The Law of Last Resort

A financially distressed individual or corporation employs the bankruptcy process only as a last resort. The study of bankruptcy law, however, need not, and should not, be an afterthought. The traditional bodies of law that compose private ordering are the laws of property, contract, and tort. Property law establishes private entitlements that can be specifically enforced against the world. Contract law permits individuals to exchange obligations and thus invest one another with entitlements. Tort law creates its own set of entitlements and imposes liability for unwanted interference with those or other entitlements. These bodies of law are often presented as complete, either unto them- selves or in combination with the others. Few might recognize these laws as part of bankruptcy law, even broadly defined. But the issues of bankruptcy law are inextricably intertwined with the rest of private law. The world is not so orderly that entitlements, obligations, or duties are meaningful simply because the law intends them to be so. In reality, property rights often matter only because obligations conflict, while obligations are breached and duties disregarded because the obligor or transgressor simply lacks the capacity to comply. Where such conflict or incapacity exists, bankruptcy law fills the breach, not fully to resurrect all the impaired claims-this would be impossible- but to choose among them. There are two points here. First, the classic bodies of private law can best be seen, in part, as bankruptcy law (broadly defined). Second, if one imagines that private individuals transact in the shadow of the law, that shadow is cast no less by bankruptcy law than by the classic law of property, contract, and tort, or by derivatives thereof such as corporate law. The content of bankruptcy law, as much as the distinct features of other bodies of law, can be expected to influence the activity of individuals, not merely after the fall, but from the outset