Mary Eschelbach Hansen and Bradley A. Hansen
- Published in print:
- 2020
- Published Online:
- September 2020
- ISBN:
- 9780226679563
- eISBN:
- 9780226679730
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226679730.003.0007
- Subject:
- Economics and Finance, Economic History
The conclusion reviews four themes in the evolution of bankruptcy and bankruptcy law. First, long run growth in personal bankruptcy comes from growth in the supply of credit at the extensive margin. ...
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The conclusion reviews four themes in the evolution of bankruptcy and bankruptcy law. First, long run growth in personal bankruptcy comes from growth in the supply of credit at the extensive margin. Businesses regularly invented new ways to grow through consumer lending, and the relaxation of usury restrictions facilitated riskier loans. Second, state laws governing the collection of debt are key to interpreting geographic and temporal patterns in bankruptcy. The interaction of state collection law and bankruptcy law caused bankruptcy rates to be higher in states with pro-creditor collections. Pro-creditor collection law also magnified the effect of the growth in the credit supply and the effect of recessions on the bankruptcy rate in those states. Third, people matter. A small number of individuals had outsized influence on the history of bankruptcy. Fourth, stories matter. Beliefs about bankruptcy are typically expressed in stories about what brings people to bankruptcy. In some stories, debtors are driven to bankruptcy by unscrupulous creditors or economic crises. In other stories, unscrupulous debtors take advantage of overly generous laws, imposing the cost of their default on others. The direction bankruptcy reform took depended upon which story carried the day.Less
The conclusion reviews four themes in the evolution of bankruptcy and bankruptcy law. First, long run growth in personal bankruptcy comes from growth in the supply of credit at the extensive margin. Businesses regularly invented new ways to grow through consumer lending, and the relaxation of usury restrictions facilitated riskier loans. Second, state laws governing the collection of debt are key to interpreting geographic and temporal patterns in bankruptcy. The interaction of state collection law and bankruptcy law caused bankruptcy rates to be higher in states with pro-creditor collections. Pro-creditor collection law also magnified the effect of the growth in the credit supply and the effect of recessions on the bankruptcy rate in those states. Third, people matter. A small number of individuals had outsized influence on the history of bankruptcy. Fourth, stories matter. Beliefs about bankruptcy are typically expressed in stories about what brings people to bankruptcy. In some stories, debtors are driven to bankruptcy by unscrupulous creditors or economic crises. In other stories, unscrupulous debtors take advantage of overly generous laws, imposing the cost of their default on others. The direction bankruptcy reform took depended upon which story carried the day.
Mary Eschelbach Hansen and Bradley A. Hansen
- Published in print:
- 2020
- Published Online:
- September 2020
- ISBN:
- 9780226679563
- eISBN:
- 9780226679730
- Item type:
- book
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226679730.001.0001
- Subject:
- Economics and Finance, Economic History
Though the U.S. Constitution granted it the power to create a bankruptcy law, Congress did not pass the first permanent bankruptcy law until 1898. Bankruptcies rose from about one per 10,000 people ...
More
Though the U.S. Constitution granted it the power to create a bankruptcy law, Congress did not pass the first permanent bankruptcy law until 1898. Bankruptcies rose from about one per 10,000 people annually in the first decades of the twentieth century to about one per 300 people at the turn of the twenty-first century. Bankrupt in America explains how bankruptcy evolved from an option that Congress seldom used, to an indispensable tool for businesses, to a central element of the social safety net for households, all in the span of a century. The analytical narrative unites the history of how Americans have used bankruptcy with the history of the bankruptcy law itself. The central argument is that bankruptcy law and bankruptcy rates interact over time. Bankruptcy is the last in a series of choices by debtors and creditors about borrowing, lending, repaying, and collecting debt. Changes in federal bankruptcy law, in state and federal law governing debtor-creditor relations, in local legal culture, and in the supply of credit influence the choices and lead to changes in how the bankruptcy law is used. Changes in how the bankruptcy law is used give rise to changes in beliefs and in interest groups, which in turn result in changes in the law. The interactions create an ongoing historical process of institutional change. The book traces the interactions over the twentieth century using a rich combination of statistics and documents, including recently digitized bankruptcy statistics and stories constructed from court case files.Less
Though the U.S. Constitution granted it the power to create a bankruptcy law, Congress did not pass the first permanent bankruptcy law until 1898. Bankruptcies rose from about one per 10,000 people annually in the first decades of the twentieth century to about one per 300 people at the turn of the twenty-first century. Bankrupt in America explains how bankruptcy evolved from an option that Congress seldom used, to an indispensable tool for businesses, to a central element of the social safety net for households, all in the span of a century. The analytical narrative unites the history of how Americans have used bankruptcy with the history of the bankruptcy law itself. The central argument is that bankruptcy law and bankruptcy rates interact over time. Bankruptcy is the last in a series of choices by debtors and creditors about borrowing, lending, repaying, and collecting debt. Changes in federal bankruptcy law, in state and federal law governing debtor-creditor relations, in local legal culture, and in the supply of credit influence the choices and lead to changes in how the bankruptcy law is used. Changes in how the bankruptcy law is used give rise to changes in beliefs and in interest groups, which in turn result in changes in the law. The interactions create an ongoing historical process of institutional change. The book traces the interactions over the twentieth century using a rich combination of statistics and documents, including recently digitized bankruptcy statistics and stories constructed from court case files.
