Ending Perpetual Debts
51 Pages Posted: 19 Apr 2018 Last revised: 9 May 2018
Date Written: December 1, 2017
Consumer debts in the United States can effectively live (and grow) forever: most statutes of limitations do not extinguish them; they can morph into relatives’ obligations after the debtor’s death; and they sometimes rise from the grave even after they have been paid. All the while, interest and fees accrue. There is one sure way to extinguish most debts, however, and that is by filing bankruptcy. This Article explores the practical, philosophical, and economic effects of the current system. It proposes a form of “automatic bankruptcy” for consumer debts: a federal discharge that, by operation of law, would extinguish debts (roughly) seven years after a default, or seven years after a judgment. The Article explores additional features of this proposal including ones designed to ensure it is self-executing, and others that mirror features of the Fair Credit Reporting Act and the discharge provisions of the Bankruptcy Code.
Keywords: consumer debts, bankruptcy, garnishment, debt collection, credit reporting, FDCPA, FCRA, zombie debts
JEL Classification: K12, K35, K41, K42
Suggested Citation: Suggested Citation