Bankruptcy law is a system of interventionary legislation which interferes with the ability of individuals freely to establish the terms of loan contracts. It benefits the less prudent and less scrupulous borrowers -indeed may encourage their conduct -while making loans costlier for the honest and conscientious. Bankruptcy is defined as “that system of laws by which an insolvent debtor surrenders his property to a court which distributes the proceeds proportionately among his creditors and usually declares the debts discharged”. It is a system which provides, in other words, for the coercive elimination of contractual obligations.
