Bankruptcy and related laws

Author: (American) Epstein
Publisher:
Publish Date: 2005-08-01
Features: In the field of American legal education and practice, "Essentials of American Law" is a distinctive series of books. The most prominent feature of these books is undoubtedly their conciseness, clarity, and accessibility. Many law students use this series as supplementary materials outside of class to grasp the essence of various American legal departments. Practicing lawyers also frequently rely on these books to quickly familiarize themselves with unfamiliar legal departments or review courses they have previously studied. It is believed that this series will also be well-received by domestic readers. Whether they are undergraduate or graduate students in law, practicing lawyers, or other individuals, they can gain a wealth of knowledge about American law from this series, which will be beneficial to their studies and work. Additionally, learning American law through authentic English materials should also enhance readers' legal English proficiency and facilitate direct communication and exchange with their American counterparts. — Xu Chuanxi, Ph.D. in Law from Harvard University, Ph.D. in Social and Cultural Anthropology from Yale University, currently Dean of the Sino-American Law School, Professor, and Doctoral Supervisor at China University of Political Science and Law.
Bankruptcy law has long been a minor course in nearly four hundred law schools in China, with few scholars researching it. Even at China University of Political Science and Law, a comprehensive law school, early bankruptcy law instruction was included within civil law and civil procedure courses. In the curriculum for students majoring in economic law, basic bankruptcy law was also explained within the context of business law. This weak state of bankruptcy law teaching and research is related to the controversy in the Chinese legal community about whether bankruptcy law is a substantive law, a procedural law, or a special law. Due to excessive emphasis on the disciplinary attributes of bankruptcy law, its true value has been overlooked. In recent years, bankruptcy law teaching has improved in many law schools, at least at China University of Political Science and Law, where at least five professors now teach bankruptcy law, comparative bankruptcy law, and bankruptcy law and corporate restructuring. The initial neglect and current emphasis on bankruptcy law in Chinese law schools are entirely an interesting phenomenon rooted in China's social and market transformation. As China's market-oriented reforms have deepened, the market's understanding of bankruptcy law has become increasingly profound, and law students, as well as professionals in business, finance, and commerce, have placed greater importance on bankruptcy law. At China University of Political Science and Law, even specialized research institutions like the Bankruptcy Law and Corporate Restructuring Research Center have been established.
In American law schools, bankruptcy law is a crucial course. Since the United States does not have a secondary discipline division like China, bankruptcy law does not have a designated disciplinary and does not involve debates about whether it is a substantive, procedural, or special law. In American law schools, bankruptcy law is treated as an equally important practical law course as corporate law, securities law, and antitrust law. I can illustrate the importance of bankruptcy law in American law schools with an example. At Harvard Law School, bankruptcy law is taught by [university-level] professors. Among the few law professors at Harvard Law School, at least three teach bankruptcy law courses. In 2000, when I was a visiting scholar at Harvard, I audited Elizabeth Warren's two-semester bankruptcy law courses: Creditors and Debtors and Advanced Bankruptcy Law, each lasting one semester, meeting once a week for three hours. Harvard Law School's JD program enrolls 550 students per year. Due to Warren's status as the Chair of the U.S. Congress's Bankruptcy Reform and Advisory Committee and one of the most renowned professors at Harvard Law School, combined with the importance of bankruptcy law, the number of students enrolled in her courses each semester exceeds 70. Warren used her own lecture notes, and each unit required students to pay for them, costing about $12 per unit. By the end of the semester, with eight or nine units, it would cost around $100. American students generally consider bankruptcy law to be a challenging but highly practical course. Additionally, in Harvard Law School's Legal, Economic, and Business Center, the law and economics course includes the study of bankruptcy law using economic methods. I also audited bankruptcy law taught by Professor Scarberry at Pepperdine University in California's western region. The law school enrolls about 300 students annually, with over 50 selecting his course. Scarberry provided me with his bankruptcy law textbook, a lengthy 1,000-page work in its third edition. Considering the number of students, the elective system (with only six required courses among hundreds), the credit system, and the difficulty of the bankruptcy law course, the fact that so many students choose it demonstrates that bankruptcy law is a significant practical law course in the United States.
In a fully commercialized society, bankruptcy law is undoubtedly one of the most important laws in that society. The current U.S. bankruptcy law, passed in 1978 and commonly referred to as the "Bankruptcy Code," is listed in Title 11 of the U.S. Code. Although the 1978 Bankruptcy Code has been amended in 1984, 1986, 1988, 1990, 1994, 1998, 1999, 2001, and 2003, and even a new bankruptcy law amendment bill was signed into law by President Bush in April 2005, its overall framework and basic content have not changed significantly. The main content of the U.S. Bankruptcy Code is divided into the following eight chapters:
Chapter 1: General Provisions, Definitions, and Rules;
Chapter 3: Case Administration;
Chapter 5: Creditors, Debtors, and Bankruptcy Property;
Chapter 7: Liquidation;
Chapter 9: Adjustment of Municipal Debts;
Chapter 11: Reorganization;
Chapter 12: Adjustment of Debts of Family Farmers with Fixed Annual Income;
Chapter 13: Adjustment of Debts of Individuals with Fixed Annual Income.
Several examples can illustrate the important role and function of U.S. bankruptcy law in American society. U.S. bankruptcy law is one of the two laws mentioned in the U.S. Constitution, and the relationship between bankruptcy law and the constitution has become a heated topic in bankruptcy law classes in American law schools, a phenomenon rarely seen in other countries. The ongoing debates about bankruptcy reform proposals in Washington, D.C., are also a perennial hot topic for creditor groups, American labor unions, the American Bankruptcy Association, and various lobbying groups. Bankruptcy cases are often front-page news in major American business publications like the Wall Street Journal. Notable cases like Enron, United Airlines, and WorldCom, which have shocked the world, were all handled by U.S. federal courts under Chapter 11 of the U.S. Bankruptcy Code. In 2003 and 2004, the number of personal bankruptcy filings in the United States exceeded 1.5 million each year, and for a society highly sensitive to unemployment and bankruptcy, this data has a significant impact on the economic and social stability of the United States. All these factors demonstrate the importance of bankruptcy law in American society and its direct and profound influence on the commercial and economic society.
Bankruptcy law is important because it addresses one of the oldest, most active, and fundamental relationships in human society—the relationship between creditors and debtors. According to Professor Warren, "The history of bankruptcy law is the history of the creditor-debtor relationship." Since the advent of commercial relationships in human society, the issues of debt and creditor-debtor relationships have existed. Ordinary people and merchants engage in borrowing and lending in their daily lives, production, and transactions. Once borrowing and lending occur, creditors and debtors are created. In creditor-debtor relationships, repaying debts is a fundamental behavioral norm. Although the relationship between creditors and debtors may initially be harmonious, in the myriad of such relationships, there are always instances where debtors are unable to repay their debts, leading to the breakdown of the creditor-debtor relationship. In a commercial society, the occurrence of insolvency can be attributed to various factors, including the debtor's financial and operational capabilities, intense competition, changes in consumer demand, market risks, unpredictable transaction factors, and malicious fraudulent commercial practices. Regardless of the cause, when a debtor is unable to repay their debts, the creditor-debtor relationship undergoes a fundamental transformation. The primary focus of creditor-debtor relationship law is how to handle such complex relationships, particularly how creditors can maximize the recovery of their debts. From the perspective of creditor-debtor relationship law, there are only two paths to resolving the issue of insolvency: non-legal (outside the court) and legal (within the court). Bankruptcy law is the most important legal method for addressing insolvency.
Essentially, bankruptcy law is an ordered and civilized commercial arrangement under judicial supervision that fairly distributes the property of debtors unable to repay their debts to creditors or provides financial relief to debtors. This judicial commercial arrangement addresses the procedural and technical issues of fundamental creditor-debtor commercial relationships. It not only involves creditors and debtors but often engages more stakeholders related to this commercial arrangement and fundamental relationship, including shareholders, corporate employees, management teams, labor unions, the government, debtor families, bankruptcy lawyers, accountants, and others. The complexity of bankruptcy law lies in this.
Due to its involvement in complex creditor-debtor commercial arrangements, commercial transaction evaluations, and intricate legal relationships, bankruptcy law itself holds significant commercial value. In a bankruptcy case, effective bankruptcy law and case handling can not only maximize the interests of creditors but also balance the interests of all stakeholders involved. Further, bankruptcy law is also a complex, theory-practice integrated science with practical and academic value.