Bad Bakruptcy Law

This chapter explores the correspondence between the dominant preferences among citizens and various characteristics of Spanish bankruptcy law. In relation to European countries of similar size, Spaniards show, on average, marked statist and anti-competitive preferences, which would favor a finalist conception of the law; as well as a tendency to impose excessive mandatory rules on contractual freedom. Both characteristics are present in the bankruptcy field. Consequently, to the extent that the structural dysfunctions of our regulatory framework correspond to our citizen preferences, they could explain both the proliferation of legal reforms and their content —characterized by an excessive judicial role and notable redistributive consequences, the result of favoring the debtors, privilege continuity and prevent the liquidation of insolvent companies— and, therefore, their repeated failure. Greater normative and judicial restraint, being more aware of the serious limitations suffered by laws and judges, would allow a more effective interaction of the public ordering with the private solutions that business agents implement in exercise of their contractual freedom.