Law Review: Sousa, Michael D.- The Persistence of Bankruptcy StigmaLaw Review: Sousa, Michael D.- The Persistence of Bankruptcy Stigma

The debtor-creditor relationship has always been intertwined with notions of morality. Failing to pay one’s financial obligations has traditionally been met with social opprobrium, internal shame, and external stigma. This dynamic did not change with the advent of American bankruptcy law. Indeed, for much of the twentieth-century, scholars have studied and debated whether the stigma associated with filing for bankruptcy has declined over the years, particularly in the 1980s and 1990s when the number of consumer bankruptcy filings increased dramatically. Existing studies suggest that the stigma regarding personal bankruptcy has declined in the latter portion of the twentieth-century.
Using a data set previously untapped by bankruptcy and social science scholars, this study explores the trend of bankruptcy stigma for approximately four decades, from the advent of the Bankruptcy Code in 1978 to the present day. Contrary to both existing studies on this issue and the arguments set forth by some commentators, the results of the present study suggest that the stigma surrounding personal bankruptcy has actually increased over time, rather than decreased, and this trend paradoxically tracks the number of consumer bankruptcy filings each year.
The results of this study should not only serve to re-invigorate the debate regarding Americans’ views about the bankruptcy process from a social perspective, but it also offers evidence for policymakers and Congress should they choose to re-examine the 2005 amendments to the Bankruptcy Code occasioned by the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”). If, indeed, the results of this study are accurate insofar as bankruptcy stigma has increased from 1977 to 2016, then our nation’s bankruptcy laws currently rest upon an entirely faulty premise.


The author’s concluding explanation for the increasing stigma in filing bankruptcy is the feeling that as:

Americans adhere to the concept of economic meritocracy, then those who find themselves clinging to the lower economic rungs in society deserve their fate. It is consequently understandable that when financial calamity strikes an individual or family and debt service simply becomes no longer manageable, attribution of the economic plight is associated with personal failings and limitations. Becoming mired in debt and needing to file for bankruptcy as a result offends Americans’ traditional values of hard work, personal responsibility and morality, thus leading society to stigmatize those who break with these social norms.

This perspective could also explain to some degree the differing rates of Chapter 7 and Chapter 13 filings, both regionally and based on race, that has been noted elsewhere.

For a copy of the paper, please see:

The Persistence of Bankruptcy Stigma


1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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