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The Economic Logic of a Fresh Start

Satyajit Chatterjee

Vice President and Economist

Q1 2008

Business Review — A debtor’s right to have his or her debts dismissed or discharged via a bankruptcy proceeding is referred to as the law’s “fresh start” provision. Fresh start has been — and continues to be — a controversial feature of the U.S. bankruptcy law.

Lately, the law has come under scrutiny because of the dramatic rise in personal bankruptcy filings over the past 25 years. In this article, Satyajit Chatterjee explains the economic logic underlying the fresh start concept. He also argues that this logic can explain why opposition to a discharge policy has waxed and waned over time.

This article appeared in the First Quarter 2008 edition of Business Review.

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