МОГУЋЕ РЕПЕРКУСИЈЕ УВОЂЕЊА ИНСТИТУТА СТЕЧАЈА ПОЈЕДИНЦА НА ОСНОВУ ИСКУСТВА САД
POSSIBLE RAMIFICATIONS OF INTRODUCING THE INSTITUTE OF PERSONAL BANKRUPTCY: THE USA EXPERIENCE

Summary/Abstract: In the past decade, the increase of household debt in Serbia as well as in the entire region has brought the issue of personal bankruptcy into the spotlight. The adoption of this procedure would enable individuals who are over-indebted and unable to settle out the credit and current payables to file for personal bankruptcy. The main objective of this procedure would be to ensure the maximum reimbursement of creditors’ claims from the debtor’s available assets and annual revenues. Such a procedure would also provide for the protection of the debtor’s basic human rights and dignity. In order to provide a fresh start for the debtor and his financial standing, bankruptcy proceedings commonly include debt write-offs, to some extent. Obviously, personal bankruptcy has two sets of goals, which are mutually inconsistent, contradictory and often incompatible. In order to prevent possible abuses, bankruptcy reasons must be clearly defined and set out in more rigorous terms. This paper analyzes the impact of personal bankruptcy in generating the global economic crisis and the repercussion that personal bankruptcy has had on the global economy. The increase in the number of bankruptcy proceedings filed in the USA in 2005 was a warning about the forthcoming events. Mortgage loans were the major reason for filing a large number of personal bankruptcy claims. In fact, until 2006 the US real estate market had been booming but no one could have guessed then that the real estate values would fall sharply in the years to come. Credit deregulation caused higher demand for mortgage backed loans and the nation’s household debt increased significantly. However, the negative selection of debtors, their insolvency and irregular payment of annuities caused turmoil, which generated major problems for financial institutions. At the end of 2007, nearly 16 percent of all mortgage loans were uncollectible in full. The analysis of events that led to the onset of the global economic crisis and the role of personal bankruptcy as its most probable cause yields a conclusion that the adequate legal regulation of this process is paramount. The experiences of countries that have already introduced this legal institute are invaluable. The countries in the region which have set too rigorous rules for debt write-offs are currently facing the option of undertaking massive write-offs of debtors’ claims, which are most unlikely to be objective. On the other hand, in the countries which have envisaged too flexible proceedings for debt write-offs, there is a negative selection of debtors and default of financial institutions. With this experience in mind, it is necessary to regulate and apply the insitute of personal bankruptcy so that it provides for the maximum debt collection as well as for accomplishing the major social goals.

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