Question

Do you think the concept of bankruptcy is fair to creditors? Or does it give borrowers too much of a second bite at the apple of credit??

Answer 1

The concept of bankruptcy is fair to creditors only to a limited extent. If the bankruptcy is made that easy it will have an adverse impact on the banking sector of the country which is the backbone of the economy. Further due to regular defaults the bank would start charging higher interest rates that would directly impact a genuine customer.

Easy bankruptcy gives the borrower a mechanism to abscond with the money and then leaving all the stakeholders at huge losses. Hence bankruptcy should be granted only after strict scrutiny.

Today is an era of innovation where markets are bombarded with new companies. In such a scenario, banks should go for a very stringent background research to make sure that such activities are minimised.