Yvana L.b.h. Mols, bankruptcy Stigma and Vulnerability: Questioning Autonomy and Structuring Resilience

• Citation: Vol. 29 No. 1
• Publication year: 2011

BANKRUPTCY STIGMA AND VULNERABILITY: QUESTIONING AUTONOMY AND STRUCTURING RESILIENCE

ABSTRACT

Stigma is an enduring byproduct of bankruptcy, both as felt by the debtor and as perceived by society. The stigma exists even though some have declared its demise, and is certainly present after the BAPCPA amendments aimed at action intended to revive the stigmatic effect of filing for bankruptcy. Bankruptcy stigma may be a useful tool when it prompts individuals to make wiser fiscal decisions, but for debtors who face uncontrollable financial circumstances, this same stigma is burdensome and does not provide a social benefit. Even worse, ineffective stigma exacerbates debtor vulnerability when bankruptcy could provide tools for debtor resilience and “fresh start.”

This Comment examines how stigma operates in bankruptcy, the emphasis on stigma in bankruptcy law changes, and stigma’s relation to vulnerability analysis. The conclusion proposes revisions to the Bankruptcy Code that take into account debtor vulnerability and provide debtor resilience. In support of this conclusion, this Comment examines the pervasiveness of stigma and autonomy in the bankruptcy context and how these were especially seen in the discussion preceding BAPCPA. The means test and prepetition credit counseling requirements reinforce the Bankruptcy Code’s structured autonomy, which is required for effective application of behavioral stigma. Vulnerability theory provides an important counterpoint to the Code’s imposition of stigma on debtors by critiquing radical autonomy and arguing for responsive, rather than stigmatizing, structures. Applying vulnerability theory, three levels of remedies emerge that address the problem of ineffective, autonomy-based stigma: Code changes that remove stigmatizing provisions, structural Code changes that separately treat uncontrollable debt, and extra- bankruptcy structures that support individual resilience and decrease the need for bankruptcy filing altogether.

INTRODUCTION

“Happy families are all alike; every unhappy family is unhappy in its own way.”1 Although Tolstoy’s famous quote dealt primarily with the infelicities of intra-family relationships, it provides surprising insight into the plight of debtors seeking bankruptcy relief. Happy, financially secure families are alike in one vital sense: they are apparently independent. This supposed autonomy

forms a buffer from the gradations of financial dependency that may lead to the stigma of bankruptcy. But, the path from resource rich resiliency is broad and contains many branches. Each unhappy family comes to bankruptcy with its own unique story to tell: job loss, debilitating illness, lack of adequate insurance, divorce, or death.2 Dependency may be direct, as a major illness that requires time off from work;3 or indirect, as the caregiver for a terminally ill family member.4 Though these families are unhappy in their own way, as they approach bankruptcy, they are made alike through stigma.5

Stigma affects debtors before filing by weighing on their moral conscience that they should repay their debts. It also operates through societal disapproval and shaming after filing, especially if society perceives they were responsible for the decisions that led to this situation.6 This notion of fault is based on a

1. LEO TOLSTOY, ANNA KARENINA 3 (Constance Garnett trans. 1901).

2. Recent studies show that a majority of individual bankruptcy filers are in financial peril because of medical-related costs. High costs for medical care and prescriptions, insufficient insurance, and loss of caregiver income, among other costs, make medical bankruptcies increasingly common in the United States. See David U. Himmelstein et al., Medical Bankruptcy in the United States, 2007: Results of a National Study,

122 AM. J. MED., Aug. 2009, at 741; see also David U. Himmelstein et al., Medical Bankruptcy in Massachusetts: Has Health Reform Made a Difference?, 124 AM. J. MED., Mar. 2011 at 224.

1. This is known as “inevitable dependency,” because it recognizes that illness, as well as aging, is an

   “unavoidable and inescapable dependency.” MARTHA ALBERTSON FINEMAN, THE AUTONOMY MYTH: A THEORY OF DEPENDENCY 35 (2004).

2. Derivative dependency is distinct from inevitable dependency and “arises when a person

   assumes . . . responsibility for the care of an inevitably dependent person.” Id. at 35–36. Fineman further notes, “[T]hose who care for others are themselves dependent on resources in order to undertake that care.” Id. at 36.

3. Often supported and directed by the law, stigma operates on a more foundational level of social

   punishment and shaming. Martha C. Nussbaum, Objectification and Internet Misogyny, in THE OFFENSIVE INTERNET: PRIVACY, SPEECH, REPUTATION 68, 73 (Saul Levmore & Martha C. Nussbaum eds., 2010) (“Shame justice is justice by the mob: the dominant group are asked to take delight in the discomfort of the excluded and stigmatized.”).

4. Stigma can be used for a host of socially constructed deviancies, with some based on identity and some

   based on fault. In the bankruptcy context, it makes most sense to think about stigma based on behavior and fault. See infra text accompanying notes 17–19.

   presumption of fundamental autonomy7 and individual agency that not only runs through the Bankruptcy Code (the “Code”),8 but also through the American legal system as a whole.9 The once clear notion of individual autonomy and fault in bankruptcy has become murky in recent years, especially in the continuing wake of the subprime mortgage crisis that surfaced after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), which amended the Code. While stigma may be applied and perceived in all bankruptcies, it has little effect on decision-making at the moment immediately before filing. Stigma can only work to change behavior if

   an alternative course of action is possible, and therefore its effectiveness for prospectively molding action depends on when it is imposed. Imposing stigma when there is only one viable action—for instance, upon someone’s last-resort bankruptcy—serves only to punish, not to shape behavior. On the other hand, stigma may function to shape behavior in line with social norms when it is imposed at a point when alternate decisions are available. Structures that recognize vulnerability and support individual resilience can address the issues at the heart of an individual’s financial difficulties. These supports would proactively take into consideration, and attempt to alleviate, circumstances that lead to the stigmatizing of debtors, instead of reactively imposing stigma only at the point of bankruptcy.

   
   

   This Comment will analyze the interrelated concepts of stigma, autonomy, and vulnerability in the context of bankruptcy. The Comment concludes that debtors will come closer to receiving a fresh start through social structures that create resiliency. Part I explores how stigma has and continues to operate in society. This Part explores the interrelatedness of behavioral stigma, autonomy, and legislative action in United States bankruptcy history. Part II discusses the structure of the Code, and how provisions like the voluntary filing provision, prepetition credit counseling, and the means test perpetuate and reinforce behavioral stigma. Part III expounds the vulnerability paradigm:

   
   

5. Fundamental, or radical, autonomy refers to the sense of individual self-sufficiency, in contrast to a notion of mutual interdependency, an alternative way of thinking about autonomy. See FINEMAN, THE AUTONOMY MYTH, supra note 3, at 20, 28–29.

6. The ability to voluntarily file is the most obvious example in the Code. See 11 U.S.C. § 301 (2006).

7. See generally FINEMAN, THE AUTONOMY MYTH, supra note 3, at 20–21 (explaining that the American legal system is based upon and idealizes the economically self-sufficient individual and family, in its

   independence from state and government support). “Autonomy is the term we use when describing the relationship between the individual and the state . . . . [W]e think of an economically self-sufficient individual as autonomous in relation to society and its institutions.”) Id.

   an alternative framework that questions autonomy and agency, and instead posits the enduring vulnerability of all legal subjects.10 Part IV uses this vulnerability paradigm to propose remedies to bankruptcy provisions designed to stigmatize debtors, focusing on the previously discussed means test and

   prepetition credit counseling requirement. It also considers other structures, within and beyond bankruptcy, which would provide resilience in areas known to be the source of uncontrollable debt for vulnerable subjects.

   
   

   1. STIGMA DEFINED AND ITS RELATION TO THE BANKRUPTCY CODE

      
      

      Stigma operates in bankruptcy as a product of competing social and economic norms and finite resources. Social norms dictate that individuals keep promises and pay back debts; yet, society emphasizes consumption11 and makes credit readily available for those borrowing beyond their means.12 The tension between these norms fluctuates with the health of the economy and with shifts in how society perceives debtor stigma. Because stigma grows and

      shifts over time, both in bankruptcy and in other areas, Part I examines stigma’s general mechanics. After defining stigma, this Part explores two reasons for shifting stigma: societal revaluation of norms and reconsideration of individual control over behaviors and circumstances. It then provides a brief history of U.S. bankruptcy law focusing on stigma’s role in that history.

      
      

      A. Stigma Defined

      
      

      The ancient Greeks defined stigma as a “system of markings typically burned . . . onto the bodies of criminals, traitors, and prostitutes as a way of

      
      

8. See, e.g., LORNA FOX O’MAHONEY, HOME EQUITY AND AGEING OWNERS: BETWEEN RISK AND

   REGULATION 187 (2012); Martha Alberston Fineman, The Vulnerable Subject and the Responsive State, 60 EMORY L.J. 251 (2010); Martha Alberston Fineman, The Vulnerable Subject: Anchoring Equality in...