Layering, Conversion, and Drifting: A Comparative Analysis of Path Dependent Change in Consumer Insolvency Systems

The past twenty-five years have been marked by major developments in consumer insolvency systems around the world. The threshold challenge for comparative scholars is to keep up with the changes occurring in individual countries, as a necessary—but preliminary—step toward broader comparisons of the historical, social, and institutional forces in consumer bankruptcy. In order for deeper work to take place, though, the field needs consensus on what factors are most useful to analyze. Moreover, the dynamic environment of consumer insolvency requires a framework for analysis that is flexible and adaptable enough to provide insights notwithstanding the rapid changes in the field. Enter historical institutionalism, which Professor Iain Ramsay has proposed as a useful lens for broadly evaluating changes in consumer insolvency systems. In particular, Professor Ramsay argues that in order to take comparative consumer bankruptcy past its current descriptive stage, scholars should focus more carefully on the roles of various institutional actors in facilitating or impeding change in consumer insolvency law. Drawing on the foundational descriptive work of consumer insolvency scholars, this Article responds to Professor Ramsay’s invitation by using the tools of historical institutionalism to analyze modern trends in seven different insolvency systems. Specifically, I identify the key actors in each system and their role in contributing to legal change. I then evaluate the trends of legal change in each country, with a particular eye toward whether the trends have improved outcomes for consumers and reduced the inefficiencies caused by irrational sorting. My analysis suggests that countries whose insolvency systems have been entrusted to powerful public actors have evolved in pro-consumer ways, while countries whose systems depend on private professionals have trended in the opposite direction. These insights may be helpful for countries that are in the process of designing consumer insolvency systems, as well as for systems that find themselves stuck in suboptimal outcomes and are interested in pursuing effective reform