Bankruptcy

Consumer Overindebtedness Around the World

By Bob Lawless

My plan for the evening is to go in search of a giant sculpted head of Karl Marx. Fortunately, I'm in Chemnitz, Germany, where such a monument is a feature of the town square, a holdover from the days when the city was known as Karl-Marx-Stadt. Dr. Wolfram Backart has organized a wonderful conference at the Technische Universtät Chemnitz. The conference is entitled "Overindebtedness: Everyday Risk in Modern Societies? Theoretical Aspects and Empirical Findings in International Perspective" and has brought together scholars from Germany, China, Portugal, Japan, Sweden, South Africa, Finland, Canada, the United States, the United Kingdom, and Austria. Two themes have been emerging

The Europeans are ahead of the United States and pretty much everyone else on an empirical understanding of overindebted consumers. As part of most every debt adjustment regime in Europe--and not every European country has such a regime--a consumer must first enter a program of debt advice and possible renegotiation of debt. These programs are not without controversy from a policy perspective as their efficacy is often questioned. From a research scholar's perspective, the programs accomplish two things. First, they allow for the identification of financially distressed debtors outside the formal bankruptcy system and thereby can give the research a more complete perspective on the overindebted. In the United States, for example, logistical problems largely limit study to those debtors who come into the formal bankruptcy system, meaning we often do not know much about other heavily indebted consumers who are coping without the use of formal bankruptcy. Second, they allow the collection of basic information that is lacking in other places. In the United States, again for example, the government does not collect even basic demographic information about bankruptcy filers, and we would not have any demographic profiles of bankruptcy filers were it not for research like our own Consumer Bankruptcy Project.

Last night, Dr. Backart and his colleague, Dr. Ditmar Brock, spoke to us about the need for harmonization of scholarly research instruments across international boundaries. This is another theme that is emerging in the conference. Dr. Götz Lochner and his colleagues at the Technische Universtät Chemnitz were able to surveyed German debtors in their debt advice system. At the Consumer Bankruptcy Project, we have surveyed U.S. debtors in bankruptcy. Professors Claudia Lopes and Fernanda Jesus of the University of Coimbra, Portugal have similarly examined Portuguese debtors. Because of differing institutions, research instruments cannot be duplicated. For example, different educational systems in different countries make it difficult to come up with a uniform measure of educational attainment. Duplication would not prevent harmonization. More consistent research instruments across borders would perhaps allow researchers to decompose the causes of overindebtedness into cultural and personal components. The reality of that goal may be a way off, but conferences like this help to foster international cooperation in study overindebtedness. Dr. Backart and his colleagues at Technische Universtät Chemnitz are to be congratulated for this conference.

Full post as published by Credit Slips on March 27, 2009 (boomark / email).