Corporate and Personal Bankruptcy Law

Posted: 10 Jan 2012

See all articles by Michelle J. White

Michelle J. White

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2011

Abstract

Bankruptcy is the legal process by which the debts of firms, individuals, and occasionally governments in financial distress are resolved. Bankruptcy law always includes three components. First, it provides a collective framework for simultaneously resolving all debts of the bankrupt entity, regardless of when they are due. Second, it provides rules for determining how the assets and earnings used to repay are divided among creditors. Third, bankruptcy law specifies punishments intended to discourage debtors from defaulting on their debts and filing for bankruptcy. This review discusses and evaluates bankruptcy law by examining whether and when the law encourages debtors and creditors to behave in economically efficient ways. It also considers how bankruptcy law might be changed to improve economic efficiency. The review shows that there are multiple economic objectives of bankruptcy law because the law has very diverse effects. Some of these objectives differ for individuals versus corporations in bankruptcy.

Suggested Citation

White, Michelle J., Corporate and Personal Bankruptcy Law (December 2011). Annual Review of Law and Social Science, Vol. 7, pp. 139-164, 2011. Available at SSRN: https://ssrn.com/abstract=1982339 or http://dx.doi.org/10.1146/annurev-lawsocsci-102510-105401

Michelle J. White (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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