Bankruptcy: The Case for Relief in an Economy of Debt

Description

A decade after the Global Financial Crisis and Great Recession, developed economies continue to struggle under excessive household debt. While exacerbating inequality and political unrest, this debt - when combined with wage stagnation and a shrinking welfare state - has played a key role in maintaining economic growth and allowing households faced with rising costs of living to make ends meet. In Bankruptcy: The Case for Relief in an Economy of Debt, Joseph Spooner examines this economic model and finds it increasingly unsustainable. In a call to action to reduce debt burden, he turns to bankruptcy law, which is uniquely situated as a mechanism of social insurance against the risks of a debt-dependent economy. This book should be read by anyone interested in understanding the problem of consumer debt and how best to address it. Cover Half-title page Series page Title page Copyright page Dedication Contents List of Figures Preface and Acknowledgments 1 Introduction 1.1 The Debt Economy: Household Debt and Crises of Financialised Capitalism 1.1.1 Debt and Economic Stagnation 1.1.2 Debt and Inequality 1.1.3 Debt and Political Instability 1.1.4 The Case for Debt Relief 1.2 An Indebted Society: High Household Debt Levels and Over-Indebtedness 1.2.1 Household Debt Levels 1.2.2 Distribution of Household Debt 1.2.3 Debt and Over-Indebtedness 1.3 A Law of Consumer Bankruptcy 1.4 Debt Overhang and the Limits of Bankruptcy 1.5 Conclusion 2 Financialised Capitalism and the Centrality of Household Debt 2.1 Eras of Capitalism: Political Economy of the Household Debt Expansion 2.1.1 Post-War Consensus in Keynesian Demand Management 2.1.2 The Neoliberal Turn and Inflation Targeting 2.1.3 Neoliberal Regulation and the Legal Foundations of a Debt-Dependent Economy 2.1.4 Neoliberal Regulation, Market Innovation and the Consumer Lending Revolution 2.1.5 Justifying a Debt-Dependent Economy 2.2 Contradictions of the Debt-Dependent Economy 2.2.1 Privatised Keynesianism and Loans for Wages 2.2.2 Credit/Welfare Trade-Off 2.2.3 ‘Let Them Eat Credit’: A Time-Limited Credit Consensus 2.3 Conclusions 3 Consumer Bankruptcy Theory and the Case for Debt Relief 3.1 Introduction: Ambivalent Aims and an Identity Crisis of Personal Insolvency Law and Policy 3.1.1 Bankruptcy: Debt Collection or Debt Relief? 3.1.2 Bankruptcy: Commercial Law or Social Safety Net? 3.2 Developing a Hierarchy of Policy Priorities 3.2.1 Creditor Wealth Maximisation and Bankruptcy as Debt Collection 3.2.2 Consumer Credit Market Failures and the Creditors’ Bargain Model 3.2.3 Externalities 3.3 Bankruptcy as Social Insurance 3.4 Objections to Debt Relief 3.4.1 Moral Hazard 3.4.2 ‘Lenders Should Feel Able to Advance Money’ 3.4.3 A True Tragedy: The Practice of Bankruptcy When There Is Nothing Left to Collect 3.5 Conclusions: The Case for Debt Relief 4 A Consumer Bankruptcy Marketplace 4.1 Introduction: The Retreat of English Consumer Bankruptcy Law 4.2 Debtor Choice and the Structure of English Law 4.3 ‘Vanishing’ Bankruptcy: Restricted Access to Public Provision 4.4 Individual Voluntary Arrangements: Contractual Bankruptcy 4.4.1 The Market Dominance of the IVA 4.4.2 Facilitating the Consumer Bankruptcy Market 4.4.3 Judicial Shaping of the IVA ‘Product’: Contractual Bankruptcy and Creditors’ Bargains 4.5 Conclusion 5 The Limits of Contractual Consumer Bankruptcy 5.1 ‘Market-Based Debt Resolution’ and Post-Crisis Consensus 5.2 The Consumer Bankruptcy Market 5.3 Failures in the Consumer Bankruptcy Market 5.3.1 Intermediation and Principal-Agent Problems 5.3.2 Contracting Failures and the Limits of Consensual Household Debt Restructuring 5.4 Conclusions 6 The Austere Creditor: Austerity, Bankruptcy Policy and Government Debt Collection 6.1 Introduction 6.2 Household Debt at a Time of Austerity 6.2.1 Austerity Policies, Increased Household Financial Difficulties, and ‘Priority Debts’ 6.2.2 The Austere Creditor: Austerity and Government Debt Collection (i) Social Welfare Debt: A Tightening Social Safety Net (ii) Local Government Debt (iii) The Austere Creditor in Context: Privatisation, Commercialisation and the Neoliberal State 6.2.3 Implications for Bankruptcy 6.3 Testing the Law’s Insurance Function in the Face of Austerity and Recession 6.3.1 Priority Debts in Personal Insolvency 6.3.2 Government as (Priority) Creditor: Council Tax Collection and Local Authority Creditor Petitions 6.3.3 Litigating State Immunity from the Fresh Start 6.3.4 The Sharples Decision and Bankruptcy in a Housing Crisis 6.5 Extending Bankruptcy’s Social Insurance Function to Government Debts 6.6 Conclusions 7 Moral Hazard and Bankruptcy Abuse Prevention 7.1 Introduction 7.1.1 The ‘Very Bedrock’ of Bankruptcy Law 7.1.2 The Household Debt Expansion and the Reasonableness of Consumer Borrowing in a Debt-Dependent Economy 7.1.3 Neoliberalism, Financialisation and the Responsible Financial Consumer 7.2 Moral Hazard, Debtor Misconduct and Bankruptcy ‘Abuse’ 7.2.1 The Politics and Morality of Moral Hazard 7.2.2 Moral Hazard as a Policy Tool 7.3 Addressing Moral Hazard under English Law 7.3.1 The Cost of Debt Relief: Designing Incentives 7.3.2 Bankruptcy Restrictions Orders and Undertakings 7.4 Limitations of the Bankruptcy Restrictions Order/Undertaking System in addressing Moral Hazard 7.4.1 Applying a Historical Commercial System to Contemporary Consumer Debtors 7.4.2 Financialised Capitalism, New Public Management, and the Enforcement of Bankruptcy Law (i) Procedural Problems: Contractualisation and the Limits of Consumer Plea Bargaining (ii) The Bankruptcy Restriction Order/Undertaking Regime and ‘Post-Democratic’ Governance: Performance Targets and Political Communication 7.4.3 Indeterminate Standards and Difficulties in Determining Reasonable Borrowing Behaviour 7.5 Moral Hazard and Judging the Reasonableness of Consumer Borrowing Behaviour 7.5.1 Household Borrowing in the Debt Economy 7.5.2 Moral Hazard and the Allocation of Responsibility for Consumer Insolvency 7.6 Forgiveness, Discipline and the Privatisation of Credit Morality 7.6.1 ‘Market-Based Debt Resolution’ and Forcing Debtors to ‘Do the Right Thing’ 7.6.2 Credit Reporting in Contemporary Surveillance Capitalism 7.7 Conclusion 8 Conclusion 8.1 Bankruptcy as Social Insurance in a Debt-Dependent Economy 8.2 The Logical and Political Limits of English Bankruptcy Law 8.3 Social Insurance of Last Resort or a Right Not to Pay One’s Debts? Index