The Rise and Fall of Fear of Abuse in Consumer Bankruptcy: Most Recent Comparative Evidence from Europe and Beyond

Abstract

Prepared for a symposium celebrating the groundbreaking career of Jay Westbrook, this paper examines recent evidence of fear of abuse of the benefits of consumer bankruptcy and the gradual abatement of that fear in modern consumer insolvency law reform. It marshals evidence of a recent and accelerating retreat in both the judicial discretion that Westbrook in the mid-1990s attributed to lawmakers’ fear of abuse, as well as other more direct techniques to avoid abusive recourse to consumer discharge. Fear of abuse appears to be diminishing with accumulated experience, as indicated by recent liberalizing reforms in Denmark, Slovakia, Poland, Austria, Russia, Croatia, and Romania. At the same time, evidence from countries that have only begun to develop policies on personal insolvency and discharge (Bulgaria, China, and Saudi Arabia) indicate that fear, or at least resistance to discharge relief, clearly persists.

Keywords: personal bankruptcy, insolvency of natural persons