Consumer Bankruptcy, Sociology Of

Bankruptcy Laws

The function of debt discharge is historically rooted in Anglo-Saxon bankruptcy law, derived from the British colonial period and confirmed by the U.S. federal bankruptcy laws of 1898, 1938, and 1978, although there was some retrenchment toward creditor interests in 2005. Constitutional law scholars generally agree that the bankruptcy clause in the U.S. Constitution, stating that Congress should adopt uniform federal bankruptcy law, prescribes that bankruptcy law contain a discharge provision.

In Continental European countries, on the contrary, bankruptcy law did not contain any discharge provisions for the private debtor until the late twentieth century. Some alleviation of the debt burden was already included in the commercial bankruptcy laws of the early modern period, but that discharge was mainly available for merchants and preconditioned by the acceptance of the majority of creditors. For ordinary citizens, liability for debt used to be a lifelong burden if the creditor regularly renewed its enforcement attempts. After the deregulation of consumer credit in the 1980s and 1990s, which led to a remarkable increase in household indebtedness, legislatures enacted legal reforms in many European countries. In 1984, Denmark enacted the first Continental European consumer bankruptcy law including a discharge scheme, and most western European countries followed that example in the 1990s. Nevertheless, consumer bankruptcy laws with a discharge provision are still unusual outside the Anglo-Saxon and western European jurisdictions.

Sociolegal Research

Against this background, sociolegal research on consumer bankruptcy regimes has a longer tradition in the Anglo-Saxon countries than in other parts of the world. Sociolegal studies on the operation of new debt adjustment schemes in Europe have started to emerge, sometimes from a practical point of view. European scholars have also been interested in comparative work analyzing the differences among consumer bankruptcy regimes. Comparison has highlighted the differences between the more liberal and market-oriented Anglo-Saxon regimes and the more restrictive European systems. With the emphasis on mandatory payment plans, restricted access to discharge, and state-supported counseling services, Europeans prefer to call their regimes “consumer debt adjustment” rather than bankruptcy.

In the United States, the 1978 reform of the Bankruptcy Code was preceded by several sociolegal studies by Philip Schuchman and a well-known study [Page 284]in the Brookings Institute, conducted by David Stanley and Marjorie Girth. Research in the 1990s has been dominated by an interdisciplinary group of scholars, Teresa Sullivan, Elizabeth Warren, and Jay Westbrook, whose studies have reached an audience far wider than that of most bankruptcy literature.

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