A Law-in-Action Approach to Comparative Study of Repayment Forms of Consumer Bankruptcy

This chapter proposes three criteria for comparative evaluation of repayment forms of consumer bankruptcy around the world: creditor repayment net of administrative costs, rates of discharge, and treatment (particularly as judged by whether debtors have debt problems again). It also argues that rational sorting reconciles these three goals to the extent possible. After marshalling available data from North America, Australia and Europe, the chapter concludes that repayment bankruptcy options in all these regions of the world appear to have high costs in relation to unsecured debt repayment and significant rates of failure to achieve a discharge. A glaring hole in our knowledge is whether repayment options treat the problem of overindebtedness or instead leave many debtors still struggling financially and perhaps in other ways, too. All systems seems to have sorting problems, with many low income debtors attempting and failing to complete plans, meaning they repay little or nothing but are nonetheless delayed in getting a discharge and in starting on the road to a sound financial future. Further empirical investigation is needed to evaluate systems in terms of results rather than aspirations, the essence of a law-in-action perspective.