A bankruptcy system sorts out rights among claimants to particular assets. But this sorting does not exist in the abstract; rather, it is derived from activities in the nonbankruptcy world that create myriad relationships among various entities. These relationships give rise to a rich variety of substantive entitlements (assets) and obligations (liabilities). These assets and liabilities, as well as their implementation, may vary in subtle (or not so subtle) ways one from another, both because of various private arrangements and because of the dictates of legal rules. The ways in which implementing them may vary, moreover, differ depending on whether the question is being addressed as one, say, of debtor versus creditor or as one of creditor versus creditor.

All this richness affects the bankruptcy process. Bankruptcy's central normative goal is to collectivize the process by which a debtor's assets are made available to its claimants. This goal can be achieved only if the nonbankruptcy attributes of assets and liabilities that affect ordering among claimants are identified and translated precisely, with minimal dislocations, into the bankruptcy forum. Questions of identification and translation are difficult. Nonetheless, it is rarely necessary to compound this difficulty by asserting the relevance of any bankruptcy policy other than those inherent in (or implied by) the collectivization norm.

The Normative Role of a Bankruptcy Proceeding

Introduction

The need for bankruptcy arises from the operations of the nonbankruptcy world.