As We Forgive Our Debtors: Bankruptcy and Consumer Credit in America
As We Forgive Our Debtors
Bankruptcy can be traced from Biblical references to a reality in the lives of nearly 617,000 Americans in 1989. This book is not a historical account of bankruptcy law over time, but the authors give recognition to its philosophical underpinnings and examine the creditor as well as the debtor side of bankruptcy. Though some might argue that the percentage of bankrupts in the population, 2.5, is insignificant, this book documents that the bankruptcy process is part of the broader debtor-creditor relationship and that bankruptcy is one of several major stages at one end of a continuum of financial and credit behaviors. The authors examine the characteristics of individuals and households who go through the bankruptcy process in comparison to the general population. From this examination, they build a conceptual model for the condition of bankruptcy, including a detailed discussion of the role of creditors and the structure and operations of the credit industry. Finally, they consider implications of this debtor and creditor interaction for our laws--that is, for the bankruptcy code and credit legislation.
This book is not just about bankruptcy. The authors are careful to compare their sample of debtors with the general population. Bankruptcy could happen to any number of Americans, given certain changes in economic fortunes. From among a multitude of descriptive statistics (the book includes over 60 tables), the comparative analyses of debts and assets (based on the 1983 Survey of Consumer Finances) show that one-third of the general population has a net worth of less than $5000, while 84% of the debtors are worth less than that amount. About 5%, or 1.25 million Americans, have debts in excess of 20% of their incomes. These households are particularly vulnerable to financial misfortunes such as job loss or income interruption, which are common precursors of bankruptcy.
The database utilized in this book is unique. Whereas few previous studies or analyses have gone...