Business, Management and Accounting
4 years ago

Debt Forgiveness Debate: U.S. Bankruptcy System Faces Major Reform

Economic quarterly - Federal Reserve Bank of Richmond
To Forgive or Not to Forgive: An Analysis of U.S. Consumer Bankruptcy Choices
Wenli Li

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The U.S. has two types of bankruptcy, Chapter 7 and Chapter 13, with different rules. From 1980 to 1999, the number of bankruptcies increased a lot, mostly under Chapter 7. This caused big losses for creditors. People are debating how to fix this, with some wanting to get rid of Chapter 13 and forgive all debts, while others want to push more people towards Chapter 13. The Gekas bill wants higher-income bankrupt people to repay more of their debts.