Consumer Bankruptcy

Abstract

This chapter presents information on consumer bankruptcy basics, trends, and causes. The effects of bankruptcy reform in 2005 are evaluated from the consumer perspective and current policy considerations are explored. Opposing theories explain the historic growth in filings amidst pressing economic, social, and political developments. The precarious financial position of America’s middle class contributes to household debt burdens and the number of bankruptcy filings. Common types of debts range from fully collateralized, income-generating investments to title loans with predatory terms of credit. Bankruptcy holds immediate and long-term consequences for filers, particularly for those in vulnerable groups. Designed to incentivize debtor and creditor responsibility and support their well-being, bankruptcy policies in practice can be punitive or equitable, effective or inadequate. The chapter concludes with ways to address the problems with current bankruptcy practice and recommendations for future research.