What are the benefits of bankruptcy laws that enable lenders to seize

What are the benefits of bankruptcy laws that enable lenders to seize the assets of firms that default on loan contracts?

What will be an ideal response?

ANSWER

When borrowers are aware that default will lead to asset seizure, they will work harder to avoid default. When lenders know that borrowers will do all they can to avoid default, they will offer more funds at lower cost. The result is more and more-productive economic activity. When default occurs, the seizure of assets is a reallocation of resources that raises their value and supports economic growth.