'Short a Few Quid': Bankruptcy Stigma in Contemporary Australia

Abstract

Bankruptcy has always been a source of significant stigma. The first Elizabethan statutes regarded bankruptcy as a quasi-criminal state, punishable by public shaming, imprisonment and, in some cases, death. More modern regimes have recognised that bankruptcy serves important economic objectives, by encouraging entrepreneurial risk-taking and offering rehabilitation to debtors with useful skills and productive capacity. Over the course of the nineteenth century, the laws of the United States and United Kingdom became more liberal and less morally prescriptive in their treatment of financial failure. The early laws of the Australian colonies took a similarly pragmatic approach, and the current federal Bankruptcy Act 1966 continues in this vein. Still, bankruptcy remains a source of considerable stigma in Australian society, fuelled by political discourse, judicial decisions and media accounts of high-profile bankrupts. Noting that bankruptcy stigma has received little scholarly attention in Australia, the authors draw on parliamentary debates, court judgments, media reports, and other sources to provide an account of bankruptcy stigma in contemporary Australia. The authors examine the UK’s recent efforts to address bankruptcy stigma by way of legislation, and consider several factors that may undermine such efforts. The authors conclude by calling for a wider public discussion about rising levels of household debt – one that would reframe bankruptcy as a social issue, rather than just a matter of personal morality.

Keywords: Bankruptcy, stigma