The Function of Bankruptcy Laws in Our
Accounting and Legal Studies
The purpose of this assignment
is to have students
reflect on the function of bankruptcy laws in our society and determine whether the recent changes to the
Bankruptcy Code frustrate or promote
this function. Questions are designed to raise moral and ethical issues
as well as issues of social utility. (I hope to engage students at the high end
of Bloom’s taxonomy of learning scale.)
Please read the profiles of bankrupt people from the Washington Post. Then, answer all of the following questions:
- Did you come to the assignment with a pre-formed
image of the “typical” person who files for bankruptcy? For example, did
you make any assumptions about yearly income? the kinds of purchases
that resulted in the debt? typical reasons why debtors fall behind on making
payments? Please explain.
- Did you find anything particularly surprising in the
debtor profiles that appeared in the Washington
Post? Please explain.
- Do you think any of the debtors profiled in the
article were abusing the Bankruptcy Code? Are there any debts on which
they will be discharged under the old Code that you would require them to
- Congress refused to make special provisions for
consumer-debtors who incurred unmanageable debt because of illness, job
loss, or divorce. Argue briefly for the rightness or wrongness of
- Make the best argument you can for allowing the debts
of someone who has $1.5 million in an asset protection trust to be discharged .
- When you take out a loan or buy something on credit,
the creditor loses the value of the money or goods he gives you. He
accepts this temporary loss based on the promise that you will (re) pay
him in the future. We normally think that keeping a promise is a moral
obligation, excused only in the most extraordinary circumstances. A
discharge in bankruptcy means that the debtor is excused from keeping his
promises and the creditors’ losses become permanent. Although it is now
legal for the debtor to walk away from his debts, is it also moral and ethical
for him to do so? Please explain.
- What did you find surprising about the situations profiled
in the Post?