Continuity, Change, and Innovation in Emerging Consumer Bankruptcy Systems: Belgium and Luxembourg

Abstract

Comparative analyses of the treatment of excessive consumer debt are more relevant today than ever before, particularly given the recent overhaul of U.S. consumer bankruptcy and rapid developments in several new European consumer bankruptcy systems. This article is the next in a series designed to offer access by English speakers to such comparative analysis. Following on earlier studies of the systems in Germany and France, this article examines the recent enactment and implementation of consumer debt relief legislation in Belgium and Luxembourg. First, it explores the paradox of consumer bankruptcy in two of the least indebted states in Europe. It reveals how and why legislators overcame their reticence to adopt formal consumer debt relief procedures despite low levels of aggregate consumer indebtedness. Second, it reports on how lawmakers in Belgium and Luxembourg ultimately chose to structure formal consumer debt relief, focusing on the extent to which these new systems reflect continuity, change, and innovation in terms of the existing systems in neighboring states, especially France. In so doing, this article offers a foundation for predicting the challenges that will arise in the new, more demanding U.S. law, as well as the sort of debt relief system that will likely soon emerge as rising consumer debt becomes a problem for other countries with legal systems based on the French civil law model, such as Spain, Portugal, and a number of South American states. The first few years of experience with consumer debt relief systems in Belgium and Luxembourg show that such procedures need not be overly debtor-friendly to be effective, and they need not undermine dedication to the sanctity of contracts in a civil law system.

Keywords: consumer bankruptcy

JEL Classification: I38, P51