Bankruptcy Laws

Nowadays, the primary aim of modern bankruptcy legislation and business debt restructuring programmes is usually to help the debtors facing financial distress by rehabilitating them, thus allowing them to continue their businesses. Instead of trying to eliminate the bankrupt person or organization, the laws try to get to the root of the problem by remodelling the debtor’s organizational and financial structures.

In the case of private house-holds, simply dismissing their debts after a given amount of time is considered to be insufficient for the long run. It is vital, therefore, to examine the problems underlying the situation in order to minimize the chance of such a situation occurring again in the future. When a person is undergoing rehabilitation due to his or her financial crunch, it is of paramount importance to provide social help, financial education and debt advice to him or her to help find new sources of income and also to optimize household expenditure.

Debt discharge is the situation when the debtor’s debt is cancelled or forgiven by the law. The law for discharge varies from country to country. In the United States, for example, debt discharge is conditioned to a certain level (partial payment obligation). The United Kingdom follows a similar system as well. Other countries, Spain, for example, grants a debt settlement scheme which results in the debt being reduced, at most to half its value, along with a payment period of 5 years.