Debt’s Emotional Encumbrances

Abstract

This chapter focuses on the role of emotions in the theory and practice of commercial and consumer credit laws, including bankruptcy, in the United States. It assesses knowledge about people’s emotions regarding personal and business financial problems, and evaluates how “money law” systems account for these emotions. This assessment finds that emotions surrounding taking on and being able to pay back debt differ between business leaders and people who shoulder household debt. These differences are traceable in large part to historical understandings of the respectability of incurring debt. This history has shaped the development of bankruptcy, commercial, and consumer credit laws in ways that make it easier for businesses than for households to access and navigate these legal systems. The result is that people dealing with stigmatizing money troubles face additional emotional encumbrances brought by “money law” systems, which impacts access to justice and the effectiveness of these laws. In contrast, business debt comes with less stigma and a relatively hospitable legal system, creating an opportunity for heightened risk taking. The chapter ends by considering the economic and social ramifications of business and consumer debt’s differing emotional encumbrances.