Why Do We Have “Bankruptcy”?

Posted on November 10, 2009 by Eugene Melchionne Attorney at Law

Why is there  a bankruptcy process?  Doesn’t it give people a disincentive to repay debts that they really should pay?  Why would Congress go out of its way to create a law that lets people get out of their contractual obligations to make payment?  What’s with this whole “free-pass” thing?

First, the concept of bankruptcy and debt forgiveness actually has its roots in the Old Testament in Deuteronomy 15:2.  The Bible says it is to be granted every 7 years.  Additionally, bankruptcy is specifically mentioned and acknowledged to be an important part of a democratic society in the U.S. Constitution.

Second, bankruptcy is a necessary “escape hatch” for a well-functioning capitalist economy.  The existence of a safety net is what enables and encourages people to take the kinds of economic, investment and career risks that lead to innovation and progress from which we all benefit.  And if there’s one thing that continues to make America the strongest economy in the world, it’s innovation and risk-taking.

The alternative is to keep people in debtor’s prison.  Or let them suffer under a debt burden that they can never overcome.  In the big picture, it’s better to have people continuing to be productive rather than locked away or in a position where they can barely function.

Viewing bankruptcy in this way helps remove the moral stigma.  Bankruptcy is simply a fact of economic life.  Some will succeed.  Others will struggle.  And for the greater good, we need a way to allow people to continue to move forward with their economic lives or else we’ll all bear a more expensive burden.

This is why the U.S. and any successful society has a bankruptcy process.

About Eugene Melchionne Attorney at Law

Eugene S. Melchionne, Esq. - Mr. Melchionne is a graduate of The University of Connecticut (B.A. 1977) and Drake University School of Law (J.D. 1980) where he received the American Jurisprudence Award for academic excellence.Since 1980, Mr. Melchionne has focused his practice in the areas of consumer bankruptcy, workouts and foreclosure defense in distressed real estate markets, real estate transactions, condominium law, commercial litigation, business organizations and probate. Prior to opening his office in 1990, Mr. Melchionne was associated with Grady & Riley in Waterbury, Connecticut and DiPietro, Kantrovitz & Brownstein, P.C. in New Haven, Connecticut. From 1990-1998, Mr. Melchionne was of counsel to Bender & Anderson handling that firm's complex litigation and trials. In addition to his practice, Mr. Melchionne was an adjunct professor at the American Institute of Banking and Teikyo Post University teaching bankruptcy, real estate, commercial and consumer law. Mr. Melchionne also advised the Corporation Counsel's office for the City of Waterbury on bankruptcy and foreclosure matters and mentored junior attorneys in that office. In 2005, Mr. Melchionne was appointed State Chair for the National Association of Consumer Bankruptcy Attorneys (NACBA). He acts as a liasion between the national organization and Connecticut attorneys who are members of the Association. He has fostered education of attorneys in the bankruptcy field and increased access of the public to bankruptcy relief in light of the law passed in 2005. In 2007, Mr. Melchionne was elected as Vice President of the Bankruptcy Law Network, an internet resource for consumer information on bankruptcy and now serves as its President. Bankruptcy Law Network has three sister sites, Credit Law Network, Debt Law Netowrk and Mortgage Law Network. Areas Of Practice: Consumer Bankruptcy Workouts & Foreclosure and Repossession Defense Real Estate Closings Honors: Super Lawyer Connecticut - 2007, 2008 Member of the Month - April 2006, National Association of Consumer Bankruptcy Attorneys American Institute of Banking Community Service - Ken Kovel Award, 2001 Teacher of the Year, American Institute of Banking, 1998 Pro Bono Representation of Indigent Clients, U.S. Bankruptcy Court, District of Connecticut, 1996 - 2002 American Jurisprudence Award 1978   Classes/Seminars Taught: Speaker - NACBA 2009 Convention, Chicago, IL Speaker - NACTT 2009 Convention, Boston MA Speaker - NACBA 2008 Workshop, Hilton Head, SC Speaker - NACBA 2008 Convention, Los Angeles, CA Speaker - NACBA 2007 Workshop, Las Vegas, NV Speaker - NACBA 2007 Convention, Philadelphia, PA Adjunct Professor - Bankruptcy, Real Estate, Consumer, and Commercial Law, American Institute of Banking and Teikyo Post University Past/Present Affiliations: National Association of Consumer Bankruptcy Attorneys American Bankruptcy Institute American Institute of Banking, Northwest Region Council City of Waterbury Corporation Counsel - Advisor, 1996 - 2000 Waterbury Bar Association - Chair, Committee on Bankruptcy -1998 Waterbury Credit Bureau, Inc. - Vice President, 1983 - 1985 American, Connecticut, and Waterbury Bar Associations Admitted: Connecticut, 1982 U.S. Federal Court, 1982 Education: Drake University Law School, Des Moines, IA, J.D. - 1980 University of Connecticut, Storrs, CT, B.A. - 1977 Past Positions: Bender & Anderson, Of Counsel, Hamden, Conn. DiPietro, Kantrovitz & Brownstein, P.C., New Haven, Conn. Grady & Riley, Waterbury, Conn.
This entry was posted in Bankruptcy Basics, Bankruptcy News and tagged , , , . Bookmark the permalink.

Comments are closed.