Late-night television offers a surprisingly clear illustration of modern American consumer culture. Commercials for fast food, cars, and mortgages are bookended by lawyers explaining how bankruptcy can work for you. How did bankruptcy become something that can be attended to as easily as calling a 1-800 number from the comfort of your own home?
Bankrupt in America explores the history of bankruptcy law in America. The main argument contends that the primary driver of bankruptcy was increased access to credit for consumers. However, increased access to credit did not create a uniform rise in bankruptcy. Close analysis of previously undigitized state laws demonstrates that debtors in pro-creditor states filed more often. The book's important historiographical contribution is that the history of bankruptcy is best understood as an interaction between increasing consumer credit, variance in state collection laws, and amended federal bankruptcy laws. The book's insights make it vital reading, along with David Skeel's Debt's Dominion: A History of Bankruptcy Law in America (2001) and Louis Hyman's Debtor Nation: The History of America in Red Ink (2011).
Mary Eschelbach Hansen and Bradley A. Hansen implement an interdisciplinary approach, combining economic, legal, and historical analysis to examine the law's change over time. However, empirical methods are primarily quantitative and statistical. The authors use an institutional approach to economic history that “emphasizes the role of institutions in explaining economic performance” over time (p. 8). Rational choice theory is applied to understand why debtors chose bankruptcy. Each chapter begins with a small vignette to introduce key concepts and ends with an appendix devoted to explaining the authors’ regression analysis. This allows for both an easy-to-follow narrative for nonspecialists and detailed statistical analysis for specialists. The book is also packed with helpful tables, charts, and maps.
The narrative structure focuses on key moments of transition for bankruptcy law between 1898 and 2005. Congress passed America's first national bankruptcy law in 1898 to ensure a safe flow of credit to new business and to protect both lenders and debtors from the effects of business failures. By the 1920s, an unintended consequence emerged as new state laws allowed increased credit to laborers. Bankruptcy rates climbed disproportionally in states that had pro-creditor collection laws, forcing debtors to seek refuge in the federal law. Thus, bankruptcy became a type of social safety net for the working class. The Great Depression marked a fundamental shift in belief about the role of bankruptcy law for federal legislatures. Congress modified the law to protect consumers against unscrupulous lenders, resulting in the Chandler Act that created the Chapter XIII amendment. After World War II, focus on consumer protection continued, culminating with the Consumer Credit Protection Act of 1968 that ended wage garnishment and also increased protections for minority debtors. However, by 2005 creditors dominated the political economy. Lobbying efforts resulted in the Bankruptcy Abuse Prevention and Consumer Protection Act (BACPA), which required many debtors to pursue repayment over disbursal of debts.
The theme most interesting to historians of business and American capitalism is how the expansion of easy credit impacted society. For example, the decision in Marquette v. First of Omaha (1978) held that state anti-usury laws cannot be enforced against nationally chartered banks based in other states. Soon banks chartered in one state began to issue credit cards to customers in another. The book thus provides material detail to the rather nebulous idea of financialization. Marquette effectively created one national market, with the issuing states’ higher interest rates becoming the national rate, increasing access to credit, profits for the finance industry, and bankruptcy rates.
Bankrupt in America relates a key theme that all historians should note: that “stories matter” (p. 19). Throughout the book, two narratives surround bankruptcy. The first centers on how unscrupulous lenders took advantage of Americans (think of loan sharks in the 1920s and ’30s). Public opinion shifted to support increased consumer protections. Conversely, stories of spendthrift debtors living beyond their means were employed to enact wage garnishment and other pro-creditor laws, like BACPA. However, these narratives often oversimplified the truth. For example, after the Marquette decision, the national bankruptcy rate increased from 10 per 10,000 in the 1970s to 50 per 10,000 in 1990. Lobbyists for creditors argued that responsible borrowers were subsidizing reckless borrowers, ignoring wage stagnation as a key contributor.
While the authors’ exploration of Marquette and BACPA is thorough, they fail to explicitly examine how stagnate wages led to increased use of credit for millions of Americans. The claim that “personal bankruptcy rates rose because creditors allowed more people onto the path” does not fully scrutinize the complex lived experience of financialization, as indebtedness was often a reaction to increasingly unfavorable labor dynamics (p. 157). However, this small critique illustrates how, like all excellent scholarship, Bankrupt in America raises interesting questions that necessitate further research. For another example, can bankruptcy be a way to analyze changing household dynamics as modern consumer culture took hold in the 1920s? The authors explain that working-class families went into debt purchasing household appliances. Were these appliances small luxuries? Or were they necessary when both parents worked, creating a need to replace unpaid domestic labor? In total, Bankrupt in America is an outstanding resource that scholars in various fields will be building on for years to come.
Bankrupt in America delivers convincing arguments in a concise and easy-to-read narrative. The authors manage to humanize their statistical models through the use of vignettes and profiles of key decision makers. The book covers over one hundred years of history in under three hundred pages, a feat that many busy researchers will appreciate. Finally, the inclusion of much of their digitized data and regression analysis provides a resource that many scholars will find immensely useful. In sum, Bankrupt in America is not only a great read but a model of how different fields of inquiry can work together to provide an accurate and interesting analysis of history.
