Bankruptcy Theory:  There is not a generally accepted theory for b/r.  Some say that system we have now should be done away w/ and replaced w/ contractualism—parties get what they K for.
A.    Args in favor of contractualism:  See handout.
1.    also, current system is no good—UC’s don’t get anything.
2.    The current system also has some contractualism—you can choose to be a UC or an SC.
B.    Args against contractualism:
1.    Contractualism doesn’t take into account less sophisticated debtors who have a poor bargaining position.  May limit application to the big guys.
2.    Against Schwarz—ever creditor gets what they can as they go—doesn’t make sense if creditors have conflicts of interest.  He thinks they do not.
3.    None of the theories on contractualism have been proven—supported by Lopucki.
4.    No human element to contractualism—doesn’t consider the fact that things change.
5.    Tort liability?  Most agree that you need to do something special for them.
6.    Externalities: Do costs of externalities (like job loss for exmployees of bankrupt) that may be more extensive in contractualism exceed the savings in contractualism?  Those who do not like K’ism say no.
7.    If you want Kism, you still need a system of enforceability if you want it to work.