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
11.
Which one of the following █████████ █████ ████ █████████ ██ ████████ ██ ███ ███ ██ ███ ████ █████████ ██ ███ ████████
a
Only when today's ██████████ ████ ███ ██████████ ████ ██ ██████████ ██ █ █████ █████ ████ ██████████ ███████████ ██████ ██ ███ ████████ ███████
This doesn’t fit, because the author thinks current bankruptcy laws are good. There’s no reason the author would add a claim about today’s laws being seen as inadequate as a requirement for getting back to the original intent.
b
Punishment is no ██████ ███ ███████ ████ ██ ██████████ ████ ████ ██ ████ ██ ███ ████ ███████ █████ ████████ ███████████
This is the best answer. In the second-to-last sentence, the author notes that there are certain features of bankruptcy that
c
Since leniency serves ███ ██████ ████████ ██ ██████████ ████ ██ ██ ██████ ██ ██ ██ ██ ████████ ███ ██ █████
There’s no reason the author would add a sentence about criminal law at the end. Criminal law isn’t brought up in the last paragraph, and we have no reason to think modern bankruptcy laws are related to criminal law in any way.
d
Future bankruptcy legislation █████ ███████ ████████ █████████ ███ ████ ██ ████ ████████ ██████████ ███████ ██████████
This doesn’t fit at the end, because we have no reason to think the author wants to consider adding punitive measures to current bankruptcy laws. Although current law does have some aspects that
e
Today's bankruptcy laws █████ ███ ██████ ██ ██████████ ████████ ██ ███ █████████ ██ ██████████ ██ ██████ ████████ ██ ███ ██████████ ████ ████ ███████ ███████ ██ ████████
This isn’t supported. We have no reason to think creditors bear the main burden of bankruptcy. Sure, the modern laws are less punitive for debtors, but that doesn’t imply creditors now have the primary burden if someone goes bankrupt. The debtors are still affected by bankruptcy and arguably could have the primary burden. Creditors simply benefit from bankruptcy if the debtors can stay in operation and can pay the creditors back.