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1
in whole or in part.
The easier it is for debtors to file for bankruptcy, the greater the incentive for debtors to
do so to avoid paying their debts. This of course increases the creditors’ risk. To compensate
for this greater risk, creditors raise interest rates, require more security, or become more
direction, favoring creditors’ interests at the expense of debtors. Thus, attempts to balance the
rights of creditors and debtors are likely to always raise questions of fairness and justice.
2. So long as there is no breach of the peace, a lender may repossess goods
on the debtor's default under the self-help provision of the UCC’s Article 9. Do you think
that debtors have a right to be told in advance about a planned repossession? Some
observers argue that the self-help remedy under Article 9 should be abolished. Do you
agree? Why or why not? The rationale for the UCC’s “self-help” provision—under which
creditors may take possession of collateral on a debtor’s default without judicial process—is that
2 UNIT FIVE: CREDITORS’ RIGHTS AND BANKRUPTCY
But it is difficult to see how requiring a debtor to be notified before a repossession would
protect anyone’s interest. The debtor might be no less likely to resist a creditor’s actions—and
might do so with more violence, having been given the opportunity to prepare. The creditor
might be no less likely to rely on the element of surprise by attempting to exercise the “self-help”
3. Is it unethical to avoid paying one's debts by going into bankruptcy? Does a
person have a moral responsibility to pay his or her debts? Discuss. Bankruptcy is not
easy for debtors (and seems to have become even less easy with the Bankruptcy Reform Act of
2005). Many debtors feel a sense of shame and failure when they file a petition. And there are
Some might argue that this is as it should be. Others might contend that debts should not
be discharged at all, but should be paid, even if according to an extended schedule. Some
Others might argue that bankruptcy is only an economic tool to be used to the advantage
of any party who can benefit from it. Individuals who have obtained a discharge in bankruptcy
4. Are borrowers better off as a result of the bankruptcy reform legislation?
Why or why not? The text posits that when the number of bankruptcies increases, creditors in-
cur higher risks in making loans—because bankruptcy shifts the cost of the debt from the debtor
in whole or in part.
2 UNIT FIVE: CREDITORS’ RIGHTS AND BANKRUPTCY
But it is difficult to see how requiring a debtor to be notified before a repossession would
protect anyone’s interest. The debtor might be no less likely to resist a creditor’s actions—and
might do so with more violence, having been given the opportunity to prepare. The creditor
might be no less likely to rely on the element of surprise by attempting to exercise the “self-help”
3. Is it unethical to avoid paying one's debts by going into bankruptcy? Does a
person have a moral responsibility to pay his or her debts? Discuss. Bankruptcy is not
easy for debtors (and seems to have become even less easy with the Bankruptcy Reform Act of
2005). Many debtors feel a sense of shame and failure when they file a petition. And there are
Some might argue that this is as it should be. Others might contend that debts should not
be discharged at all, but should be paid, even if according to an extended schedule. Some
Others might argue that bankruptcy is only an economic tool to be used to the advantage
of any party who can benefit from it. Individuals who have obtained a discharge in bankruptcy
4. Are borrowers better off as a result of the bankruptcy reform legislation?
Why or why not? The text posits that when the number of bankruptcies increases, creditors in-
cur higher risks in making loans—because bankruptcy shifts the cost of the debt from the debtor
in whole or in part.
