PT128.S1.P2.Q10

PrepTest 128 - Section 1 - Passage 2 - Question 10

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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.
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Increased Bankruptcies Declared · This has been criticized
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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.
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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
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Two Rationales · (1) Public good is paramount and (2) that's better served by allowing the debtor to continue to operate
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Mechanism · Court-directed reorganization of debt
Some debts forgiven; some assets transferred to creditors.
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Punishment · Bad credit score
A bit of punishment is still there, but the point is to benefit society
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Goal · Restoration of healthy economic activity
Passage Style
Critique or debate
Problem-analysis
Show answer
10.

Which one of the following ██████ █████ █ ████████ ██ ███ ████████ ██████ ██ ██████████ ███████████ ██ ████ ██████ ██ ████ █████

a

Debt that has ██████ ██ █████ ████ █████████ ██ ██████████ ██ ██████████ █ █████ ███████ ███ ████ █ ██████ ███ █████ ███ ███ ██████ ███████ ████████ ██████████

There’s evidence a defender of the punitive theory would have said this, because the punitive approach reflected a belief that bankrupt debtors were “breaking sacrosanct social contracts.” Sacrosanct means sacred. So there’s an implication of a moral element to the punitive theory.

72%
b

Because insolvency ultimately █████ ███ ██████ ████████ ███ ███ ██████ ███████ █ ████████ █████████ ██ ███████████

There’s no evidence defenders of the punitive theory probably said this. We have no evidence they considered the punitive theory to be more economically efficient. (Don’t confuse what this question is asking with, “Which of the following, if true, would support the punitive theory?” This question is not asking us to strengthen the punitive theory or weaken the author’s argument.)

20%
c

The insolvency of █████████ ██ ███████████ ██ █████████ ██ ███ ████ ██ ███ ██████ ██ ████████████ ██████████████ ████████ ████ █████ ██████ ████████████ ████████ ██████ ██ ███ ████ ████

There’s no evidence defenders of the punitive theory said this. We have no evidence they considered the punitive theory to be more economically efficient.

2%
d

The dissolution of █ █████ ██████████ ██ ██████ ██ ███ ███████ ██ █ █████ ███ ██████ ███ ██ ████████ ████ ████ ████ ████████████ ██████████ ██ ███ ██████ ██ ███ ███ ██████ █████████████████

There’s no evidence defenders of the punitive theory said this. We have no evidence they considered the punitive theory to be more economically efficient.

3%
e

The employees of █ █████ ████████ ██████████ ██████ ██ ██████████ ████ ██ █████████ ██ ███ █████ ██ █ ████████ ████ ███████████████

There’s no evidence that defenders of the punitive theory would have said this. We don’t have any indication of their beliefs regarding the comparative negligence of employees and a sole business owner.

3%

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