The 2005 Bankruptcy Law

Paper Summary:

This paper explains that the Bankruptcy Abuse and Prevention and Consumer Protection Act of 2005 is considered to be the most extensive review of the Bankruptcy Code ever since its inception in 1978. The author points out that, although several provisions, such as general structure of liquidation under chapter 7 and provisions for reorganization under chapter 11 remain as they are, the 2005 Act is considered to have significant impact on the rights and interests of both creditors and debtors in consumer and business bankruptcy cases, which is reviewed in this paper chapter by chapter of the new code. The paper relates that the primary objective of this legislation, which was widely patronized by both banks and the credit card industry, is to discourage bankruptcy filings and to turn some debts not subject to a bankruptcy discharge.

From the Paper:

"Such reformation in terms of major modifications in the corporate bankruptcy law is expected to lead to a rush to the courts by loosing companies to find out easier treatment. The new bankruptcy law embodying the new creditor protections in the law will make the bankruptcy reorganizations more stringent and also more costly for companies in search of shelter under Chapter 11. The formulators of the Law have made it stringent in reply to the concerns that management has been too fast to use bankruptcy like another financial device to affect creditors and shareholders. The recent impositions on personal bankruptcies attracted the attention but the legal experts opined that new rules could have extensive effects."

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