With the Dow below the 6,800 mark (as of 3:30 PM EST) for the first time since 1997, now is perhaps an appropriate time to turn our attention to bankruptcy scholarship. To this end, a recent paper by Bob Lawless (IL) et al. warrants attention as it is among the first wave of empirical assessments of the recently reformed bankruptcy code. In Did Bankruptcy Reform Fail? An Empirical Study of Consumer Debtors, the authors report that:
"Contrary to the advocates' claim that high-income filers would be driven from the system and, by implication, that those remaining would have more modest incomes, the data show no change in the income levels of bankruptcy filers after the amendments. These findings thus cast doubt on the suggestion that those purged from the bankruptcy courts - approximately 800,000 in 2007 alone based on trend extrapolation - were high-income deadbeats; they instead appear to have been ordinary American families in serious financial distress. The data also show that debtors filing for bankruptcy in 2007 have even greater debt loads than their counterparts from 2001, a development that seems to track a national trend of increasing consumer debt. The findings thus align with at least two predictions of some legal scholars. The first is that the bankruptcy reform bill was not aimed at high-income abusers but was instead a general assault on all debtors, regardless of their financial circumstances. The second is that debtors are waiting longer - and incurring more debt - before ultimately seeking bankruptcy relief, consistent with the so-called "sweat box" theory of credit card lending."