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Increase of Personal Bankruptcy

In the last 25 years, consumer bankruptcy filings have increased from 225,000 to 1.5 million forcing many experts to examine what could be the reason behind this worrying trend. Interestingly, the experts have concluded that the attitude of the society towards those who file for bankruptcy is to blame (Zywicki, 2007, p.1).

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This has in turn generated the notion that lack of shame is responsible for the recent trends in bankruptcy filings in the United States. In the past, bankruptcy was viewed negatively and was to be avoided at all costs. Bankrupts faced severe punishments like having their citizenship revoked, imprisonment, death, and other forms of public humiliations such as wearing distinguishing apparels in public (Efrat, 2006a, p.366).

The fact that most of these societal repercussions are conspicuously lacking in the contemporary times underscores the waning negative view of personal bankruptcy. Therefore, the enormous increase in personal bankruptcy today suggests, “Americans have lost their sense of shame” as justified in this exposition.

The lack of shame is evidenced by the impenitent of those who are filing or have filed for bankruptcy. According to Efrat, interviews conducted showed that remorsefulness was decreasing among the bankrupts (2006a, p.376). Further, those filing for bankruptcy are in a position of “extreme distress” (Mann, 2006, p.185).

Essentially, shame springs from doing something that is contrary to the expectations of the society; however, the society is frequently turning a blind eye on those who engage in filing personal bankruptcy. Consequently, with the society becoming tolerant to bankrupts and with so many people being declared bankrupt, it is becoming less shameful for one to be declared bankrupt.

Secondly, an increase in the number of celebrities filing for bankruptcy or those declared bankrupt, makes it a popular and acceptable thing to do. Celebrities influence the way people live; from the cars they drive, the clothes they sport and their general perspectives in life. Regrettably, now they have shown many that it is not shameful to file for bankruptcy (Zywicki, 2007, p.27).

As bankruptcy gains popularity, many are opting to find out more on the subject. Given the ease involved in filing for bankruptcy, majority are bound to opt for it. Furthermore, the media in reporting cases of bankruptcy has gradually toned down the criticism on those declared bankrupt. New York Times for instance used to label bankrupts as “manipulators and ‘dupes’ prior to the 1960’s, but this changed to irresponsible individuals who lacked discipline in the 90’s” (Efrat, 2006, p.389).

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This indicates the changing public perception on bankruptcy, which has contributed greatly in reducing and eventual loss of the shame that one got once he/she filed for bankruptcy.

Since the beginning of the 1960’s, there has been a shift of fault from the person filing for bankruptcy to some other inevitable reasons. According to Efrat “the explosion of rights and entitlements is alleged to have been accompanied with a corresponding decline in personal responsibility, manifested by the tendency to shift blame from personal fault to external causes” (2006b, p.491). Some of these causes include high inflation rates, stock market crunches, unemployment, recession, decline in housing prices, auto accidents, illness, medical bills, and other unforeseen financial impediments.

The change in blame has played a big role in changing people views. For instance, a person who files for bankruptcy is more likely get sympathy instead of resentment; an evolving phenomenon. Consequently, no expectation is placed upon such a person not to opt out of debt through the bankruptcy route further diminishing the shame that such a person is likely to feel.

Authorities have been playing great role in toning down the shame associated with bankruptcy making it easy for insolvent citizens to have access to credit. After all, if someone would access credit facilities whether insolvent or not, then anyone would be willing to file for bankruptcy as a way of evading debt repayment The Bankruptcy Reform Act 1978 played a great role in altering the social norms that were associated with bankruptcy.

Efrat claims, “The government played the role of a norm entrepreneur by enacting this law” (2006b, p.496). In the same year, the Congress replaced the word ‘bankrupt’ with ‘debtor’ in an effort seen to have the effect of lessening the ‘crime’ of bankruptcy. This elevated the people with a bankrupt status to a debtor status further increasing the notion that bankruptcy is not a shameful thing but a solution to having bad debts.

In a recap, it is a proven fact that the number of those filing for bankruptcy in the United States is on the increase in the contemporary times. The reasons for this trend are still debatable; however, the correlation that exist between efforts made to change the perception of bankruptcy and the shame associated with it, leads to the conclusion that, lack of shame is to blame for the upsurge in numbers of these cases. Therefore, evidently, the enormous increase of personal bankruptcy today shows that Americans have lost their sense of shame, as many government officials believe.

Reference List

Efrat, R. (2006a). The Evolution of Bankruptcy Stigma. Theoretical Inquiries in Law, 7(2), 365-393.

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Efrat, R. (2006b). Bankruptcy Stigma: Plausible Causes for Shifting Norms. Emory Bankruptcy Developments Journal, 22(2), 481-519.

Mann, J. (2006). Charging ahead: The Growth and Regulation of Payment Card Markets. Cambridge: Cambridge University Press.

Zywicki, T. (2005). Institutions, Incentives, and Consumer Bankruptcy Reform. Washington and Lee Law Review, 62(3), 1-76.

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