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Consumer bankruptcy systems in Europe and the United States have witnessed especially robust and dynamic development during the past decade. The ever-rising volume of seeking entry to these systems now allows for cross-systemic comparisons of substantially differing “markets” for the relief that these systems offer. In particular, the distinct trend toward greater efficiency seen in other financial markets can be increasingly observed in most consumer bankruptcy regimes, with some notable exceptions. In this context, market performance can be gauged in part by the degree to which systems offer efficient and effective relief as a stimulus to deploying available debtor resources to paying debts while reducing waste in fruitless collections activity and avoiding old and inefficient shibboleths that prevent the efficient allocation of default risk.

An evaluation of the performance of consumer bankruptcy reform depends in large part upon one's perspective. Creditors will likely never be satisfied with the proliferation and refinement of systems that impose a coercive end to debt collections, conclusively robbing creditors of their right to attempt to extract payment from their debtors. Moreover, creditors will likely always complain of rampant “abuse” of these systems by debtors who are perceived as having the means to pay but otherwise lacking the will. But these are among the chimera notions that both developing and developed consumer bankruptcy regimes have chased relentlessly in the past, at significant and often wasted expense to the state and society. Notions of widespread abuse of “debtor-friendly” systems indeed fit the definition of “chimera,” for they are largely if not entirely “unreal creature[s] of the imagination, a mere wild fancy.”

This paper examines reforms in six prominent consumer bankruptcy systems that have occurred within a little more than a decade, evaluating which of them continue to pursue chimeras of abuse and which have actually begun to slay some real dragons, primarily the twin monsters of inefficiency and waste. It reveals whether these reforms have achieved their stated goals of improving efficiency and effectiveness, as opposed to chasing chimerical abuse. It concentrates on the most salient aspects of recent reforms and their effects, particularly the degree to which reforms have enhanced the risk-shifting efficiency and effectiveness of these systems, developing a more social policy-oriented concentration on, e.g., fighting social exclusion and restraining the anti-social effects of deregulated consumer finance markets. Progressing from worst to best, this examination begins with the thoroughly misguided and counterproductive U.S. reform of 2005 and ends with the increasingly impressive series of reforms implemented in France in 1999, 2004, and 2010. Between these poles, the examination progresses through reforms in the Netherlands in 2008, Denmark in 2005, Sweden in 2007, and Germany in 2002, charting a steadily increasing ratio of positive to negative design and result. Overall, the European systems seem to have performed quite well. Broadly speaking, the European reforms have enhanced efficiency by eliminating wasteful formality, targeting appropriate forms of relief to those who clearly need it, and appropriately socializing the burdens of financial distress and assigning financial market risks to sophisticated repeat players better able to gauge and minimize those risks.