The Leniency of Personal Bankruptcy Regulations in the EU Countries

György Walter,Jens Valdemar Krenchel

doi:10.3390/risks9090162

Abstract

Discussions on personal bankruptcy regulations are usually focused on the controversial effects of leniency on society, economy, financial markets, entrepreneurship, and labour supply. However, the methodology of measuring leniency has been limited to one-time legislative changes or some elements of the US personal bankruptcy system. In contrast, we create a composite index of personal bankruptcy legislations. We calculate the composite index for 25 EU countries and the US as a benchmark, validate the results, and rank the countries according to the leniency of their personal bankruptcy systems. We analyse the index scores by region, law origin, and the age of the regime. We conclude that the systems show high heterogeneity and cannot be clustered by region or legal origin assumed based on former studies. However, there is a strong association between leniency and the age of legislation. Results indicate that personal bankruptcy policies in the EU are usually launched as creditor-friendly and are later shifted to a more lenient direction.

Highlights

Risks 9: 162. https://doi.org/ personal bankruptcy dates back to ancient times, the US bankruptcy legislation is regarded as the first and benchmark regime in modern societies
We compared the budget allocation process (BAP) aggregation results with an equal weights (EW) aggregation of the dimensions
There are no significant changes in the ranking if we use EW instead of BAP

Summary

Introduction

Personal bankruptcy ( named consumer bankruptcy) dates back to ancient times, the US bankruptcy legislation is regarded as the first and benchmark regime in modern societies. Personal bankruptcy law ‘is the legal process for resolving the debts of insolvent individuals, married couples, / . Code in 1979, personal bankruptcy regimes have expanded all over the world. Focusing on Europe (Graziano et al 2019), legislations were first passed in the Western European countries (Great Britain 1986; France 1989; Germany 1994; Austria 1995; Belgium and the Netherlands 1998–1999; Ireland 2012) and Scandinavian countries (Denmark 1984; Sweden, Finland, and Norway 1994). From 2000, more countries introduced personal bankruptcy legislations in Central and South-Eastern Europe: Slovakia (2006); Slovenia (2008); Czech. Personal bankruptcy regulation exists in South-Europe: Spain (2013), Portugal (2004), Greece (2010), and Italy (2012). Baltic countries (Estonia, Latvia, Lithuania) have implemented the regulatory framework over the last 10–15 years

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