THEORETICAL BACKGROUND

Bankruptcy has been a threat among those entrepreneurs all around

the world. Wherein it cannot be predicted when it may come.  This study is
supported by the following theories:

Value-Based Theory

This theory, proposed by Korobkin (1991), suggests that the mere

economic explanation of bankruptcy is flawed and must be understood in  all

respects. The Bankruptcy Law Framework provides forum, which expresses and

recognizes competing interests and values related to financial distress. This theory

suggests that bankruptcy law should take into account in the distributive liquidation

effect of a legal entity on people who are not technically creditors and who may not

have  formal  rights to the company's assets doing. In other words, the purpose of

the bankruptcy law is to address and solve the multifaceted, social and political

problems that arise from the financial burden of the business. Since all beneficiaries

will inevitably have conflicts of interest, the law must provide that each can derive its

optimal value.

There are a lot of entrepreneurs who had experience bankruptcy who

were not being valued by this bankruptcy law. This bankruptcy law merely signifies

that they can be protected by this if they had some ongoing debts. Which has been
also a big problem to them because just by the means of bankruptcy they have lost

all of their assets and income from the business or may not have worked the

business well. Wherein, they may have still some debts that are still going around.

Also, they are still in the process of recovering all those loss that they happened to

lose.

PROCEDURE THEORY

                  According to procedure theory, it is wrong to transfer a debtor's wealth in

bankruptcy to benefit third-party interests such as at-will employees and the general

public. It's likewise improper to change priority among a debtor's rightsholders in

bankruptcy in a way that contradicts nonbankruptcy entitlements. The goal of

bankruptcy law is explained by procedure theory. It makes no mention of how

bankruptcy law is supposed to achieve its goals (e.g., status quo, adoption of

market-based or contract-based structures to maximize wealth, etc.). It claims that

providing different substantive standards in bankruptcy when those rules are equally

applicable outside of bankruptcy is just nonsensical. The bankruptcy bar wields

significant control over bankruptcy legislation, whether it is established by Congress

or administered by the courts, according to a public choice study. A public choice

study exposes the bankruptcy bar's huge influence over bankruptcy law, whether

devised by Congress or enacted by the courts. The bankruptcy courts and the
Judiciary Committees in Congress, both of which are dominated by bankruptcy

experts, are inappropriate forums for the establishment of non-bankruptcy-specific

legal concepts. If there is a basis for bankruptcy law, it must be that it may maximize

or increase recovery and benefits for rightsholders when contrasted to

nonbankruptcy law since it is a communal action. Finally, the study looks at a few

key aspects of US bankruptcy law that appear to clash with (or at least appear to

conflict with) procedure theory. The idea of "property of the estate," the "claims"

recognized in bankruptcy, the "automatic stay," pro rata sharing among creditors,

and the trustee's avoidance powers, among other things, are all aspects that it uses

to justify procedural theory. In numerous circumstances, procedural theory

necessitates a change in the legislation.