Available at: https://ssrn.com/abstract=5798042
Abstract:
Debt’s Grip opens with a bracing number: one in 11 Americans will file for bankruptcy; approximately 34 million people will file at some point in their lifetime. (1)This, of course, is just the visible part of the iceberg. The percentage of people who experience financial distress either pervasively or at some point in their lives is a multiple of that 1:11 figure. Foohey, Lawless and Thorne (“FLT”) seek to show who those bankruptcy filers are, how they got there, and what that means for the bankruptcy system. Along the way, they offer an indictment of the role that debt plays in our economy. This essay seeks to tell, in abbreviated fashion, the story told by Debt’s Grip, and then offers an appraisal, both of the limits of the methodology, of the policy prescriptions for consumer bankruptcy, and of their suggestions for structural reform. The takeaway is threefold: (1) the data they provide generates a thirst for more data from outside the bankruptcy system; (2) the proposal for consumer bankruptcy reform is constructive but falls short of the comprehensive rethink the system may require; and (3) sadly, the need for structural reform is clear, but has never been less in the cards.
Summary:
Ted Janger offers a generous but clear-eyed reading of Debt’s Grip, the latest product of the Consumer Bankruptcy Project’s (CBP) now-four-decade exploration of who files bankruptcy and why. The book’s authors—Pamela Foohey, Bob Lawless, and Deborah Thorne—appear in the article under the simple abbreviation FLT.
Janger abbreviates Foohey, Lawless & Thorne simply as “FLT,” which I cannot help noting that those initials also echo the physics shorthand for “faster-than-light” — an oddly fitting coincidence, given how routinely their empirical work has illuminated the consumer-bankruptcy universe long before Congress manages to catch up.
FLT’s central thesis is familiar to anyone practicing in the trenches of consumer bankruptcy:
the people who file are honest but unfortunate, clinging to the middle class with fingernails worn to the quick, and filing only when every other option—borrowing, privation, prayer—has been exhausted.
Janger walks readers through the key themes:
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Debt is now the default shock absorber for nearly every American household crisis.
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“Life in the sweatbox” is not a metaphor; it is an empirical category.
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Filers are not the poorest—they are the strugglers who tried to save something.
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Race, gender, and age intensify risk:
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Black households file at disproportionately high rates.
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Black debtors are routed into Chapter 13 at double the rate of whites.
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Single mothers and older Americans struggle the longest.
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The “can-pay debtor” is a myth, confirmed across decades of CBP data.
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Debt is functioning as a shadow social safety net, a role it is fundamentally unsuited to play.
FLT propose reforms—most mirrored in the Consumer Bankruptcy Reform Act of 2024—including mortgage modification, student-loan discharge, federal exemptions, and a unified consumer chapter. Janger sees the merit but doubts the politics.
The article ends with realism shading towards pessimism: the CBP’s data points to structural solutions, but Washington is currently dismantling what little consumer protection infrastructure existed.
Commentary:
If Debt’s Grip is the MRI of American household financial life, Janger’s review is the radiologist’s report: “multi-system failure, chronic, progressive.” FLT—our “faster-than-light” researchers—continue their decades-long project of showing the world what consumer bankruptcy lawyers see daily: that modern debt relief is not a tool of prosperity, but of triage.
The Missing Strugglers: the unseen majority
Janger’s most stinging observation—drawn from FLT and work like Dalie Jimenez’s “Missing Strugglers”—is that bankruptcy filers are only the ones who finally fell.
The unseen universe of non-filers—those facing garnishments, lawsuits, utility cutoffs, medical collections, and credit-card minimum-payment purgatory—remains largely unmeasured.
Bankruptcy’s data tells the story of those who broke. It tells us nothing about the millions still bending.
Debt is no longer investment—it is life support
As in your earlier commentary, the review reinforces that consumer credit today functions not as a ladder but as a life raft. People do not buy luxuries with credit cards; they buy time, groceries, brakes for the car, emergency dental care, asthma inhalers.
Student loans—once the golden ticket to upward mobility—now resemble a regressive tax on ambition. Mortgages, stripped of any modification authority in bankruptcy and even before the absurd suggestion of having a 50-year term, can be more of a trap than asset for the working poor.
Reform: applying bandages to an arterial wound
FLT (and Janger) correctly support the essential reforms:
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mortgage modification
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federal exemptions
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dischargeability of student loans
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elimination of the means test
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unification of consumer chapters
But even if enacted, these would treat symptoms of a deeper illness: the privatization of risk and the abandonment of social investment.
As your earlier post put it, you cannot cram down the cost of eldercare. You cannot discharge wage stagnation. You cannot lien-strip insulin prices.
The long view: the CBP will still be here when Congress wakes up
The CBP has been documenting household financial distress for forty years. It will almost certainly be needed for forty more. Reform is unlikely in the short term; political winds are blowing in the wrong direction.
But eventually—after enough damage—there will be an appetite for structural solutions.
When that time comes, FLT’s faster-than-light research may be the map policy makers finally follow.
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