The article provides a great example. Airlines are a structurally unstable industry. Yet you can hop on a plane and get anywhere. Bankruptcy law enables airlines to keep operating as they restructure their debts with minor hiccups.
More broadly, our modern world exists because of large scale organizations, the ability for strangers to transact, and efficient markets for allocating credit and capital. Bankruptcy law is a pillar that makes that possible. It enables lenders to extend credit knowing that, if the debtor can’t repay, there will be an orderly process for getting some of the money back. That backstop in turn lowers the barriers to transaction.
Contrast this with what happens in a country without modern bankruptcy law. Businesses in those countries still need to borrow money. But what happens when a debtor can’t pay? Individual creditors have an incentive to harass the debtor and be the first ones to recover their share. Debtors have incentives to pay back certain creditors before others. Creditors might seek to liquidate an otherwise viable business just to get paid. All that means that lending and borrowing is risky. So when people do it, they go through established trust networks, such as families, clans, etc. This dampens business formation and entrepreneurship.
