Death or survival : post-communist bankruptcy law in action ; a survey

The paper discusses some major lessons to be learnt from the application of bankruptcy law in a post-communist environment. Its focus is on East Central Europe because elsewhere bankruptcy law is of rather limited practical relevance. The incentives and the selection of trustees turn out to be key issues if the loss of value typically occurring during bankruptcy procedures is to be contained within reasonable limits. Reorganization is a realistic option only if management has sufficient incentives to file bankruptcy in time. Post-communist legislation has tried to achieve this mostly by threat of punishment. This approach has proved inefficient. The paper also criticizes the tendency of post-communist legislation to deemphasize individual remedies against defaulting debtors.