Know the Goal of Bankruptcy Laws

Those who have never had any encounters with bankruptcy law may assume that the courts are predisposed to act in the interests of creditors, and thus, are against debtors. However, this is not the case. After all, the very fact that bankruptcy laws exist in the United States are emblematic of the fact that the government is not interested in feeding insolvent parties to the lions, in a manner of speaking.

Courts of bankruptcy law, in theory, are designed to be balanced in representing all sides in proceedings, and whether a judge's discretion significantly impairs this balance is up to judgment in and of itself. Some notes on bankruptcy courts' stated goals with regard to bankruptcy laws in the United States:

Keeping with the theme of bankruptcy law as an emblem, American bankruptcy laws are perhaps the perfect example of a "second chance" as far as the law in this country goes. As of result of proceedings in a bankruptcy court, everyday people may be allowed to wipe their debts away for good, getting them out of a situation that otherwise would have had them struggling to stay afloat for years more or just would not have been possible to manage by virtue of the numbers game.

As students of bankruptcy law understand, there are several specific chapters of the Bankruptcy Code. Bankruptcy laws have not just been written to protect average Americans, though. However, especially when the failures of companies may affect tens, hundreds, and thousands of people, the idea that corporations may also apply for assistance in overcoming insolvency is paramount. Courts of bankruptcy law extend the same choices of liquidation and reorganization to businesses facing failure.

As noted, bankruptcy laws are supposed to work in the best interests of all with an interest in the case. This includes creditors who may not be able to get 100% back on their investments, but may still recoup a satisfactory amount of what they were legally owed. Through the workings of bankruptcy law, creditors with valid claims may be able to get a portion of what they are entitled to in regular installments from debtors through the officers of the court.

Then again, the United States is obviously not the only maker of bankruptcy laws in the world, as such a fate may befall anyone in any land. In such instances, Chapter 15 of the Bankruptcy Code comes into play.

NEXT: Learn About the Bankruptcy Court Background