Law And Economics Analysis Of Personal Bankruptcy System

Modern personal bankruptcy system plays a significant role in ensuring the smooth operation of economy,reducing judicial pressure and protecting the basic rights of debtors,while the deficiencies of personal bankruptcy system may bring some social issues such as implementation difficulty and increased financial risk.To cope with these problems,China has proposed to gradually establish the bankruptcy system of natural persons in the future.It arouses discussions,but meanwhile leads to some worries.Some people worry that bankruptcy exemptions may be used maliciously by debtors to avoid debt,which not only damages the rights and interests of creditors,but also might upset the economic order.Such worry is reasonable,and it is a crucial problem for China that a personal bankruptcy system should be established to effectively serve the economic and social development.In addition,knowing the operation mechanism of the personal bankruptcy system,and learning its advantages and deficiencies are extremely vital to its establishment.Law and Economics,providing a angle of view,makes people understand the operation mechanism through economic analysis.Moreover,it takes social background as an important factor that affects the transaction costs to learn the generation,development and practice of the personal bankruptcy system,which is beneficial to the economic analysis of the personal bankruptcy system.Originally,the personal bankruptcy system is formulated to solve debt problems.It makes an analysis on the gambling between debtors and creditors,and researches the transaction costs incurred by debt contracts,aiming to know the role of personal bankruptcy as a mechanism that is used to solve debt disputes.What's more,the economic analysis on the merits and demerits of specific systems and personal bankruptcy enables to know the operation mechanism of the personal bankruptcy system,the distribution mode of its benefits,and its effects on the transaction costs and efficiency caused by such mode.Economic analysis shows that the personal bankruptcy system is featured by merits.For example,it relieves conflicts between debtors and creditors,promotes information exchange and encourages debtors to meet their liabilities.Such merits can effectively lower the translation costs and protect the rights and interests of all parties,though to different degrees.However,it also presents deficiencies such as the increased uncertainty of creditor's rights and damages on the interests of creditors,which will increase the transaction costs and destroy the normal economic operation.While to some extent,systems such as the loss and restoration of rights and free property are enacted to remedy its deficiencies.Nations who have established the personal bankruptcy system have formulated specific rules according to their actual social situations.During the process of establishing the personal bankruptcy system,China should consider its actual situations,put emphasis on the benefit balance among parties and exert the merits of the personal bankruptcy system.Meanwhile,it should avoid its deficiencies and properly draw on foreign experience.