Have you ever wondered what life would be like in America without our modern bankruptcy system? Well, unfortunately for the citizens of the Philippines, life without a modern bankruptcy system has proven disastrous.
“The lack of a modern insolvency legislation caused untold damage to our economy. Mere liquidity problems nearly spelled the death knell for businesses. Our vintage 1909 Insolvency Law was simply not responsive to the 21st century needs of our financially distressed companies. It did not have Chapter 11-like provisions that could have resuscitated them back to life. In the process, many of our companies have suffered a perverted death,” said Sen. Edgardo Angara, one of the bill’s proponents.
After 100 years, the Philippines has realized that a powerful bankruptcy system is critical to the strength, vitality and resilience of the business markets and to the economy as a whole. Many Americans continue to take a bankruptcy system for granted and some even resent the fresh start given to previously overwhelmed debtors. But where would we be if we still had debtor’s prisons and an economic system where individuals had no opportunity for debt forgiveness? Without bankruptcy, the foreclosure crisis, credit crisis and even the crisis that hit the auto industry might have sunk us into a full blown Depression. Without bankruptcy, millions of Americans would be completely destitute because creditors would seize all of their assets to repay debts. It is bankruptcy that gives business owners, banks and individuals the courage to move forward on untested ideas and in unchartered waters.