The problem identified is that American Bankruptcy law might be more lenient and less balanced compared to the Australian Bankruptcy law. The article of Lewis (2001) highlighted this problem by comparing Australian and American bankruptcy laws and it also highlighted that they share the same common law roots. The early bankruptcy statute (the common law roots) as first presented by the authors was designed in the year 1570, with no option for discharge of the debtor even after their assets were liquidated and distributed. This was a much problematic standpoint. Then the work goes on to present American Bankruptcy law in current times where there are options for the debtor to be discharged. Both the United State and Australia have some way to work insolvency issues by claiming bankruptcy. The creditor or the debtor can both apply for bankruptcy, and there are some commonalities in the way the debtor could get discharged. In the past, as early as in 1570, under common law, the debtor would not be discharged, but would be imprisoned, while in current time, under situ of insolvency, the debtor could be discharged. While these initials issues have been solved, how much leniency should be shown and how fairness can be achieved is also a problem.
American Bankruptcy law appears to be more forgiving to the debtor. A more lenient law could lead to more debtors using the system, and creditors might lose trust, so genuine people might not get the necessary line of credit to run their business. On the other hand, if the law is very strict, then it could so happen that people might not start a business as they may fear its failure. It is recommended that the American bankruptcy laws must become as balanced as Australian laws.
The author presents the viewpoint that personal bankruptcies in America are on the rise. The author seems to present America as being a little more lenient when it comes to discharge of duties of a debtor in the case of insolvency, and Australia as being more balanced. Authors hence recommend this, “The Australian approach to personal bankruptcy strikes a different and interesting balance between the rights of debtors and creditors, and in doing so reflects a different ideology at the core of its bankruptcy system than is seen in the United States” (Lewis, 2001, p. 335).
These are issues of importance as they highlight how to deal with insolvency in a manner that is fair to the creditors and the debtors. Without a balance in how issues are addressed for debtors versus creditors, the law could become unfair.