Self-study
P1
In many Western societies, modern bankruptcy laws have undergone a shift away from a focus on punishment and toward a focus on bankruptcy as a remedy for individuals and corporations in financial trouble—and, .
Intro to Topic ·
Modern bankruptcy laws
No longer about punishment. About remedying the financial situation for the debtor and creditor.
Increased Bankruptcies Declared ·
This has been criticized
Main Point ·
Do not abandon modern bankruptcy laws
Their increased use is not a reason to abandon them. They serve a useful economic purpose.
P2
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Old Solution ·
Imprisonment and dissolution
Punishment was thought to be the right solution to insolvency because debtors were violating "sacrosanct" social contracts.
Critique ·
This benefits no one
Creditors can't get paid if the debtor is in jail. A dissolution of a company would cause unemployment.
P3
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New Solution ·
Modern bankruptcy law
Two Rationales ·
(1) Public good is paramount and (2) that's better served by allowing the debtor to continue to operate
Mechanism ·
Court-directed reorganization of debt
Some debts forgiven; some assets transferred to creditors.
Punishment ·
Bad credit score
A bit of punishment is still there, but the point is to benefit society
Goal ·
Restoration of healthy economic activity
Passage Style
Critique or debate
Problem-analysis
7.
In stating that bankruptcy laws ████ ███████
a
are often surprised ██ ███████ ████████████ ██ ██████████ ██████
We don’t get any discussion of how creditors react. We know that creditors can benefit from the current bankruptcy laws, but there’s nothing that indicates creditors' reactions to these laws — are they surprised, pleased, supportive, etc. We just don’t know.
b
have unintentionally become ███ █████ █████████████ ██ ██████████ ████
“Chief” is too strong. Although we know they do benefit, we don’t know that creditors are the main beneficiaries of bankruptcy laws.
c
were a consideration, ██████ ███ █ ███████ ████ ██ ███ ███████████ ██ ██████████ ████
In the line that uses “perhaps unexpectedly,” the author discusses the effects of current bankruptcy laws — they’re helpful to debtors and to creditors. But the line doesn’t involve what went into the “formulation” of bankruptcy laws, which involves how they were written. What’s unexpected has nothing to do with the writing or making of bankruptcy laws, but rather, with the effect of bankruptcy laws.
d
are better served ████ ██ ███████████ ████████ ██ ████ ████████ ██ ███ █████ ████████ ██ ███████ █ ██████ ███ ███████
The line in which the highlighted phrase appears expresses the idea that bankruptcy laws benefit debtors and creditors. The benefit to debtors is expected; but the benefit to creditors is not, on its face, something we’d expect to happen. But creditors actually do benefit when debtors are helped, because creditors have a higher chance of getting more money back.
e
were themselves active ██ ███ ███████████ ██ ██████ ██████████ ████
In the line that uses “perhaps unexpectedly,” the author discusses the effects of current bankruptcy laws — they’re helpful to debtors and to creditors. But the line doesn’t involve what went into the “formulation” of bankruptcy laws, which involves how they were written. What’s unexpected has nothing to do with the writing or making of bankruptcy laws, but rather, with the effect of bankruptcy laws.