THE MORAL APPEAL OF PERSONAL BANKRUPTCY

RAFAEL EFRAT*

I. INTRODUCTION

The essence of the fresh-start principle in bankruptcy is two-fold. It provides the financially troubled individual with an opportunity to obtain relief from the burden of pre-existing debts and to properly position the individual to re-join the economy as a productive member of society.1 The fresh-start principle generally takes the form of forgiving the debtor part or all of the debts she incurred prior to her bankruptcy filing.2 In addition to discharging her pre-petition debts, the fresh-start policy facilitates the joining of the debtor to the economy by allowing the debtor to keep her basic necessities of life.3

Traditionally, many have asserted, and some continue to assert, that the scope of the fresh-start policy has a direct impact on the frequency of consumer bankruptcy filings. According to the neoclassical economic model, the pleasure maximizer individual will resort to bankruptcy as long as the fresh-start policy is sufficiently broad and economically wise. However, some recent empirical studies have questioned the accuracy of that mono-utility traditional assessment tool. Some scholars have suggested that the deficiencies of the neoclassical model may result from its failure to consider several important non-economic factors, such as stigma and personal morality.

This Article first explores the traditional economic model of bank-ruptcy filings, assesses its limitations, and briefly considers several non-economic factors that may further explain and clarify the circumstances

* * RAFAEL EFRAT IS AN ADJUNCT PROFESSOR OF LAW AT WHITTIER LAW SCHOOL. IN 1997, PROFESSOR EFRAT ALSO SERVED AS A TEACHING FELLOW AT STANFORD LAW SCHOOLS ADVANCED MULTIDISCIPLINARY RESEARCH PROGRAM IN INTERNATIONAL LAW, AND IS CURRENTLY A J.S.D. CANDIDATE THERE. HE OBTAINED HIS J.D. FROM THE UNIVERSITY OF SOUTHERN CALIFORNIA IN 1992 AND PRACTICED INSOLVENCY LAW FOR FIVE YEARS BEFORE BECOMING A PROFESSOR.1 1. See Richard E. Flint, Bankruptcy Policy: Toward a Moral Justification for Financial Rehabilitation of the Consumer Debtor , 48 WASH. & LEE L. REV. 515, 515-16, 529 (1991); Karen Gross, Preserving A Fresh Start for the Individual Debtor: The Case for Narrow Construction of the Consumer Credit Amendments , 135 U. PA. L. REV. 59, 60 (1986).2 2. Thomas H. Jackson, The Fresh-Start Policy in Bankruptcy Law, 98 HARV. L. REV. 1393, 1393 (1985).3 3. See Flint, supra note 1, at 515-17.

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contributing to consumer bankruptcy filings. The Article then focuses on the impact of an individuals moral code on their propensity to commence bankruptcy protection. In that context, the Article addresses the nature of trust relationships in the credit market and their likely impact on the debtors moral considerations as they relate to her decision to file bankruptcy. Furthermore, the Article examines the relationship between religion and morality as well as the potential affect of religion on the individuals moral considerations in filing for bankruptcy. Finally, the Article takes the position that the moral appeal of bankruptcy should not simply be incorporated as a cost in the neoclassical economic model. Rather, the Article advocates the adoption of a multi-utility model that acknowledges two distinct sources of utility shaping the individuals behavior: pleasure and morality.

II. THE NEOCLASSICAL ECONOMIC MODEL AND CONSUMER BANKRUPTCY FILINGS

Traditionally, many have assumed that a general downturn or upturn in economic conditions explains respective rises or declines in the rate of bankruptcy filings.4 While some studies have correlated those trends to bankruptcy filing rates,5 others have demonstrated that the increase in personal bankruptcy filings could not be explained solely by adverse economic conditions.6 As a result, most economists have begun to rely primarily on the neoclassical economic model to explain and predict individuals propensity to commence bankruptcy proceedings.7

Under this model, the economic man is assumed to act rationally by

4 4. See Philip Shuchman, A Brief Survey of Empirical Research on Personal Bankruptcy in the USA with Comments on Legislative Impact, in DEBTORS & CREDITORS: A SOCIO-LEGAL PERSPECTIVE 293, 301 (Iain Ramsay ed., 1986).5 5. See, e.g., The Increase in Personal Bankruptcy and the Crisis in Consumer Credit: Hearings on S. 89 Before the Subcomm. on Administrative Oversight and the Courts of the Senate Comm. on the Judiciary, 105th Cong. 23 (1997) [hereinafter Personal Bankruptcy Hearings] (statement of Professor Ian Domowitz, Department of Economics and Institute for Policy Research at Northwestern University) (I fail to see that the correlation of bankruptcy activity with aggregate economic fluctuations, no longer exists. The correlation is there for consumer bankruptcies, as well as for the total, which includes corporate and farm activity.).6 6. See Shuchman, supra note 4, at 301-02, 306; see also Personal Bankruptcy Hearings, supra note 5, at 39 (statement of Kim Kowalewski, Chief, Financial & General Macroeconomic Analysis Unit of the Congressional Budget Office) (Although nonbusiness bankruptcies have risen during recessions . . . , they have tended to increase even more dramatically during economic expansions.); id. at 23 (testimony of Ian Domowitz) (While it was once assumed that bankruptcies reflected general economic trends, the correlation no longer exists.) (quoting from materials presented by the banking industry); id. at 140 (statement prepared by the American Bankruptcy Institute).7 7. See Michelle J. White, Economic Versus Sociological Approaches to Legal Research: The Case of Bankruptcy, 25 L. & SOCY REV. 685, 686 (1991).

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calculating costs and benefits in an attempt to maximize his pleasure or wealth.8 The underlying assumption is that individuals act in response to economic incentives and disincentives.9 Thus, under the neoclassical economic model, we expect individuals to file for bankruptcy protection when the economic incentives of bankruptcy will make them better off.10

Specifically, the neoclassical model suggests that, by manipulating the economic incentives and disincentives in the bankruptcy process, one can either encourage or discourage the reliance on the bankruptcy process by the economic man.11 For example, since a broad fresh-start policy can attract to the bankruptcy process many individuals who wish to improve their economic position, disincentives can also be

8 8. See CHARLES E. DYKE, PHILOSOPHY OF ECONOMICS 31 (1981) (All actions are directed toward the gaining of pleasure or the avoidance of pain .);TERESA A. SULLIVAN, ET AL., AS WE FORGIVE OUR DEBTORS: BANKRUPTCY AND CONSUMER CREDIT IN AMERICA 239 (1989) [hereinafter AS WE FORGIVE OUR DEBTORS]; Richard A. Posner, The Economic Approach to Law, 53 TEX. L. REV. 757, 761 (1975) (The basis of an economic approach to law is the assumption that the people involved with the legal system act as rational maximizers of their satisfactions.); Philip Shuchman, Theory & Reality in Bankruptcy: The Spherical Chicken, 41 LAW & CONTEMP. PROBS. 66, 71 (1977) ([I]ndividuals and firms engaged in consumer credit transactions always act as profit maximizers.); White, supra note 7, at 690 (Rational choices made by individuals are the central focus of the economic theory of bankruptcy.). 9 9. See Posner, supra note 8, at 763 ([T]he legal system is treated as a given and the question studied is how individuals or firms involved in the system react to the incentives that it imparts.).0 10. See William H. Meckling, Financial Markets, Default, and Bankruptcy: The Role of the State, 41 LAW & CONTEMP. PROBS 13, 27 (1977) (Changes in bankruptcy law which lower the costs or raise the benefits to debtors . . . will without question increase both the number of debtors who elect that option . . . . ); John H. Moore, Foreword [to a symposium on the economics of bankruptcy reform], 41 LAW & CONTEMP. PROBS. 1, 5 (1977) (Lower bankruptcy costs will cause a higher rate of bankruptcy election by debtors . . .); White, supra note 7, at 686; William J. Woodward, Jr. & Richard S. Woodward, Exemptions as an Incentive to Voluntary Bankruptcy: An Empirical Study, 57 AM. BANKR. L.J. 53, 54 (1983) ([I]f the provisions of the bankruptcy law are made more attractive to debtors, more of them will select that option as a solution to their financial problems. A corollary of this idea is commonly used to deal with rising bankruptcy rates: make the law less attractive to debtors and less of them will choose bankruptcy.). However, not all consumers are predicted to file for bankruptcy protection when it will make them better off. See White, supra note 7, at 686. ([E]conomic models are used to make predictions concerning groups of consumers, not particular consumers. Rather, the stronger the incentive is for a group of consumers to file for bankruptcy, the more of them are hypothesized to do so.).1 11. See Teresa A. Sullivan, et al., Consumer Debtors Ten Years Later: A Financial Comparison of Consumer Bankrupts 1981-1991, 68 AM. BANKR. L.J. 121, 122 (1994) (The simple economic model hypothesizes that consumer behavior responds predictably to incentives and disincentives built into the law, so that, to change debtor behavior, legislators must change the schedule of incentives and disincentives.); William T. Vukowich, Reforming the Bankruptcy Reform Act of 1978: An Alternative Approach, 71 GEO. L.J. 1129, 1153 (1983).

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placed in the bankruptcy system to deter well-off individuals from resorting to it.12 Further, by adopting both disincentives for using the bankruptcy system and incentives for negotiating with the creditors outside of the bankruptcy system, the use of out-of-court repayment agreements in lieu of the bankruptcy process will presumably increase.13

Moreover, the increase or decrease in the amount of property exemptions a debtor may claim in the bankruptcy process will theoretically provide an incentive or disincentive (as the case may be) for commencing bankruptcy protection.14

Under the neoclassical model, in considering whether to invoke bankruptcy protection, the economic man will translate the bankruptcy systems incentives and disincentives structure into costs and benefits.15 When the benefits of filing bankruptcy exceed the related costs the rational maximizer economic man would commence bankruptcy protection.16 The benefits generally associated with bankruptcy laws may include the forgiveness of certain debts, the exemption of certain property from the hands of the creditors (and the bankruptcy trustee),17 and the availability of public financial support.18

2 12. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 234. For example, the legislature may adopt a liberal discharge policy for well-deserving debtors and a very conservative discharge policy for well-off debtors. 3 13. See id.4 14. See id.5 15. See Meckling, supra note 10, at 25 (An individual debtors decision to resort to bankruptcy is a function of the costs and benefits to him of alternative courses of action.).6 16. See Lawrence Shepard, Personal Failures and Bankruptcy Reform Act of 1978, 27 J.L. & ECON. 419, 429 (1984) (Just as the natural incidence of joblessness depends on the attractiveness of unemployment, so theory suggests that the natural rate of bankruptcy varies with the perceived amenities and disamenities of financial failure.); Shuchman, supra note 8, at 67 ([C]hanges in bankruptcy law which lower the costs of bankruptcy or raise the benefits to insolvent debtors will directly increase the number of debtors who opt for bankruptcy instead of paying their debts.); Michelle J. White, Personal Bankruptcy Under the 1978 Bankruptcy Code: An Economic Analysis, 63 IND. L.J. 1, 3 (1987) ([T]his Article pursues an economic approach to analyzing personal bankruptcy . . . . The [economic] models results are startlingly clear in demonstrating how attractive filing for bankruptcy is for debtors who are motivated purely by economic considerations.). A comparative study between the fresh-start policies in the United States and Canada found a strong inference on the connection between economic incentives and bankruptcy filing rates. See F. H. Buckley, The American Fresh Start, 4 S. CAL. INTERDIS. L. J. 67, 68 (1994) ([The] econometric study finds that consumer bankruptcy filing rates in the United States exceed those in Canada, and that the difference may plausibly be attributed to the broader American fresh start rights.).7 17. See Vukowich, supra note 11, at 1152-53. Among other things, Professor Vukowich contends that less people will file for bankruptcy protection if the property exemption levels offered in the bankruptcy system is reduced. Id.8 18. [E]xpected levels of public assistance constitute logical determinants of the natural level of bankruptcy: in a welfare-free world, the loss of assets associated with financial failure could threaten ones very survival, motivating consumers to be so

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In contrast, the costs generally associated with bankruptcy laws include relinquishing nonexempt assets,19 the potential difficulties in obtaining credit in the future,20 and the payment of court filing and attorney fees.21

III. THE LIMITATIONS OF THE NEOCLASSICAL ECONOMIC MODEL IN EXPLAINING CONSUMERS TENDENCIES TO FILE BANKRUPTCY

PETITIONS.

While the neoclassical model has been widely used in formulating bankruptcy policy and in predicting bankruptcy filings,22 the model has recently been attacked as ineffective in fully predicting the debtors behavior.23 Several empirical studies attempted to assess the correlation between the property exemption level and bankruptcy filing rates. Those

conservative in their financial affairs as to make failure a relatively remote possibility. On the other hand, the higher are levels of guaranteed public support, the more likely are consumers to incur bankruptcy and the risks that can contribute to failure. Thus, bankruptcy rates are expected to move directly with the expected levels of public assistance. Shepard, supra note 16, at 429.9 19. See Woodward & Woodward, supra note 10, at 59 ([I]f debtors are rational maximizers, one would think that the prospect of keeping more property from creditors through bankruptcy would induce some debtors to choose bankruptcy who would not have otherwise done so. Perhaps more important for policy makers is the corollary: reducing or eliminating this incentive . . . will slow the rate of bankruptcy filings.).0 20. See Jackson, supra note 2, at 1428; see also Meckling, supra note 10, at 25; J. Fred Weston, Some Economic Fundamentals for an Analysis of Bankruptcy , 41 LAW & CONTEMP. PROBS. 47, 60-61 (1977) ([The debtors] need to borrow from a number of sources, their knowledge that credit information is collected by lenders, their need for future loans, all provide strong stimuli to debtors to honor their obligations.). But see Moore, supra note 10, at 4 (Some seminar participants pointed out that full discharge under bankruptcy may make credit easier for individuals to obtain than it would be if they still had heavy debt obligations on the books- yet another reason to expect an increase in the rate of bankruptcy declaration.); Shepard, supra note 16, at 427 (While it is true that declaring bankruptcy can affect ones future access to credit, most individuals for whom bankruptcy is potentially a wealth-maximizing strategy have previously impeached their credit rating and exhausted their credit sources.).1 21. See Meckling, supra note 10, at 25.2 22. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 234 (These predictions [based on the economic model] have powerfully influenced both the course of the bankruptcy policy debates and subsequent changes in the bankruptcy laws.); Teresa A. Sullivan, et al., Consumer Bankruptcy in the United States: A Study of Alleged Abuse and of Legal Culture, 20 J. CONSUMER POLY 223, 252 (1997).3 23. See, e.g., AS WE FORGIVE OUR DEBTORS, supra note 8, at 235-36 (The data indicate that the economic model has surprisingly little predictive power . . . ). But see Note, A Reformed Economic Model of Consumer Bankruptcy, 109 HARV. L. REV. 1338, 1338 (1996) (This Note seeks to demonstrate that . . . the underlying economic methodology remains an effective way to evaluate the available data and to think about consumer bankruptcy.).

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studies tested the hypothesis that, as the property exemption level in bankruptcy increases, bankruptcy filing becomes more attractive for the rational wealth maximizer debtor. However, most studies have found slight, if any, correlation between bankruptcy exemption level and bankruptcy filing rates.24

Furthermore, based on the assumptions of the neo-classical economic model, a recently conducted study attempted to predict the percentage of the American households that will file for bankruptcy protection. The study concluded that the neo-classical economic model is dramatically deficient in predicting the human behavior in the bankruptcy context. The author found the actual percentage of individual filings for bankruptcy protection was significantly lower than the percentage predicted by the neo-classical economic model.25

4 24. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 236 (These data suggest to us that the relatively simplistic economic models used in bankruptcy policymaking do not work. . .); Lisa J. McIntyre, A Sociological Perspective on Bankruptcy, 65 IND. L. REV. 123, 128 (1989) ([T]he carrot-and-stick approach to bankruptcy has flourished. Yet, the data gathered in this research flatly contradict such conventional wisdom.); Moore, supra note 10, at 6 (The wide district-to-district variations in the rate of election of chapter XIII plans were cited as evidence that factors not taken into account by the economic model are important in understanding and predicting the effects of changes in bankruptcy law.); Shuchman, supra note 8, at 86, 88 (States with larger exemptions do not necessarily have more bankruptcies . . . .); Sullivan et al., supra note 11, at 124 (The data provide little evidence that exemptions influence behavior any more in 1991 than they did in 1981 . . . . [T]he data still refute the hypothesis that debtors in high-exemption states behave differently from debtors in low-exemption states- a key premise underlying the simple economic model.); Elizabeth Warren, Reducing Bankruptcy Protection for Consumers: A Response, 72 GEO. L.J. 1333, 1344 (1984); White, supra note 7, at 707 (I would characterize the [neoclassical economic model] as providing suggestive rather than definitive results concerning whether economic factors are important determinants of the decision to file for bankruptcy. Further research is clearly needed . . . .); Woodward & Woodward, supra note 10, at 68 (This study shows that states that have eliminated the disparity between exemptions available to debtors outside of bankruptcy and those available to debtors in bankruptcy have not realized significantly lower bankruptcy rates than those states which have continued to allow debtors access to the [Bankruptcy] Codes relatively higher bankruptcy exemptions.). But see White, supra note 7, at 701 ([T]he type of data collected by . . . [and presented in the book AS WE FORGIVE OUR DEBTORS] cannot be used to study how people make the decision to file for bankruptcy, because their data set includes only people who actually filed for bankruptcy and excludes those who did not file.).5 25. The author noted:

[D]espite the rapid growth in the number of personal bankruptcy filings, far fewer households file for bankruptcy than the number that could benefit financially from doing so . . . . I calculate[d] that at least 12 [percent] of U.S. households would benefit financially by filing for personal bankruptcy. In comparison, the proportion of U.S. households that actually filed for bankruptcy averaged only .66 percent per year in the decade from 1985-1994.

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Two main explanations suggest the lack of direct empirical correla-tion between economic incentives and bankruptcy filing rates. First, some contend that the neoclassical economic model does not adequately predict the rate of bankruptcy filings because individuals do not act as rationally as the model assumes.26 This lack of rationality may occur because the individual is under too much pressure to engage in a methodological analysis of costs and benefits.27 An individual also may engage in irrational behavior due to inherent cognitive deficiencies.28

Further, many individual debtors lack adequate information regarding their options to make a rational decision and simply cannot understand the complexities of the bankruptcy systems.29 On top of that, in many

Michelle J. White, Creditors Remedies and Debtors Right to File for Bankruptcy: Why Dont More Households Go Bankrupt? 1-2 (Feb. 7, 1996) (unpublished manuscript presented at the Law & Economics Workshop Series at the University of Toronto).6 26. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 243 (Debtors may fail to follow the economic model of the bankruptcy debates because the circumstances of their decisions inhibit the economic rationality predicated by the model.); Shuchman, supra note 8, at 89 (The examples also suggest that consumer creditors are not rational and prudent in the sense that economic theory would indicate, unless it is a theory with much more behavioral analysis and content than most economists will accept.); Woodward & Woodward, supra note 10, at 54 ([D]ebtors may not act rationally about choosing a solution to their financial problems.). 7 27. See AMITAI ETZIONI, THE MORAL DIMENSION: TOWARD A NEW ECONOMICS 73 (1988) (A large body of research shows that under stress peoples decision-making becomes less rational . . . .); AS WE FORGIVE OUR DEBTORS, supra note 8, at 244 (Debtors on the verge of a bankruptcy filing are under enormous pressure from their creditors . . . . There may be terrific tension in their homes . . . . Most of those intimately associated with the bankruptcy process- the judges and the lawyers- explain that the debtors emotions . . . do not leave them in a position to calculate much of anything. . . .); Moore, supra note 10, at 6 (A bankrupt borrower, for example, may be in too much personal turmoil or under too much pressure from creditors to undertake a cool assessment of the costs and benefits of various legal options.).8 28. See Melvin A. Eisenberg, The Limits of Cognition and the Limits of Contract , 47 STAN. L. REV. 211, 213 (1995) ([E]mpirical evidence shows that actors characteristically violate the standard rational-choice or expected-utility model, due to the limits of cognition.); Jackson, supra note 2, at 1405 ([A]vailable evidence suggests that many people systematically fail to pursue their own long-term interests when making decisions about whether to spend today or save for tomorrow . . . . [I]ndividuals systematically misjudge (or ignore) their own interests and that this bias leads them to consume too much and save too little.).9 29. See Gary Neustadter, When Lawyer and Client Meet: Observations of Interviewing and Counseling Behavior in the Consumer Bankruptcy Law Office, 35 BUFFALO L. REV. 177, 239 (1986) (The authors findings suggest consumer debtors rarely have independent information about the complex bankruptcy process that would allow them to challenge the advise of their attorneys.); Warren, supra note 24, at 1348 (It requires a great deal of accurate information about the complexities of the bankruptcy statutes and about how they relate to ones own assets and debts before any rational maximizer who was so inclined could make the economically based

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cases a debtors attorney does not adequately explain the debtors available options.30

The second suggested reason for the absence of empirical support for the economic model is that other non-pecuniary factors may influence an individuals decision regarding whether to file for bankruptcy protection.31 By its nature, the economic model narrowly focuses on economic variables to predict individuals behavior.32 The narrow focus of the neoclassical model may explain its deficient

decision that [Professor] Vukowich assumes will be made routinely.); Woodward & Woodward, supra note 10, at 54 (Debtors may not know that the [bankruptcy] provision is attractive at the time they exercise their choice.).0 30. See Neustadter, supra note 29, at 229 ([L]awyers did not regularly discuss solutions to financial distress other than solutions offered by federal bankruptcy law.). If the economic incentive proponents agreed that thousands of almost-bankrupt debtors could not make such decisions, the proponents might assert that surely debtors attorneys could help them to do so. The reality of consumer bankruptcy practice, which involves a high volume of cases, relatively low fees, and, consequently, few hours spent per case, does not support such an assumption. . . . How the attorney will be paid, the attorneys perceptions of the bankruptcy judge before whom the attorney must regularly appear, the attorneys perceptions of the helpfulness of the chapter 13 trustee, and the attorneys previous experiences [in bankruptcy] . . . , are among the factors that encourage an attorney to steer a debtor into a particular chapter for noneconomic reasons. Debtors, if they are so inclined, need an enormous amount of information to make an economically based election. There is no reason to assume that many of them will get it.Warren, supra note 24, at 1348; White, supra note 7, at 692 ([I]n reality, debtors are likely to be uninformed concerning the law and to depend on lawyers for advice. But lawyers own incentives are to make themselves as well off as possible, which is not necessarily the same as making their clients as well off as possible.); William C. Whitford, The Ideal of Individualized Justice: Consumer Bankruptcy as Consumer Protection, and Consumer Protection in Consumer Bankruptcy , 68 AM. BANKR. L.J. 397, 406 (1994) (Rather than making informed decisions reflecting their particular circumstances and personal goals, debtors are steered to particular choices by their attorneys. Too often, I believe, those choices reflect the best interests of the attorneys rather than the interests of debtors themselves.).1 31. See Jon Elster, Introduction, in RATIONAL CHOICE 23 (Jon Elster, ed., 1986); Moore, supra note 10, at 6 ([I]t was objected that lenders and borrowers behavior, even if rational, can be explained but not predicted by economic calculus. . . . Those making this argument questioned . . . whether critics of the reforms have given adequate consideration to nonpecuniary factors that influence behavior in financial markets. . . ); Shuchman, supra note 4, at 302-03 (My experience with economists suggests that some of their mistakes are because of their implicit presumptions about human psychology which, for their discipline they assume must necessarily be limited.); Warren, supra note 24, at 1345.2 32. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 244 (The economic model is global in that it purports to explain choice . . . by looking only at economic variables.); ETZIONI supra note 27, at 12 (The neoclassical paradigm does not merely ignore the moral dimension but actively opposes its inclusion. . . . Other neoclassicists . . . belittle the role of values, or see them as but one source of tastes

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explanatory and prediction value.33 Its narrow focus omits factors such as social stigma,34 moral appeal of bankruptcy,35 demographics36 and legal culture37 from the analysis. These additional considerations may help to portray a more complete picture of the phenomena.38 The next section of this Article explores the nature of one of the non-pecuniary factors: morality. The discussion on morality and bankruptcy will address the issue of how individuals behavior is influenced by their perception of right and wrong as shaped by credit trust relationships and by religious beliefs.

among many others.); RICHARD SWEDBERG & MARK GRANOVETTER, THE SOCIOLOGY OF ECONOMIC LIFE 9 (Mark Granovetter and Richard Swedberg eds., 1992) (Economic action is socially situated and cannot be explained by reference to individual motives alone. It is embedded in ongoing networks of personal relationships rather than being carried out by atomized actors.).3 33. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 244; ([The economic models narrow focus] . . . excludes other characteristics that may impinge on debtor decision making, and this may contribute to its weak explanatory power.); DAVID CAPLOVITZ, CONSUMERS IN TROUBLE: A STUDY OF DEBTORS IN DEFAULT 274 (1974) (Although many of these default-debtors were no doubt eligible for bankruptcy, only 7 percent of the 1,261 debtors . . . filed for bankruptcy.).4 34. See ERIC POSNER, LAW AND COOPERATION (forthcoming 1998) (manuscript at 4, on file with author) ([People] conform to social norms. The question left unanswered by law and economics is why people conform to social norms, or . . . how such norms arise. Without an answer to that question, one cannot predict the effect of the enactment of a law on peoples behavior.); McIntyre, supra note 24, at 128-29; Honorable Burton Perlman, A View from the Bench, 61 U. CIN. L. REV. 511, 517 (1992); White, supra note 16, at 11.5 35. See Jackson, supra note 2, at 1427-28 (suggesting that ethical sensibilities may deter an individual from commencing bankruptcy protection); McIntyre, supra note 24, at 129; Shuchman, supra note 4, at 303;

[T]here are some debtors with moral compunctions about straight bankruptcy. They want to pay their debts. And not because it is more prudent or more rational, and not because they are profit maximizers. They think it is right to pay their debts and that they should (that normative posture) do so. Such a specific morality is a non-economic cause of economic actions. It does not make its way into our economists theoretical calculus.

Shuchman, supra note 8, at 84; White, supra note 7, at 695; White, supra note 16, at 25; see also discussion infra Part IV.6 36. Some demographic variables that have been linked to bankruptcy are marital status, migration history, home ownership, business ownership and job prestige. See AS WE FORGIVE OUR DEBTOR, supra note 8, at 244-46. Also, one study correlated ethnicity with bankruptcy. See CAPLOVITZ, supra note 33, at 275 ([B]ankruptcy seems to be affected much more by the amount of indebtedness and by ethnicity than by garnishment.).7 37. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 246 (In addition to the influence of economic and social-demographic factors, we believe that debtors bankruptcy decisions may be importantly influenced by the local legal culture they encounter when they seek legal help.); Jean Braucher, Lawyers and Consumer

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IV. THE IMPACT OF THE DEBTORS MORALITY ON THE PROPENSITY TO INITIATE BANKRUPTCY

The individuals moral beliefs about right and wrong contribute significantly to an individual debtors decision whether to commence bankruptcy protection.39 In addition to pursuing pleasure and wealth maximization as the neoclassical model advocates, an individual continuously attempts to promote her moral ideology. Strong evidence suggests that an individuals moral perception of right and wrong can deeply shape the individuals actions and choices.40 Moral perception

Bankruptcy: One Code, Many Cultures, 67 AM. BANKR. L.J. 501, 508 (1993) (A possible alternative theory that may appeal to some is replacing a simple economic model of consumer behavior with a simple economic model of their lawyers behavior.(emphasis added)); Sullivan et al., supra note 22, at 244-56; Teresa A. Sullivan et al., The Persistence of Local Legal Culture: Twenty Years of Evidence from the Federal Bankruptcy Courts, 17 HARV. J.L. & PUB. POLY 801, 839-57 (1994).8 38. Even some economists have acknowledged the limits of the neoclassical economic model. See Posner, supra note 8, at 774 (A scientific theory necessarily abstracts from the welter of experience that it is trying to explain, and is therefore necessarily unrealistic when compared directly to actual conditions . . . . Similarly, an economic theory of law is certain not to capture the full complexity, richness and confusion of the phenomena . . . that it seeks to illuminate.); White, supra note 7, at 695 (Thus the economic model sets out the conditions under which individuals or couples have an incentive to file for bankruptcy . . . . However, economists do not believe that individuals always do everything that they have an incentive to do. They believe that other influences besides economic ones affect individual behavior . . . . ); White, supra note 16, at 3, 25 ([Not] only economic issues and economic motivations are important in explaining individuals decisions to file for bankruptcy. . . . Economic and non-economic factors thus interact in determining the prevalence of opportunistic behavior and the frequency of bankruptcy filings.).9 39. See McIntyre, supra note 24, at 129; see also Moshe Silberg, Law and Morals in Jewish Jurisprudence, 75 HARV. L. REV. 306, 322-23 (1961) (Society, to be sure, has an interest in the fulfillment by every individual of his obligations toward the others, but the individual debtor has no material interest in paying his debts; he is forced to do it either by the recognition of his moral obligation or by the fear of coercion.). See generally ETZIONI, supra note 27, at 12 (Acts are morally right when they conform to a relevant principle or duty.).0 40. See ETZIONI, supra note 27, at 12; see also id. at 93 ([T]he majority of choices people make, including economic ones, are completely or largely based on normative-affective considerations, not merely with regard to selection of goals, but also of means . . . . ); id. at 90 (The main thesis advanced here is that the most important bases of choices are affective and normative. That is, people often make non or sub-rational choices, first because they build on their normative-affective foundations, and only secondly because they have weak and limited intellectual capabilities.); For a detailed summary of scientific evidence supporting the assertion that many individuals frequently act out of moral reasons and not merely to enhance their pleasure or wealth, see id. at 51-63; JOAN ROBINSON, ECONOMIC PHILOSOPHY 13 (1962) (The author identified the requirements for an economic system as a set of rules, an ideology to justify them, and an conscience in the individual which makes

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affects individuals behavior in the personal, as well as, in the economic spheres of life.41 Contemplating an act that is inconsistent with ones moral standards can result in a bad conscience,42 and this bad conscience functions as a deterrent from engaging in an immoral conduct.43 Similarly, some studies suggest that debtors consciences, arising from their moral obligation to repay their debts, deters some from filing for bankruptcy protection since they view that course of conduct as immoral.44

him strive to carry them out.); TOM R. TYLER, WHY PEOPLE OBEY THE LAW 24 (1990) (The final influence on social behavior is the persons own set of normative values- the sense of what is right or appropriate.); id. at 56 (Obedience to the law is also strongly linked to peoples personal morality.). See generally J. GAY T. MEEKS, THOUGHTFUL ECONOMIC MAN: ESSAYS ON RATIONALITY, MORAL RULES AND BENEVOLENCE (J. Gay T. Meeks ed., 1991).1 41. See RODNEY WILSON, ECONOMICS, ETHICS & RELIGION: JEWISH, CHRISTIAN AND MUSLIM ECONOMIC THOUGHT 1 (1997) (An understanding of religious teachings helps put ethical issues, including those involving economic relations, in a fuller perspective.).2 42. See ETZIONI, supra note 27, at 32 ([E]veryday observations and experience, as well as scientific experiments . . . , show that many purchases are accompanied by or followed by feelings of guilt, shame, [or] regrets . . . .); see also id. at 71-76.3 43. See JOHN BRAITHWAITE, CRIME, SHAME AND REINTEGRATION (1989) (asserting that shame is a powerful weapon of deterrence and that some societies use the power of shame to influence unacceptable behavior); Harold G. Grasmick & Donald Green, Deterrence and the Morally Committed, 22 SOC. Q. 1, 12 (1981) (the authors found that moral commitment has strong deterrent effect on an individuals propensity to commit a crime).4 44. See Braucher, supra note 37, at 510 (For example, one of the debtors lawyers in the study heavily advertises chapter 13 repayment plans [as opposed to the chapter 7 liquidation] and says his philosophy is that most people want to pay and want to honor their commitments and the sanctity of contract.); id. (to deal with the moral dilemmas involved in filing for bankruptcy protection some debtors have formed support groups); id. at 540 (Bankruptcy has strong . . . moral implications for many debtors . . . . To describe clients feelings and attitudes, the subject lawyers used words such as these -dejected, ashamed . . . . The lawyers also said that their clients are influenced by moral values . . . ); id. at 541 (One point made by most lawyers is that clients usually say they want to pay their debts.); id. at 565 (One bankruptcy attorney, who was interviewed, said that despite his efforts to alleviate moral concerns of the debtor in filing for bankruptcy, [s]till, people feel they are stealing.); id. (Another bankruptcy attorney, who was interviewed, said: [A] lot could go chapter 7 but are going to feel they are doing something immoral. ). Others reached a similar conclusion. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 337 ([W]e do not doubt that moral conviction continues to play an important part in keeping many people out of bankruptcy . . . We believe that people generally repay the debts because they believe it is the right thing to do, so that legal enforcement is rarely required. Even among people who have taken the fateful step of filing for bankruptcy, a substantial number reaffirm some of their debts, often for no discernible reason other than their sense of obligation.); id. at 338 (If the economic theorists are correct that moral conviction and stigma are the principle deterrents to bankruptcy, the data suggest that these deterrents work.); Sheila Driscoll, Note,

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Some contend that social factors, including morality, should simply be incorporated into the neoclassical economic model as a non-pecuniary cost.45 However, as other scholars have persuasively argued, the moral appeal, as well as other social factors are distinct and separate from acts of pleasure both in terms of inner psychic states and in terms of attendant behavioral consequences.46 Therefore, they should not simply be incorporated into the economic model. Instead, some scholars suggest that the model for understanding an individuals behavior should be based on a multi-utility, as opposed to a mono-utility world.47

Consumer Bankruptcy and Gender, 83 GEO. L.J. 525, 541 (1994) (Many [clients] have a strong bias against bankruptcy. . . . They feel [they] have committed a terrible sin and are ashamed to admit . . . they cant pay their bills.); Charles G. Hallinan, The Fresh Start Policy in Consumer Bankruptcy: A Historical Inventory and an Interpretive Theory, 21 U. RICH. L. REV. 49, 141 (1986) (A second form of [non-monetary] control [against bankruptcy filing] is the debtors own sense of moral obligation regarding the payment of dischargeable debts.); Margaret Howard, A Theory of Discharge in Consumer Bankruptcy, 48 OHIO STATE L.J. 1047, 1061 (1987) ([A] debtor unable to satisfy his obligations experiences resulting feelings of shame. . . .); McIntyre, supra note 24, at 129; Whitford, supra note 30, at 401 ([Many debtors have ethical objections of obtaining a bankruptcy discharge for debts to which there is no defense.); Woodward & Woodward, supra note 10, at 66 (The decision to file a voluntary bankruptcy petition is highly complex one involving for some debtors serious questions of morality and self-worth . . .); Philip Shuchman, An Attempt at a Philosophy of Bankruptcy 21 UCA L. REV. 403, 455-56 (1973) (It seems evident that many, probably most, persons in our society view debt repayment as a matter of duty. They repay their debts . . . because it is proper and right to pay ones debts.); see also Arnold v. West (In re Arnold), 869 F.2d 240, 243 (4th Cir. 1989) ([Some debtors, although perhaps a small, but nonetheless appreciable minority . . . feel a moral obligation to . . . repay as much of their debts as possible.).5 45. See, e.g., Note, supra note 23, at 1343 (In order to provoke filing, the benefits of bankruptcy must be sufficiently large to overcome both the pecuniary and nonpecuniary costs of filing. If we omit nonpecuniary costs from the model, as did most proponents of the traditional economic approach, the model will underestimate the level of benefits necessary to induce filing.); Hallinan, supra note 44, at 142. The same argument has been previously advanced in other areas as well. See, e.g., Harold G. Grasmick & Robert J. Bursik, Jr ., Conscience, Significant Others and Rational Choice: Extending the Deterrence Model , 24 L. & SOCY. REV. 837, 841 (1990) (arguing conscience and peer group pressure can fit easily into a rational choice model of behavior and proposed to expand the deterrence model to include these additional non-state factors); POSNER, supra note 34, ch. 3 at 3 (The proper approach is not to give altruism any particular explanatory weight in a theory of cooperation, but to treat it as a taste like any other.).6 46. ETZIONI, supra note 27, at 36-37.7 47. One such author explains:

The idea that individuals pursue two or more utilities is hardly a new one. A major contribution to such an approach is found in the writings of the grandfather of neoclassical economics, Adam Smith. In The Theory of Moral Sentiments he observes that people act out of a conscience and are related to one another not merely

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According to those scholars, the study of individual behavior in general, and particularly in bankruptcy, should abandon the assumption that individuals are motivated by a single motive of pleasure. Rather, this model should acknowledge that two distinct sources of utility exist: pleasure and morality.48

While the issue is heavily contested, sufficiently plausible reasons exist for not simply incorporating the moral appeal into the neoclassical economic model. First, whereas the objective of the neoclassical economic theory is to maximize wealth or pleasure, the objective of discharging a moral obligation is not necessarily motivated by pleasure or wealth maximization, but rather by the goal of doing what is right.49

via a market- in exchange relations, trying to maximize their interest- but also as people whose psychic well-being is deeply dependent on the approval of others, which in turn is based on acting morally, not on enhancing wealth.

Id. at 36-37. See also Amartya K. Sen, Rational Fools: A Critique of the Behavioral Foundations of Economic Theory, 6 PHIL. & PUB. AFF., 317, 336 (1977) (The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool decked in the glory of his one all-purpose preference ordering. To make room for the different concepts related to his behavior we need a more elaborate structure.).8 48. Indeed:

[I]t is productive to view choices as multi-staged, multi-level events, in which moral and pleasure considerations are combined in complex manners. And the evidence strengthens the view that it is not productive to consider moral commitments as just one more source of consumer preferences, by suggesting that moral commitments are best viewed as a significant and irreducible category.

ETZIONI, supra note 27, at 67.9 49. As Etzioni explains:

If one ignores the distinction, by arguing that both kinds of acts are merely sources of satisfaction, merely another source of preference, and hence not different in principle, one overlooks important substantive differences between acts that discharge moral commitment and acts that enhance satisfaction . . . . [P]eoples behavior is systematically and significantly affected by moral factors that cannot be reduced to considerations of personal gain: Many people forgo free rides out of a sense of public duty and commitment to fairness; refuse welfare because it violates their dignity; choose to cooperate as their solution to the Prisoners Dilemma, and so on.

Id. at 22. See also id. at 67 (Examination of behavior shows that individuals who seek to live up to their moral commitments behave in a manner that is systematically and significantly different from those who act to enhance their pleasures.); TYLER, supra note 40, at 24 (The final influence on social behavior is the persons own set of normative values- the sense of what is right or appropriate . . . . People focus not on

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Second, the neoclassical economic model assumes that an individual will pursue her self-interest.50 However, at times, the morality of an individual dictates certain behavior that does not further ones self-interest, but instead furthers the interests of others. Thus, by incorporating the moral appeal factor into the neoclassical model, one dilutes the economic model of any substance.51 Third, the neoclassical economic model assumes an individual will easily be able to substitute or trade off goods and services. However, since quantitative differences sometimes exist between objects subject to moral commitment and objects sought by pleasure, they cannot be as easily substituted as the neoclassical model assumes.52 Lastly, whereas the neoclassical economic model assumes that individuals are attempting to maximize their pleasure or wealth, the evidence indicates that, when confronted with a moral duty, individuals tend to balance their moral commitments against their pleasures, rather than maximize either one.53

The remainder of this Article discusses two aspects of moral appeal and their impact on the individuals propensity to commence bankruptcy petition. The two aspects are trust relationships in the credit

personal gain or loss within a given situation but on the relationship between various kinds of potential behavior and their assessments of what behavior is appropriate.).0 50. See ADAM SMITH, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS 14 (Modern Lib. Edition 1937) (1776).1 51. As Etzioni explains:

To argue that people are pleasure-driven is a powerful hypothesis; it surely explains a good part of human behavior . . . . But once the satisfaction of ones own needs, and self-sacrifice, as well as service to others and to the community- once all these become satisfaction, the explanatory hypothesis of the concept is diluted to the point where it becomes quite meaningless. One empties the concept in trying to save it and the paradigm built around it . . . . Indeed, if people can derive pleasure directly from serving others and the community, there is no need for an invisible hand to guarantee that individualistic pursuits will lead to the satisfaction of the common good.

ETZIONI, supra note 27, at 28-29.2 52. See id. at 67, 71.3 53. According to Etzioni:

The concept of a single over-arching utility disregards a major human attribute observable in the behavior under study: people do not seek to maximize their pleasure, but to balance the service of two major purposes- to advance their well-being and to act morally. The quest for balance is evident in that, as individuals advance one major over-arching concern, they continuously strive not to neglect the other.

Id. at 83. See also Jon Elster, Introduction, in RATIONAL CHOICE, supra note 31, at 25 ([P]eople do not seek the best alternative in the feasible set, but limit themselves to what seems to be good enough or satisfactory.).

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market and religious beliefs.54

A. THE DEBTOR AND CREDITOR TRUST RELATIONSHIPS AND THEIR IMPACT ON THE DEBTORS MORALITY

1. The Definition and the Types of Trust Relationships.

The concept of trust may play a large role in individuals moral calculation when contemplating whether to file a bankruptcy petition.55

As will be demonstrated below, certain trust relationships between a debtor and a creditor are likely to cause a debtor to feel morally obligated to sustain that creditor-debtor relationship and avoid resorting to bankruptcy. Various disciplines have attempted to address the concept of trust, including sociology,56 economics,57 psychology,58 political science,59

history,60 anthropology,61 sociobiology,62 and marketing.63 However, while there may be significant interest in this area across the spectrum, no single unified approach for analyzing trust seems to exist.64

4 54. Other factors exist that influence ones moral appeal to file bankruptcy. For example, an individuals perception of right and wrong may be influenced by general social perceptions. That is, overtime changing social views about the deviant nature of bankruptcy may influence the individuals perception about the moral appropriateness of bankruptcy. See Frederick X. Gibbons, Stigma and Interpersonal Relationships, in THE DILEMMA OF DIFFERENCE: A MULTIDISCIPLINARY VIEW OF STIGMA 123, 124 (Stephen C. Ainlay et al., eds., 1986) ([T]he process of stigmatization is inextricably bound up with the concept of morality.); McIntyre, supra note 24, at 129 (Assuming that individuals generally continue to prefer to do the right thing, then we can also assume that they will continue to look to other members of their communities to help define what the right thing is.).5 55. See generally McIntyre, supra note 24, at 133.6 56. See, e.g., BERNARD BARBER, THE LOGIC AND LIMITS OF TRUST (1983); James M. Henslin, What Makes for Trust? in DOWN TO EARTH SOCIOLOGY (James M. Henslin, ed., 3d ed. 1981); J. David Lewis & Andrew Weigert, Trust in Social Reality, 63 SOC. FORCES 967 (1985).7 57. See, e.g., KENNETH J. ARROW, THE LIMITS OF ORGANIZATION 23 (1974); Partha Dasgupta, Trust as a Commodity, in TRUST: MAKING AND BREAKING COOPERATIVE RELATIONS 49 (Diego Gambetta, ed., 1988).8 58. See, e.g., Roy J. Lewicki & Barbara B. Bunker, Trust in Relationships: A Model of Development and Decline, in CONFLICT, COOPERATION, AND JUSTICE 133 (Barbara B. Bunker & Jeffrey Z. Rubin eds., 1995).9 59. See id. at 133, 134.0 60. Id. at 135.1 61. See id.2 62. See id.3 63. See, e.g., Patricia M. Doney & Joseph P. Cannon, An Examination of the Nature of Trust in Buyer-Seller Relationships, 61 J. MARKETING 35 (1997); Christine Moorman, et al., Factors Affecting Trust in Market Research Relationships , 57 J. MARKETING 81 (1993).4 64. See Lewicki & Bunker, supra note 58, at 135.

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In business settings,65 trust can be defined as a mechanism that mitigates opportunism in exchange contexts characterized by uncertainty and dependence.66 Business trust relationships can be either an interpersonal trust relationship or an institutional trust relationship.67 An interpersonal trust relationship exists between two or more individuals. An institutional trust relationship is generally formed between an individual and a large organization.68

2. The Evolution of a Trust Relationship and the Implication on Morality.

Trust evolves as the relationship develops. Two69 main stages of a trust relationship link and build on each other as the trust relationship evolves.70 The first stage of a trust relationship is the deterrence-based trust. In this stage the parties trust one another because of the credible threat of punishment that will be imposed on the party who breaches the trust. That is, one party trusts the other simply because it believes that the other party will not violate the terms of their agreement since the benefits of doing so are less than the costs of being punished for it.71

The deterrence-based trust arises when the parties are not familiar with each other and therefore rely on the threat of punishment mechanism to be able to trust the previously unknown party.72

Under this stage of a trust relationship, the parties rationally contemplate the risks associated with the trust relationship. Since the

5 65. As opposed to the romantic personal relationship context.6 66. Doney & Cannon, supra note 63, at 35.7 67. See id. at 36 (Although some researchers disagree about whether organizations can be targets of trust, a large stream of literature emphasizes that people can develop trust in . . . organizations . . . , as well as individuals.). 8 68. See Lewicki & Bunker, supra note 58, at 136 (One can have trust in particular people (personal trust) and trust in organized systems (institutional trust) . . . .).9 69. While several scholars discuss a third stage of a trust relationship, the identification-based trust, this Article does not address that stage since it does not apply to a creditor-debtor relationship. See generally Debra L. Shapiro et al., Business on a Handshake, 8 NEGOTIATION J. 221, 227-29 (1992).0 70. See Lewicki & Bunker, supra note 58, at 167; see also Shapiro et al., supra note 69, at 222-28.1 71. See Doney & Cannon, supra note 63, at 37 (To the extent that the benefits of cheating do not exceed the costs of being caught (factoring in the likelihood of being caught), one party infers that it would be contrary to the other partys best interest to cheat and therefore the party can be trusted.); Lewicki & Bunker, supra note 58, at 145 ([Deterrence]-based trust in any given transaction with another may be derived by determining: [b]enefits to be derived from staying in the relationship; [b]enefits to be derived from cheating on the relationship; [c]osts of staying in the relationship; [c]ost of breaking the relationship.). 2 72. See Lewicki & Bunker, supra note 58, at 163 (Relationships founded on [deterrence-based trust] are one way of dealing with the lack of trust when parties first get together. In these relationships, parties are careful about the degree of risk and build in safeguards to protect themselves.).

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parties are unfamiliar with each other and are not otherwise attached, no emotions are involved in that relationship. A decision by any party to breach the level of trust in that relationship will be made largely out of cold-blooded, rational assessment of the costs and benefits involved.73

Hence, morality and ones conscience plays a minor role in the deterrence-based trust relationship since emotions and personal attachment considerations are not triggered.

While a trust relationship generally begins at the deterrence-based state, at some point the trust relationship may develop to the second stage, the knowledge-based trust.74 That is, after the parties obtain a certain comfort level with each other in the deterrence-based trust relationship, the trust relationship may progress to the next level of a trust relationship.75 Rather than relying on punishment to assure conforming behavior, knowledge-based trust is founded on the information and relationship between the parties. Parties create a knowledge-based trust relationship when they have adequate information about each other and can accurately predict the other partys likely behavior.76 To accurately predict this behavior, the parties must develop some sort of a personal relationship. That personal relationship is created when the parties become closely familiar with each other through repeated positive interactions, regular communication, and courtship.77

3 73. See id. (While [the parties in a deterrence-based relationship] may be disappointed, they will not feel deeply aggrieved if trust is broken.); Lewis & Weigert, supra note 56, at 973 ([T]he cognitive-rational base of trust is more extensive and continuing in the formation of trust relationships in secondary groups. Consequently, with population growth and greater structural differentiation, a greater number of social relationships are based on cognitive trust than on emotional trust.).4 74. See Lewicki & Bunker, supra note 58, at 157.5 75. See id. 6 76. See id. at 142, 149.7 77. See Doney & Cannon, supra note 63, at 37 (Repeated interaction enables the party to interpret prior outcomes better, providing a basis for assessing predictability.); Lewicki & Bunker, supra note 58, at 157 ([Progressively] the parties will also begin developing a knowledge base about the others needs, preferences, and priorities. This information about the other creates the foundation for knowledge-based trust . . . .); id. at 149 (The better I know the other, the better I can trust what the other will do because I can accurately predict how they will respond in most situations.).

[A]ccurate prediction requires an understanding that develops over repeated interactions in multidimensional relationships . . . plus two additional factors: regular communication and courtship. . . . Without regular communication, we lose touch with each other- not only emotionally but in our ability to think like and react like the other. . . . Courtship is conducted by interviewing the other, watching the other perform in social situations, experiencing the other in a variety of emotional states, and learning how

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The personal relationship and the personal knowledge developed by the parties in the knowledge-based trust creates a certain emotional bond between the parties.78 This emotional bond discourages the parties from violating the trust.79 Thus, in the knowledge-based trust relationship, ones conscience, and hence internalized moral system, will discourage an individual from breaching the trust relationship.3. The Trust Relationship in the Debtor-Creditor Context.

Trust relationships in todays private credit market arise largely in two contexts. First, in the inter-personal credit trust relationship, the credit transaction occurs between an individual debtor and an individual creditor. In this group, one could find a credit transaction between a consumer debtor and an individual owner of a grocery store who sells goods to customers on credit. Another example would be a partnership of two dentists who allow installment repayment plans for the dental services they provide.

other people view the others behavior.Id. at 150; Shapiro et al., supra note 69, at 225 (Two approaches described above, repeated and multifaceted relationships, contribute to understanding and predictability. The more points of contact parties have, the better the chances are that they will come to understand and predict each others behavior.).8 78. See Lewis & Weigert, supra note 56, at 971 ([T]rust creates a social situation in which intense emotional investments may be made. . . . This emotional component . . . is normally most intense in close interpersonal trust.).9 79. See id. ([The inclination not to violate the trust between the parties] derives from the knowledge that the violation of trust threatens to bring severe emotional pain to all who are implicated in the trust relationship, including paradoxically the violators themselves.); id. at 974 (Personal trust involves an emotional bond between individuals, and the emotional pain that each would experience in the event of betrayal serves as the protective base of trust even where other types of short-term gains could be realized by breaking the trust.).

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Second, in the institutional credit trust relationship, the credit transaction exists between an individual and a large institution or organization. In this group, one would find the credit transactions entered between an individual and a credit card or a financing company.

In the beginning of either relationship, the parties to the credit transaction generally neither know each other, nor do they have an existing personal relationship. Thus, in both cases, the credit trust relationship will generally start as a deterrence-based trust relationship. To that end, the debtor and creditor will largely trust each other because some punitive mechanism incorporated into their credit relationship provides the parties adequate comfort that the other party will not breach that trust relationship.80

Following the initial stage in the deterrence-based credit trust relationship, some debtor-creditor relationships will sufficiently develop and, hence, evolve into the second stage of a credit trust-relationship, the knowledge-based trust relationship. The debtor-creditor relationships that are most likely to evolve into that second stage are the ones that created some type of personal relationship. That personal relationship is created when the parties achieve a greater degree of knowledge about each other and become closely familiar with each other through repeated positive interactions, regular communication, and courtship.

Inter-personal credit trust relationships are the most likely candidates to evolve into the second level of trust relationship since the parties generally become familiar with each other through repeated credit transactions as well as regular communication and interactions. In contrast, institutional credit trust relationships are the least likely candidates to evolve into the second level of trust relationship since institutional credit trust relationships rarely involve continuous personal contact between the parties;81 therefore the parties have fewer opportunities to become personally familiar with each other.82

0 80. For example, in the credit card setting, the credit card company will require the consumer debtor to sign an agreement form which will detail, among other things, the rights that the credit company will have against the individual in the event of default, such as to initiate court proceedings or to notify the appropriate credit bureau of the event of default. From the debtors perspective, the agreement will detail the rights the debtor has against the credit card company in the event the credit card company fails to live up to its obligation to extend certain amount of credit to the debtor. This agreement, which has the threat of punitive actions in the event of default, will enable the two strangers to comfortably enter into the deterrence-based credit trust relationship.1 81. See Lewicki & Bunker, supra note 58, at 137 (Institutional trust develops when individuals must generalize their personal trust to large organizations made up of individuals with whom they have low familiarity, low interdependence, and low continuing of interaction.).2 82. In other settings, others have also found that there is a difference between the trust level among individuals as compared to individuals and organizations. See

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For example, a consumer debtor is less likely to develop a trust relationship beyond the deterrence-based level with a large credit card company. The consumer debtor is not likely to have any face to face contact with the institutional creditor. The parties infrequently communicate, and when they do, they mainly use impersonal channels such as a telephone. Furthermore, a courtship will not likely develop between the parties. That is, the parties are not likely to watch each other act in social situations or observe each other in variety of emotional states. Therefore, the lack of personal bonding preclude most of these types of relationships from developing into a knowledge-based credit trust relationship.83 However, a consumer debtor is more likely to develop a trust relationship beyond the deterrence-based level with the neighborhood grocery shop owner. The individual consumer and the grocery shop owner are likely to develop some kind of a personal relationship. The personal relationship is likely to develop out of the repeated interactions between the parties over a continuous period of time, the regular personal face-to-face communication between the two individuals, and the courtship that may develop between the two parties. This courtship includes the opportunity to observe each other in various emotional conditions and to watch each other act in various inter-personal and social settings. Therefore, the creation of some personal

Doney & Cannon, supra note 63, at 35 (Anderson and Narus . . . suggest that trust of an individual differs in nature from that of an organization.). Another reason why there is less developed trust in institutional trust relationship is because there is no reciprocal trust between a large institutional creditor and an individual debtor. That is, an individual debtor is unlikely to develop her trust in a large institutional creditor where the large institutional creditor does not place its trust on the individual debtor. See McIntyre, supra note 24, at 137 (Once, perhaps, creditors saw lending money as an act of trust, but, today, lenders decisions to enter into creditor-debtor relationships are more typically based on reliance.); Dasgupta, supra note 57, at 49, 53 ([I]t is often the case that the mere fact that someone has placed his trust in us makes us feel obligated, and this makes it harder to betray that trust.); Lewis & Weigert, supra note 56, at 971 (When we see others acting in ways that imply that they trust us, we become more disposed to reciprocate by trusting in them more.).3 83. Some contend that the reason many relationships remain in the deterrence-based trust relationship is because many people view the transactions they enter into merely as part of a short term relationship. Since they do not view the relationships as long term in nature, they have less incentive to invest their energy in developing personal relationships which are critical for the evolution of their trust relationship to the next level. See Shapiro et al., supra note 69, at 226 (Americans negotiators are frequently frustrated by the desire of Asian firms to conduct long, discovery-based conversations before beginning to discuss the business issues. This frustration results from a clash between the American, who is thinking of deals as independent transactions, and the Asian partner, who is thinking of each deal as a building block for a long-standing relationship.). A similar argument can be made in the credit setting. As individuals find out that they have many indistinguishable options in deciding which credit card company to use, they feel that they can simply quickly switch to another credit card company if they so desire. Thus, there is less incentive for the consumer debtors to work hard to establish a long-term relationship.

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bonding between these parties would allow their trust relationship to evolve into the knowledge-based credit trust relationship.

Since an inter-personal credit trust relationship is more likely to evolve into a knowledge-based trust relationship, it is more likely to involve emotional attachment. Since any trust relationship, including a credit one, that has an emotional component is likely to trigger ones conscience and moral values,84 a consumer debtor, who is in an inter-personal trust relationship that evolved into the knowledge-based level, is likely to be deterred from violating that credit trust relationship out of moral grounds. Therefore, such an individual is more likely to avoid defaulting on the terms of the credit and, thereby, avoid filing for bankruptcy protection.

In contrast, since an institutional credit trust relationship is more likely to remain in the deterrence-based trust relationship, that credit relationship is unlikely to involve emotional component but, rather, will be primarily based on rational calculation of the costs and benefits of the credit relationship. Since that deterrence-based credit trust relationship does not have a significant emotional component, the individuals conscience and moral values are not likely to be involved in deciding whether to violate the credit trust relationship and to file for bankruptcy.85

This analysis has important implications to the contemporary American consumer bankruptcy system. The recent trend of rapid increase in personal bankruptcy filings in the United States86 can partly be explained by the increase of institutionally oriented deterrence-based trust relationships and the corresponding decline of inter-personal knowledge-based trust relationships.

As consumers in America increasingly utilize credit cards to finance their everyday life,87 more credit card holders become deeply

4 84. See supra notes 78-79.5 85. A similar observation was made by a practicing attorney during an interview. One attorney said: Some debtors say they feel bad about discharging debt, and I wonder if they do. Some are overly emotional, and Im thinking, Whats the big deal? Especially with credit cards- its not like a friend or relative. Braucher, supra note 37, at 564. Other researchers have also come to the conclusion that institutional credit trust relationships lack strong moral underpinnings. See GEORGE RITZER, EXPRESSING AMERICA: A CRITIQUE OF THE GLOBAL CREDIT CARD SOCIETY 177 (1995) (We live in a society that is undergoing increasing rationalization . . . Being in itself rationalized, the credit card is playing a crucial role in fostering the expansion of rationalization and, with it, the dehumanization of our lives.).6 86. See Consumer Debt: Hearings on H.R. 74 Before the Comm. on Banking and Financial Services, 104th Cong. 378-79 (1997) [hereinafter Consumer Debt Hearings] (testimony of the American Bankruptcy Institute).7 87. See id. at 380-81 (Revolving credit, primarily credit card debt, has been the fastest growing component of consumer debt, averaging annual increases of 20 percent over the past two years. . . .). For a detailed description of the growth of credit card debts in the global society see RITZER, supra note 85.

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indebted, and resort to bankruptcy protection.88 Since institutional credit trust relationships (such as credit card) does not trigger emotional feelings (as it remains in the deterrence-based trust relationship), an individuals conscience and moral values are not likely to have a significant role in a growing contemporary cases where credit card indebtedness consumer contemplates to file for bankruptcy.89 Thus, as more financially troubled individuals have growing amounts of credit card debts, the less there will be a trust-based moral deterrence to resort to bankruptcy.

8 88. Some scholars found that many bankruptcy filings are closely correlated with high credit card debts. See Personal Bankruptcy Hearings, supra note 5, at 21 (testimony of Ian Domowitz) (I must now point out that credit card use is very highly correlated with, if not a causal determinant of, consumer bankruptcy.). Furthermore, empirical evidence suggests that a rapidly growing portion of unsecured debts of individuals who file for bankruptcy in the U.S. is credit card debts. See AS WE FORGIVE OUR DEBTORS, supra note 8, at 183. This empirical study from the early 1980s indicates that almost all wage earners who filed for bankruptcy protection had some unpaid credit card debt at the time of their bankruptcy petition. Moreover, almost twenty-five percent of the average bankrupts unsecured debts was credit card debt. Id. at 69, 183. While the average credit card debt for the average bankrupt in the early 1980s was approximately $3,700, some contemporary reports indicate that the average bankrupt in 1994 and 1995 had a credit card debt of approximately $40,000. See Consumer Debt Hearings, supra note 86, at 345 (testimony of George M. Salem). However, studies conducted by the credit card industry indicates lower percentages. See VISA, BANKRUPTCY PETITION STUDY: VISA CONSUMER BANKRUPTCY REPORTS 37 (June 1997) (Bankcard debt made up 15.2 percent of the total debt for California Chapter 7 filers and was claimed by 81.7 percent of all Chapter 7 filers in that state.); see also Personal Bankruptcy Hearings, supra note 5, at 78 (testimony of Kenneth R. Crone, a Senior Vice President of Visa) (The petitions study showed that, on average, the bankcard debts of those who declare bankruptcy represent only 14.8% of total debts.); High Rochester Bankruptcies Blamed on Credit Card Misuse, Times Union, Jan. 8, 1998 at B2 (credit card companies state that credit card debt represents approximately sixteen percent of total bankruptcy debt).9 89. Accordingly:

[M]ost credit has become impersonal, a matter of computer printouts and objective indicators such as income and payment record. Few creditors today base credit decisions on the personal characteristics that were so important to the neighborhood banker in a simple time. Conversely, it was a lot harder to let down ones banker-neighbor, Mr. Reed, than it is to stiff a huge impersonal Sears or Citibank.

AS WE FORGIVE OUR DEBTORS, supra note 8, at 13; id. at 337 (In todays market, most creditors are likely to be large, impersonal corporations . . . . Debtors may feel less compunction about stiffing ITT Financial than they would Mr. Herring, especially if ITT virtually thrust the credit on them . . . , while Mr. Herring sold on credit to help out when times were tough.).

It may also be that, notwithstanding advertising efforts at personalizing large financial institutions, individual debtors of such businesses feel no internalized obligation in the sense that they might if the creditor

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B. RELIGION AND MORAL APPEAL IN THE BANKRUPTCY CONTEXT.

Religion has a profound impact on ones internalized moral code and behavior.90 An individuals internalized morality is said to be influenced by the prevailing religious thinking in a particular locality.91

Some argue that religion helps to shape the moral belief system of both religious and secular individuals.92

Historically, religions have had a profound impact both on society and on individuals moral code.93 Jewish tradition and law continues to serve as model of moral behavior of Jews around the world. That impact is illustrated in the way Judaism influences individual behavior in Israel,

was a natural person; one who- because of sentiment being- would be disappointed or have his feelings hurt at non-payment. As creditor-debtor relationships have become less personal (more form letters, automated and even computerized bookkeeping, and so forth), the elements of social and personal wrong in not paying ones debts have diminished and may . . . finally be submerged in the balance sheets, computer print-outs, and statistical analysis. . . . Feelings of having done right by or wronged another seem to arise out of the personal relationships of natural individuals. It is unlikely that the law can bring about alterations in human psychology to the extent of making a large business corporation into a person . . . .

Shuchman, supra note 44, 429-31. Others have impliedly linked the rise of bankruptcy filings in the U.S. to the decrease in a knowledge-based trust relationships. See Woodward & Woodward, supra note 10, at 54 (asserting that the latest steady rise in bankruptcy filings is partly due to the progressive depersonalization of the debtor-creditor relationship. . . ).0 90. See William R. Garrett, The Micro/Macro Linkage in the Scientific Study of Religion: The Problem of Assessing the Influence of Religion on Individuals and Society, in SOCIAL CONSEQUENCES OF RELIGIOUS BELIEF 1 (William R. Garrett, ed., 1989) (The assertion that religion represents a vital social force capable of generating profound consequences over the diverse spheres of individual conduct and collective affairs will meet with little resistance nowadays . . . .); WILSON, supra note 41, at 1 (Religion has a profound influence on personal . . . values . . . .).1 91. See John Adams, Economy as Instituted Process: Change, Transformation and Progress, 28 J. ECON. ISSUES, 331, 332-33 (1994) (the author views society as a function of institutions, churches, governments, families, banks and codes of law, the matrix of culture and the institutional structures that provide a context for personal behavior.).2 92. See WILSON, supra note 41, at 1 (It is the authors belief that [theological] . . . contributions should not be neglected, even in the context of increasingly secularized societies. . . . Religion has a profound influence on personal and social values, which affects even those without [religious] beliefs.).3 93. See Roger L. Shinn, From Theology to Social Decisions- and Return, in MORALITY OF THE MARKET: RELIGIOUS AND ECONOMIC PERSPECTIVES 175, 178 (Walter Block, et al., eds., 1985) (In short, the great world religions have always responded to social-historical situations and have exercised influence on society. . . . But in either case the concerns of faith touch all of social and personal life.).

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where the majority of people are Jews.94 While the majority of the people in Israel consider themselves as secular Jews,95 the impact of the Jewish tradition and law on the Jews in Israel remains significant.96

Jewish tradition does not favorably view one taking upon herself onerous debt to finance an extravagant lifestyle. To that end, the Jewish tradition advocates in favor of reduced level individual consumption.97

In the event that an individual has become indebted to finance her consumption, she has a very strong moral obligation to repay that debt in full.98 While the Jewish bible provides for the forgiveness of debts

4 94. Jews constitute approximately eighty-two percent of the population in Israel. See Kevin Avruch, The Society and its Environment, in ISRAEL A COUNTRY OF STUDY 88 (Helen C. Metz, ed. 1990).5 95. See id. at 97, 99 (In 1988 two-thirds to three-quarters of Jewish Israelis were not religious or Orthodox in observance or practice. . . . All varieties of Judaism- ultra-Orthodox, neo-Orthodox, the Reform and Conservatives forms- together counted as their formal adherents only a minority of Jewish Israelis.).6 96. Despite the number of secular Jews:

[R]eligion was a potent force, and increasingly so, in Israeli society. . . . [R]eligion has exerted influence through the symbols and practices of traditional Judaism that literally pervade everyday life. . . . [Additionally,] Israels political elite has selectively co-opted symbols and practices of traditional Judaism in an attempt to promote nationalism and social integration. In this way traditional Judaism, or some aspects of it, becomes part of the political culture of the Jewish state, and aspects of traditional Judaism are then enlisted in what some analysts have called the civil religion of Jewish society. Thus, Judaism speaks to Israelis who may themselves be nonreligious, indeed even secularist.

Id. at 99. But see SHELEFF LEON, MARUT HAMISHPAT VEMAHUT HAMISHTAR [THE RULE OF LAW AND THE NATURE OF POLITICS] 20 (1996) (But, it seems to me that in the last few years a problem, the scope and the meaning of which is still unclear, has evolved which is the increasing disattachment of the Jewish tradition among various broad segments of society arising out of a resistance to deepening religious coercion(translation by author)).7 97. See MEIR TAMARI, THE CHALLENGE OF WEALTH: A JEWISH PERSPECTIVE ON EARNING AND SPENDING MONEY 132 (1995) (Thou shall walk modestly before thy God is a spiritual demand by the prophet Amos. This is reflected in the simplicity in furniture, clothing, and lifestyle of Jews throughout the centuries, a simplicity that has always been an integral part of Jewish living.); The prophet Amos made other stern warnings against luxurious standard of living among the Jewish people. Amos 3:5 (King James). He criticized people who have built houses of hewn stone. Amos 5:11 (King James). Amos denounced those who lie upon beds of ivory, and stretch themselves upon their couches, and eat lambs from the flocks, and the calves out of the midst of the stall; who sing idle songs to the sound of the harp . . . who drink wine in bowls, and anoint themselves with the chief oils. Amos 6:4-6 (King James).8 98. According to Tamari:

The same moral code that obligates a Jew to lend money to another obligates the latter to repay his debts. . . . While the

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owed by poor people every seven years,99 the moral obligation to repay the debt despite the forgiveness resurfaces when the debtor subsequently obtains the financial means to repay the discharged debt.100

Similar to Judaism, Christianity widely views default on debt-repayment as morally wrong.101 Some in the religious community hold that, absent exceptional circumstances, debt-repayment should not be excused and must be honored regardless of how long it takes to completely pay it off.102 Indeed, the religious importance of meeting ones personal obligation to repay her debts is illustrated in the Bible

debtor may claim protection against paying interest forbidden by the Torah, he cannot escape paying the debt. . . . [T]here is a distinct moral demand that the debtor repay his debts out of his private assets in order to be clean before God and men, a moral demand, yet one that cannot always be enforced by the rabbinic courts. . . . After all, the debtor does not possess any moral right that would absolve him from repayment of his debts . . . . In contrast, Halakhah defines as a form of robbery, the arrangements for part payment in settlement of debt. This is an additional expression of the moral obligation of people to meet their responsibilities in the marketplace.

TAMARI, supra note 97, at 206, 209.9 99. At the end of every seven years thou shall make a release . . . every creditor . . . shall release that which he hath lent unto his neighbor; he shall not exact it of his neighbor and his brother . . . Deut. 15:1-2 (King James). However, this financial relief mechanism was limited to the benefit of the most needy debtors. See GEORGE HOROWITZ, THE SPIRIT OF JEWISH LAW 495 (1953) (As the Scriptural passages plainly show, the basic intent was to relieve needy persons, poor debtors struggling under a burden of debt.). Moreover, not all debts were to be forgiven. See id. (Obligations in the nature of fines or penalties, loans not due until after the Seventh Year; claims already reduced to judgment but not collected before the Seventh Year, and any loan secured by a pledge; were not released.).0100. See HOROWITZ, supra note 99, at 496 (The Mishnah states plainly that avoidance of an obligation by virtue of the statute was not favored; for whoever repays a debt in the Seventh Year, the spirit of the Sages is pleased with him.); Jonathan M. Lewis, Neither a Borrower Nor a Lender Be, JUSTICE, 41, 45 (Dec. 1995) (But debtors remained under a moral obligation to repay their debts one day if they could, in order to be clean before God and men. In the end, The wicked man borrows and does not repay.).1101. See John R. Sutherland, The Ethics of Bankruptcy: A Biblical Perspective , 7 J. BUS. ETHICS 917, 921 (1988) (Is it Biblical to claim bankruptcy? Christians differ strongly in their attitudes toward this question, but certainly there is widely-held conviction that declaring bankruptcy is wrong.).2102. See Sutherland, supra note 101, at 917; see also ALBERT J. JOHNSON, A CHRISTIANS GUIDE TO FAMILY FINANCES 82, 85 (1983) (citing the Bibles admonition that the wicked borrow and do not repay. . . the author suggests that avoidance of debt obligation through bankruptcy should not be pursued by Christians as a way of handling financial trouble); id. at 83-84 (Regardless of the leniency of the current bankruptcy law, the Christian finds no comfort in the Bible for taking such a step. Bankruptcy may be legal, but its morality is another question. . . . But for many, bankruptcy comes up simply as a consequence of poor planning and bad

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where a defaulting debtor may have had to become a slave as a way of repaying her debts.103 Other scholars in the Christian religion believe that, while bankruptcy is not desirable, it should be tolerated in some cases and not regarded as immoral.104 This position primarily relies on the forgiving orientation of Christianity. While in Biblical times society expected borrowers to repay their debts, the possibility existed of periodically forgiving the debtor for her debts to achieve the important goals of economic equality and family unity.105

Contemporarily, financially troubled Christians are strongly urged to consider alternatives to bankruptcy, such as entering into a debt repayment workout agreement with their creditors.106 Hence, heroic attempts by financially troubled individuals to repay their debts are favorably viewed by some as a true Christian act.107

Whereas in Judaism and Christianity failure to fulfill ones obligation is deemed as an immoral act, in Islam the fulfillment of ones contractual obligation is viewed as one of the most important human achievements and divine virtues.108 Islam regards fulfillment of

judgment. Under such circumstances, I believe the obligation still remains to pay what is owed.).

Now isnt that amazing to you, that somebody would actually default on a debt that they created legally, morally, ethically, and then would default on it? See, it ought to never happen with Christianity, or it ought to happen so rarely that we would take that person, and we would admonish them according to Matthew 18, and bring them before the church to restore them back into the faith.

Sutherland, supra note 101, at 917 (quoting LARRY BURKETT, GODS PRINCIPLE FOR OPERATING BUSINESS (Christian Financial Concepts 1982).3103. Sutherland, supra note 101, at 923.4104. Id. at 926.5105. Sutherland explains:

This study has tried to show that while borrowers were expected to repay their debts in Biblical times, there was every possibility of those debts being canceled after a period of time in order to achieve higher goals of economic justice and stability, the preservation of the family, and the maintenance of an adequate living standard for all. . . . Thus, my conclusion would be that any repentant sinner should be a candidate for forgiveness, including repentant bankrupts.

Id. at 924-25; WILSON, supra note 41, at 84 (If a borrower fails to repay due to difficult financial circumstances, then the lender should be charitable.).6106. See Sutherland, supra note 101, at 925.7107. Id. ([F]orgoing a discharge from debt by the courts in favor of attempting to meet creditors claims is a tremendous act of Christian witness.).8108. See Saba Habachy, Property, Right, and Contract in Muslim Law, 62 COLUM. L. REV. 450, 465 (1962) (Fulfillment of contracts is exalted in the Quran to rank with the highest achievements and the noblest virtues.).

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ones contractual obligation as sacred because it amounts to a fulfillment of biblical commandments and Gods wishes.109 In Islam, the covenant between God and the individual mandates the person to abide by ones personal contractual obligation. Indeed, in Islam, several Koranic verses demonstrate the divine nature of contractual agreements.110 In Islam, the pervasive sacred nature of fulfilling ones obligations is likely to influence the minds of financially troubled Muslims and deter them from filing bankruptcy to avoid debt repayment..

Similarly, Hinduism also places a high value on debt-repayment. In Hinduism, freedom from personal debt is highly valued.111 Accordingly, the Hindu religion commands those who undertake personal debts to repay their debts.112 Hindus consider the failure to repay ones debts to be a sin.113 While a Hindu debtor who repays her debts is promised she will go to heaven,114 a Hindu debtor who fails to do so faces severe religious consequences. The debtor is cursed with an incurable disease, ending up with a horrible afterlife in hell.115

The religious contours of Christianity, Islam, Judaism and Hinduism clearly foster in their believers, a moral code that emphasizes the importance of debt-repayment, and hence the avoidance of bankruptcy at all costs. While this hypothesis seems plausible, empirical studies on the relationship between religious beliefs and the propensity to resort to bankruptcy should be explored.

V .CONCLUSION

9109. See id. at 468 ([I]n Islam the exhortation to fulfill contracts does not come from a human lawgiver. It is an order emanating from God Himself.); Kristin L. Peters Hamlin, Note, The Impact of Islamic Revivalism on Contract and Usury Law in Iran, Saudi Arabia, and Egypt, 22 TEX. INTL L.J. 351, 364 (1987) (In Islam, all agreements must be observed, since God is a witness to any contract entered into by individuals . . . .).0110. See Habachy, supra note 108, at 466 & 468; Hamlin, supra note 109, at 364-65; Hans Wehberg, Pacta Sunt Servanda, 53 AM. J. INTL L. 775, 775 (1959) (Muslims must abide by their stipulations. This is clearly expressed by the Koran in many places, for example, where it is said: Be you true to the obligations which you have undertaken . . . . Your obligations which you have taken in the sight of Allah . . . For Allah is your witness.). But see WILSON, supra note 41, at 125 ([D]ebt rescheduling [in Islam] is desirable, and debt forgiveness especially worthy.).1111. See HERAMBA CHATTERJEE, THE LAW OF DEBT IN ANCIENT INDIA 83-84 (1970).2112. See id. at 83 ([The obligation to repay ones debts] arises in the case of a Hindu debtor out of religious considerations.).3113. See id. ([N]on-payment of debt is treated as a sin . . . .); id at 85 ([N]on-payment of debt has been declared as a religious [offense] of a serious nature.).4114. See id. at 85.5115. See id. at 86. In the after life, a defaulting debtor is expected to become a slave or the creditor is expected to inflict constant trouble on the debtor. Id. at 85-86.

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Understanding human behavior in general, and in the bankruptcy context in particular, is a complex undertaking. However, to appreciate that complexity, one must examine and consider various perspectives from diverse fields. A mono-utility approach of enhancing pleasure or wealth has some fundamental problems as it fails to properly account for the other qualitatively different influences and goals of the individual. This Article focused on the moral dimension of the human conduct as it relates to bankruptcy filing. It attempted to demonstrate that the debtors moral underpinnings in the contexts of trust and religion may have a discernible impact on an individuals propensity to commence bankruptcy protection.

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