Bankruptcy and Related Laws (6th Edition)

Author: (American) Epstein
Publisher:
Publication 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 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 law students, 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 will also improve readers' legal English proficiency and facilitate direct communication and exchange with American peers. — Xu Chuanxi, Ph.D. in Law from Harvard University, Ph.D. in Social and Cultural Anthropology from Yale University, currently serving as Dean, Professor, and Doctoral Supervisor at the Sino-American Law School of 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. The 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 five or more 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 a fascinating 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 grown, and law students, as well as professionals in business, finance, and commerce, have become increasingly bankruptcy law. At China University of Political Science and Law, specialized research institutions like the Bankruptcy Law and Corporate Restructuring Research Center have even been established.
In American law schools, bankruptcy law is a crucial course. Since the United States does not have a secondary discipline classification 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 -level professors. Among the few law professors at Harvard Law School, at least three teach bankruptcy law courses. When I was a visiting scholar at Harvard in 2000, 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. Since Warren is the Chair of the U.S. Congress's Bankruptcy Reform and Advisory Committee and one of the most renowned professors at Harvard Law School, along with the importance of bankruptcy law, more than 70 students enroll in her course each semester. Warren uses her own lecture notes, and each unit costs students about $12, so over eight or nine units in a semester, it would cost around $100. American students generally regard bankruptcy law as a challenging but highly practical course. Additionally, in Harvard's Law, Economics, and Business Center's legal economics course, bankruptcy law is studied using economic methods. I also audited a bankruptcy law course taught by Professor Scarberry at Pepperdine University in California. The law school enrolls about 300 students per year, and over 50 students take his course. Scarberry gave me his bankruptcy law textbook, which is over a thousand pages long and already 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 to take 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 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 of discussion in bankruptcy law classrooms 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 shaken 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 U.S. exceeded 1.5 million each year. 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. As Professor Warren puts it: "The history of bankruptcy law is the history of the creditor-debtor relationship." Since the advent of commercial relationships in human society, 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 multitude of such relationships, there are always situations where debtors are unable to repay their debts, leading to the breakdown of good creditor-debtor relations. In a commercial society, the occurrence of insolvency can be attributed to various factors, including differences in the living and operational capabilities of debtors, intense competition, changes in consumer demand, market risks, unpredictable transaction factors, and malicious fraudulent commercial practices. Regardless of the cause, when a debtor fails to repay their debts, the creditor-debtor relationship undergoes a fundamental change. The main focus of creditor-debtor relationship law is how to handle such relationships, especially how creditors can maximize the recovery of their debts. From the perspective of creditor-debtor relationship law, there are only two paths to resolving 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 insolvent debtors 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 science that combines theory and practice, with both practical and academic value.