Crisis and Bankruptcy: The Mediating Role of State Law, 1920-1932

摘要

The onset of the Great Depression did not spark a surge in personal bankruptcy. For debtors in default, state garnishment law played a significant role in the decision to file for bankruptcy. Only states that made it easy to garnish a debtor's wages experienced significant increases in bankruptcy as a consequence of the Depression. Bankruptcy is generally regarded as a countercyclical phenomenon, and a rapid increase in bankruptcy is viewed as one of the defining features of the Great Depression. According to historian Morton Keller, "The Depression greatly increased both personal and corporate bankruptcy and kindled demands for reform of the system."1 Yet when personal, or wage earner bankruptcy as it was then called, is separated from business bankruptcy, the relationship between bankruptcy and income growth during the Depression is less clear. Nationally, the number of wage earner bankruptcies per 100,000 people did not increase sharply after the crisis began in late 1929. As incomes fell and unemployment rose during the depths of the Depression, wage earner bankruptcy even dipped briefly.