt if you have more debt than you will ever be able to pay back on their own. Our society believes it isn’t right to make someone a slave to their debt for the rest of their lives so bankruptcy laws protect you and give you a chance to start over again financially. Though because creditors want to protect their collateral during they frequently litigate to protect their collateral.  Bankruptcy can actually be a benefit to a creditor in that it give an organized and structured manner to regain possession of their collateral or in the alternative give them a chance to once again receive payments on their loans just as they bargained for in the original contract.  To be sure bankruptcy can be a burden on a creditor given the cost associated with  defending their rights but given the poor alternatives of the past its the best system we have.

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