A.Everyone has to pay their debts but not everyone can, so the
question arises what to do when a borrower is insolvent. One of
the solutions is bankruptcy, which involves formal legal
protection of the borrower against certain collection actions.
The modern concept of bankruptcy began as a procedure for the
benefit of creditors. When a person or business becomes
insolvent, creditors may race to be the first to collect. This
is both wasteful and unfair. It is wasteful because the
creditors are investing effort and money to be first but the
total amount collected is not augmented by this effort and
indeed is usually diminished because assets may be sold in a
hurry at discount prices. It can be unfair because the one who
actually gets the money may not be the most worthy – the first,
the largest, etc. So a creditor can request a bankruptcy
proceeding which will halt all debt payments and arrange for an
orderly, efficient and fair liquidation. This process can also
benefit the debtor, as he is part of an orderly