Abstract

http://ssrn.com/abstract=382443
 
 

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Non-Procrustean Bankruptcy


Richard M. Hynes


University of Virginia School of Law

February 21, 2003


Abstract:     
This article questions the conventional wisdom that bankruptcy
and other forms of debt relief unfairly allow the wealthy to
retain more resources than the poor. The central insight is
that if bankruptcy provides insurance otherwise unavailable
because of market failures, an ideal bankruptcy system would
embrace significant inequality in post-bankruptcy standards of
living. When choosing insurance policies, the wealthy generally
choose contracts that ensure their high standards of living.
Though others envy these benefits, they do not wish to pay the
premiums that these policies require. To the extent that credit
markets force a debtor to pay premiums (higher interest rates)
for the debt relief she may receive, forcing all debtors to
accept the same standard of living after default forces each
debtor to accept the same Procrustean insurance with a benefit
too meager for some and premiums too dear for others. This
argument requires strong assumptions that reasonable minds may
reject. However, if one rejects these assumptions, one must
question not only the debt relief secured by the once wealthy,
but also the debt relief offered to the middle class.

Number of Pages in PDF File: 83

JEL Classification: I38, K00, K20

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Date posted: March 5, 2003  

Suggested Citation

Hynes, Richard M., Non-Procrustean Bankruptcy (February 21, 2003). Available at SSRN: http://ssrn.com/abstract=382443 or http://dx.doi.org/10.2139/ssrn.382443

Contact Information

Richard M. Hynes (Contact Author)
University of Virginia School of Law ( email )
580 Massie Road
Charlottesville, VA 22903
United States
434-924-3743 (Phone)

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