what are the purpose of bankruptcy legislation?
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- To grant the honest unfortunate debtor a fresh start.
- To provide insolvent debtors an opportunity to reorder their affairs, make peace with creditors.
- To relieve the honest debtor the weight of oppressive indebtedness.
- to save and preserve the going-concern value of firms in financial distress by reorganizing rather than liquidating.
Bankruptcy legislation allows one to eliminate overwhelming financial obligations. The legislation is made by the congress and interpreted by the federal courts. This legislation helps in ensuring the insolvent debtors have an opportunity to start a fresh, to have their affairs in order and help them avoid unnecessary insolvency and discouragements of the preexisting debt, (Grogan v. Garner, 111 S.Ct. 654 (1991). When an individual fails to meet their financial obligations, they risk losing their assets to the creditors. With bankruptcy legislation, the debtor is able to keep their assets while finding means to pay off the debt. The legislation also provides the creditor with correct actions against insolvent debtors.
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