The Rise and Fall of Fear of Abuse in Consumer Bankruptcy: Most Recent Comparative Evidence from Europe and Beyond, 96 Tex. L. Rev. 1327 (2018)

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Prepared for a symposium celebrating the groundbreaking career of Jay Westbrook, this Article examines recent evidence of fear of abuse of the benefits of consumer bankruptcy and the gradual abatement of that fear in modern consumer insolvency law reform. It marshals evidence of a recent and accelerating retreat in both the judicial discretion that Westbrook attributed to lawmakers' fear of abuse and other more direct techniques to avoid abusive recourse to consumer discharge. Fear of abuse appears to be diminishing with accumulated experience as indicated by recent liberalizing reforms in Denmark, Slovakia, Poland, Austria, Russia, and Romania. At the same time, evidence from countries that have only begun to develop policies on personal insolvency and discharge - Croatia, Bulgaria, China, and Saudi Arabia - indicate that fear, or at least resistance to discharge relief, clearly persists.

Law is fundamentally a social science. Its theories usually can and should be tested based not just on the behavior of appellate courts but also on anthropological evidence of the actual frontline form and effect of law's regulation of human behavior. Jay Westbrook has led the charge in an enormously fruitful campaign of discovery of such evidence in the United States. Our federalist legal system offers a natural laboratory for comparison of different approaches and outcomes in a checkerboard of state and federal districts and their various actors' often widely divergent approaches to key issues. This is surprisingly true even in the supposedly unified federal consumer bankruptcy system. Opportunities for comparative analysis are supercharged, however, when one moves outside the United States and beyond the Anglo-American context on which most consumer bankruptcy scholarship has focused.

Almost exactly twenty years ago, Jay extrapolated his research on U.S. consumer bankruptcy to the new frontier of emerging consumer insolvency systems in Europe. In so doing, he launched a field of scholarship that would yield rich rewards. Before the turn of the twenty-first century, there was all but nothing in Europe to compare with Anglo-American consumer bankruptcy practice. By the late 1990s, however, the first consumer discharge procedures were emerging in Northern Europe and had produced a foundation of operational results for comparison. Jay was among the first Americans to seize this new opportunity.

In a short commentary on one of the earliest comparative consumer bankruptcy conferences in Europe, Jay noted the potential of comparative perspectives on the topic. At that time, he was studying judicial discretion and a resulting pernicious phenomenon that he referred to as "local legal culture," marked by persistent disparate treatment of similarly situated consumer debtors across the United States. The comparative conference offered Jay a chance to extrapolate his U.S. findings to the few emerging consumer discharge regimes in Europe and to develop hypotheses as to the causes of the phenomenon of local legal culture. He noted that even the sparse European data revealed the emergence of local legal culture as a consequence of judicial discretion, particularly in determining (1) whether certain debtors should have access to a discharge and (2) the duration of the payment plan imposed on debtors as a quid pro quo for earning discharge relief.

In light of his U.S. research, augmented by this limited set of comparative observations, Jay tentatively suggested a cause for the discretion producing these local legal culture disparities on both sides of the Atlantic: he attributed this syndrome to a powerful fear of abuse by debtors of the benefit of consumer discharge relief, a benefit that was radical and revolutionary in Europe and still somewhat controversial in the United States. He optimistically predicted "further research over the next several years in the various countries that have adopted these new laws could yield a rich harvest of new evidence and perhaps unexpected variations."

This commentary was published just as I was beginning my academic career, and it inspired everything I have done since then. It is extremely gratifying to be able to celebrate Jay's career in this symposium issue by adducing recent comparative evidence in support of his thesis in that early commentary and by providing a small taste of the "rich harvest of new evidence" from the most recent developments in consumer bankruptcy in Europe and beyond. As Jay predicted, European authorities have been extremely concerned about debtors abusing the new discharge regimes, and common impediments to relief have been far more obvious and imposing than the nuanced effects of discretion and the resulting local legal culture. Twenty years after Jay identified this fear of abuse, however, a thaw is manifest in the icy European attitude, as evidenced in particular by developments over just the past few months. Fear of abuse - and discretionary or statutory mechanisms for making the path to discharge narrower and more onerous - appears to be diminishing with time and experience. This message needs to be broadcast more effectively, as several projects for new consumer discharge laws reveal a resurgence of fear of abuse or at least reticence to embrace the notion of discharge relief. Thus, the vicious cycle repeats itself.

This Article presents the most recent evidence of these propositions in three segments. Part I discusses three regimes that exemplify the trends discussed above - that is, extremely fearful, highly discretionary procedures that abruptly reversed course on fear of abuse after a decade or two of operation but retained significant court discretion (Denmark, Slovakia, Poland). Part II announces some of the most recent developments, including notable harbingers of both a softening of fear of abuse and a reining-in of discretion across Europe (Austria, Russia, Croatia, Romania). Part III looks to the future of several nascent personal insolvency regimes-in-waiting, which evidence a return to square one and a high degree of fear or resistance to discharge (Bulgaria, China, Saudi Arabia). Like Jay's commentary, mine here is designed primarily to stimulate interest in and discussions of developments of which many followers of English-language legal scholarship will be unaware but which hold great potential for revealing important cross-cultural trends about this important area of legal and social policy.

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