Consumer Bankruptcy

A Brief Overview  

The American Bankruptcy law system is considerably different from that of most other countries.  Instead of a policy of advantage to creditors, which is the prevailing system in most western countries, the American system places considerable emphasis on the fresh start policy.

This policy assists debtors in building up a new estate by allowing them to keep a considerable part of their assets.  It also helps creditors by preserving the bankruptcy estate, thereby possibly increasing the bankruptcy estate of the debtor.  The exclusion of the debtor’s assets from his or her bankrupt estate is known as the Exemption Law.

Whatever the policy, bankruptcy is a losing situation for all parties involved: creditors, debtors, the state and society in general.  For this reason, some commentators submit that the debtor should be forgiven.  This may be a sensible idea, because if the fresh-start policy is ignored in a bankruptcy system, a debtor may become a debt slave, never able to escape from debt.  He or she may have to depend on social hand-outs, ultimately becoming a burden on the country’s welfare system.

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