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Bankruptcy stigma and the second chance policy: the impact of bankruptcy stigma on business restructurings in China, Europe and the United States

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Abstract

This paper deals with a topic of common concern to China, Europe and the United States: the negative effects of bankruptcy stigma on the second chance (fresh start) policy encouraging restructuring of businesses as an alternative to their liquidation. In most Continental European civil law systems, for example, business restructurings are still only aspirations rather than reality. This is to a great extent due to the ubiquity of intense bankruptcy stigma as a consequence of what, for example, creditors as well as the directors and officers of the bankrupt debtor avoid participating in restructuring proceedings. The resulting dominance of liquidations is perceived as a competitive disadvantage both for China and Europe compared to the United States that possesses the top model enshrined in Chapter 11 of the US Bankruptcy Code. It was for these practical reasons that the second chance policy was given clear priority by the European Union as best expressed in the Commission Recommendation of 12 March 2014 on a New Approach to Business Failure and Insolvency. Similar policy shift characterizes the 2007 Enterprise Insolvency Law of the People’s Republic of China as visible from Chapter 8 on reorganisation and Chapter 9 on compositions (workouts). While bankruptcy stigma is present also in the United States, its effects are the least “biting” in this country and are an issue primarily in the context of consumer-bankruptcies. In light of the above, this article’s main claim is that without proper understanding and acknowledging the impact of bankruptcy stigma, hardly could lawmakers’ efforts aimed at forging a legal environment that would incentivize restructurings of financially distressed businesses yield success. Although some research on the topic is available, it tends to be focused on consumer bankruptcies only. A comprehensive, empirically based, inter-disciplinary scrutiny of the impact of stigma on business reorganisations is still lacking just like a “handbook” for combating the bankruptcy stigma. This article attempts to open the doors to this new inter-disciplinary area of law with the tools of comparative law. Besides canvassing the pertaining scholarship’s hereinbefore achievements, the paper extends also to such so far neglected niches of the globe as China and the post-socialist countries of Central and Eastern Europe.

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Notes

  1. See Reinhard Bork, RESCUING COMPANIES IN ENGLAND AND GERMANY (Oxford University Press, 2012), section 2.12. [Hereinafter: Bork—Rescuing Companies].

  2. See Gerard McCormack, Apples and Oranges? Corporate Rescue and Functional Convergence in the US and UK, 18 Int. Insolv. Rev. 109–134 (2009), at 114. [Hereinafter: McCormack Apples and Oranges].

  3. The level of bankruptcy stigma in a jurisdiction might be referred to also by a ‘bankruptcy stigma index,’ a non-numericized indicator, the exact features of which, however, are yet to be developed.

  4. See, e.g., the interview with the ‘architect of the first modern bankruptcy of China’—Cao Siyuan—in Victoria Ruan, Stigma Holds back Bankruptcy Law, in: South China Morning Post, 12 Aug 2013 issue, available electronically at http://www.scmp.com/business/china-business/article/1295985/why-stigma-holds-back-chinas-bankruptcy-law. (Last visited on 27 June 2017).

  5. As a significant portion of the Chinese economy is still in ‘socialist’ ownership’ and notwithstanding the rapid spreading of market economy elements, old reflexes and the old way of thinking is still forcefully present. And these inevitably leave imprint even on the manifestation of bankruptcy stigma. One could say, that it is an idiosyncratic mixture of capitalist and socialist (communist) ways of perceiving the phenomenon. As Cao Siyuan, the influential expert having influenced the outlook of today’s bankruptcy law of China put it: "One is the belief that bankruptcy belongs to the world of capitalism and is against the interests of the socialist system. The other is a misunderstanding that declaring bankruptcy means putting an end to a business, and that is bad for the economy ." [Emphasis added.] Id.

  6. See, e.g., Bork—Rescuing Companies, section 1.07.

  7. See Art. 3(1) of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast). For a related commentary see Wolf-Georg Ringe, in: Reinhard Bork and Kristin van Zwieten (eds.), COMMENTARY ON THE EUROPEAN INSOLVENCY REGULATION (Oxford Univ. Press, 2016), page 118.

  8. See, e.g., Nathalie Martin claiming that “while in most parts of the world business failure causes less stigma than personal financial failure, both forms are viewed far more negatively in England, Australia and Canada than in the United States.” See Nathalie Martin, Common-Law Bankruptcy Systems: Similarities and Differences, 11 Am. Bankr. Inst. L. Rev. 367, 368 (2003).

  9. Australia seems to come close to the United States as suggested by a 2015 study according to which “[i]n Australia, bankruptcy debates have often reiterated concerns about bankruptcy being ‘too easy’ and no longer having shame or a stigma associated with it.” See Nicola Howell and Rosalind Mason, Reinforcing Stigma or Delivering a Fresh Start: Bankruptcy and Future Engagement in the Workforce, 38(4) UNSW L.J. 1529–1574 (2015), at 1530.

  10. The seminal working paper on the topic of bankruptcy stigma in Hungarian language written by the author of this paper is available for downloading from the website of the Institute for Legal Studies of the Hungarian Academy of Sciences at http://jog.tk.mta.hu/uploads/files/mtalwp/2015_06_Tajti.pdf. Accessed 27 June 2017.

  11. For example, Hungary has introduced its very first consumer (individual) bankruptcy system in its history in 2015 only (the new law stepped into force on the 1st of September 2015). See Act No. CV of 2015 on Debt Consolidation of Natural Persons (“2015 . évi CV. törvény a természetes személyek adósságrendezéséről”).

  12. See the act entitled as ‘Several Provisions of the Supreme People's Court on Restricting High Consumption and Relevant Consumption of Persons Subject to Enforcement’ (2015 Amendment), which is actually Interpretation No. 17 [2015] of the Supreme People's Court. The ban may extend not only to luxurious services and products (e.g., golf club membership or educating one’s children in expensive private schools) but also to daily necessities, like prohibition to purchase a motor vehicle for private use. See Article 3 of the Act.

  13. See Yuan Yang, Beijing Penalises 6.7 m Debtors with Travel Ban, Financial Times, 16 Feb 2017 issue, page 3. Besides not paying debt on time, the ban may be imposed also for various crimes like hiding ones’ assets or lying in court. Technology pays a key role because the system works so that personal identity card numbers are blocked centrally what then makes purchase of train tickets or checking in flights impossible. This is deemed to be the substitute for the non-existent consumer (individual) bankruptcy system.

  14. See Thomas Catan, Spain’s debtors feel the shame, in: Wall Street Journal, 13 Oct 2008 issue, page 5.

  15. See Gerard McCormack, Andrew Keay and Sarah Brown, EUROPEAN INSOLVENCY LAW (Elgar, 2017), note 7 on page 226 for a list of references. [Hereinafter: McCormack et al., EUROPEAN INSOLVENCY LAW (2017)].

  16. Commission Communication of 5 October 2007 “Overcoming the stigma of business failure—for a second chance policy—Implementing the Lisbon Partnership for Growth and Jobs,” (COM/2007/0584 final). [Hereinafter: 2007 Communication].

  17. Commission Recommendation of 12 March 2014 on a new approach to business failure and insolvency (2014/135/EU). [Hereinafter: 2014 Recommendation].

  18. See Gerard McCormack, Apples and Oranges? Corporate Rescue and Functional Convergence in the US and UK, 18 Int. Insolv. Rev. 109–134 (2009), at 114.

  19. According to 2003 data, while in the US 70% of business bankruptcies ended with liquidation, the same number was in France 90% and in Germany 99%. In other words, compared to about 30% of successful US reorganisations, the same number in Germany was barely 1%. John Carreyrou and Matthew Karnitschnig, Paris Looks to U.S.—on Bankruptcy, Proposed Law Would Boost Firms’ Chances of Survival: A Reward for Risk-Takers?, in: Wall Street Journal Europe, 25 Sept 2001 issue, pages 1 and A8).

    German insolvency-related statistics are published by Federal Statistics Office at https://www-genesis.destatis.de/genesis/online. This, just like most European data bases, are much less detailed as the US ones available at http://www.uscourts.gov/statistics-reports/caseload-statistics-data-tables.

    The Hungarian statistical data (proportionate to the comparative size of the economy) are similar to those of Germany. In 2015, for example, there were 9388 liquidations and 5463 dissolutions (of inactive, zombie businesses) initiated as opposed to mere 67 reorganisations (no data whether these were successful). See the bulletin of the Hungarian Statistical Bureau at https://www.ksh.hu/docs/hun/xftp/gyor/gaz/gaz1512.pdf.

    In China, the Supreme Court releases (in English language as well) data on bankruptcy proceedings. According to these, in 2016 altogether 5665 bankruptcy cases were filed and out of these 1041 were supposed to be reorganisations. However, due to “long delays in filing bankruptcy cases […] all bankruptcy cases have been liquidations.” See Supreme People’s Court Releases 2016 Bankruptcy Data (26 Feb 2017) at https://supremepeoplescourtmonitor.com/2017/02/26/supreme-peoples-court-releases-2016-bankruptcy-data/. (Each website last visited on 21 March 2017).

  20. According to a recent US study “[R]ougly two-thirds of all large bankruptcy outcomes involve a sale of the firm, rather than a traditional negotiated reorganisation in which debt is converted to equity through the reorganisation plan.” See K. Ayotte and David Skeel, Bankruptcy or Bailouts, 35 J. Corp. L. 469–498 (2010), at 477.

  21. Germany is an excellent example of the point made: it passed a special statute (Act for the further Simplification of Company Restructuring—hereinafter: ESUG) focused exclusively at introducing a local variant of reorganisation in 2011 inspired by US Chapter 11 and the recent reforms in the UK introducing more restructuring avenues for companies (i.e., scheme of arrangements, company voluntary arrangements and administrations) notwithstanding of what the system does not function even in 2017. This was foretold by Bork in his seminal work published in 2012 when in the chapter devoted to the advantages and disadvantages of German restructuring law it concluded that “[its] principal defect [is not only that they may be resorted to too late, only after the] likely inability to pay debts [but also that they would] inevitably [be] burdened with the stigma of insolvency.” [Emphasis added]. See Bork—Restructuring Law, section 22.02.

    As far as the success of ESUG is concerned, one renowned author has concluded in 2014: ‘the 2012 reform act in effect does not function’ (“Die Reform ist praktisch wirkungslos.”). See point 5 in Horst Eidenmüller, Die Restrukturierungsempfehlung der EU-Kommission und das deutsche Restrukturierungsrecht [The Restructuring Recommendation of the EU Commission and German Insolvency Law], paper as of 4 Nov. 2014, downloadable (in German language) from SSRN, page 19.

  22. See Rafael Efrat, the Evolution of Bankruptcy Stigma, 7 Theoretical Inquiries in Law 365–394 (2006), page 366.

  23. Id. page 393. [After a succinct description of the history of bankruptcy stigma in the western world, the article focuses on twentieth century United States. It concludes with an observation—based on an empirical study reviewing 176 newspaper articles mentioning the word ‘bankruptcy’ and published in the New York Times between 1864 and 2002—that “a noticeable shift in public attitudes [was detected] … towards individuals filing for personal bankruptcy in the United States.”].

  24. See, e.g., Erving Goffman, STIGMA—Notes on the Management of Spoiled Identity (Penguin, 1990). [Hereinafter: Goffman, Stigma (1990)]; and Stephen C. Ainlay, Lerita M. Coleman and Gaylene Becker (eds.), THE DILEMMA OF DIFFERENCE: A MULTIDISCIPLINARY VIEW OF STIGMA (Springer, 1986). [Hereinafter: Ainlay, DILEMMA OF DIFFERENCE].

  25. As a recent US study concluded “To date, very little sociological attention has been devoted to studying the stigma associated with being heavily in debt and, in particular, with declaring bankruptcy. Despite the existence of American bankruptcy law for over one hundred eighty years and the escalating use of personal credit in America, only a handful of studies have addressed this stigma. The scholars in this small group have primarily focused on the question of whether bankruptcy stigma exists in modern society and whether it has declined over the years. They have reached sharply differing conclusions.” Quoted from Michael D. Sousa, Bankruptcy Stigma: A Socio-Legal Study, 87 Am. Bankr. L.J. 435–482 (2013), at 436–437.

  26. For a recent overview of quantitative and qualitative studies in the US see Michael D. Sousa, Bankruptcy Stigma: A Socio-Legal Study, 87 Am. Bankr. L.J. 435 (2013), page 456. For Australia see the 2015 thematic issue specifically devoted to bankruptcy stigma (consumer) of the University of New South Wales Law Journal (volume 38, No 4—Thematic: Enacting Stigma).

  27. See World Bank, Insolvency and Creditor/Debtor Regimes Task Force, Report on the Treatment of the Insolvency of Natural Persons (2013), section I.10, pages 43–44. Available electronically at http://siteresources.worldbank.org/INTGILD/Resources/WBInsolvencyOfNaturalPersonsReport_01_11_13.pdf. (Last visited on 20 March 2017). [Hereinafter: 2013 World Bank Report].

  28. Goffman speaks of stigma—generally—as “the situation of the individual who is disqualified from full social acceptance.” See Goffman, STIGMA (Penguin, 1990), Preface, page 9.

  29. See Anlai, DILEMMA OF DIFFERENCE, page 3.

  30. See 2013 World Bank Report, paras 120–121, page 43.

  31. See Teresa A. Sullivan, Elizabeth Warren and Jay Lawrence Westbrook, Less Stigma or More Financial Distress: An Empirical Analysis of the Extraordinary Increase in Bankruptcy Filings, 59 Stanford L. Rev. 213–256 (2006), page 233.

  32. See Anlai, DILEMMA OF DIFFERENCE, page 227.

  33. See Anlai, DILEMMA OF DIFFERENCE, page 87.

  34. See “Appendix” infra.

  35. One of the most well-known artistic works involving stigmatization is Giotto’s panel painting Saint Francis Receiving the Stigmata, presumed to have been painted around 1295 and 1300, now in the Musée du Louvre, Paris.

  36. See Jonathan M. Hoff, Lawrence A. Larose and Frank J. Scatturo, PUBLIC COMPANIES (Law Journal Press, 2006, New York), pages 9–19 and 9–20.

  37. Id.

  38. See Shuguang Li and Zuofa Wang, China’s Bankruptcy Law after Three Years: the Gaps between Legislation Expectancy and Practice and the Future Road, Int’l Corp. Rescue, vol. 7, No. 1, 303–312 (2010). [Hereinafter: Shuguang Li and Zuofa Wang (2010)].

  39. Shuguang Li and Zuofa Wang (2010), page 311.

  40. Shuguang Li and Zuofa Wang (2010), page 311.

  41. Shuguang Li and Zuofa Wang (2010), pages 304–305.

  42. Shuguang Li and Zuofa Wang (2010), page 305.

  43. László Juhász, A Magyar fizetésképtelenségi jog kézikönyve (Novotni publisher 2014), volume I, page 448. The title of the book in English: the HUNGARIAN INSOLVENCY HANDBOOK. [Hereinafter: HUNGARIAN INSOLVENCY HANDBOOK].

  44. Charles J. Tabb and Ralph Brubaker, BANKRUPTCY LAW—Principles, Policies and Practice (Anderson Publishing, Cincinnati 2003), page 1.

  45. In the English insolvency scholarship, David Defoe is held to be the father of the phrase ‘honest but unfortunate debtors.’ See, e.g., Robert Weisberg, Commercial Morality, the Merchant Characters, and the History of the Voidable Preferences, 39 Stanf. L.Rev. 3–138 (1986), page 141.

  46. See Stephanie Wickouski, BANKRUPTCY CRIMES (Beard Books 2007), page 1.

  47. See, e.g., Daniel Gubitz, Tobias Nikoleyczik and Ludger Schult, MANAGER LIABILITY IN GERMANY (C.H. Beck, München 2012), page 141 et seq.

  48. See Christopher Mallon and Shai Y. Waisman, the LAW AND PRACTICE OF RESTRUCTURING IN THE UK AND US (Oxford University Press 2011), section 5.92, page 141.

  49. See Douglas Baird, the ELEMENTS OF BANKRUPTCY (Foundation Press, 5th ed. 2010), page 36.

  50. China is a telling example. While its Insolvency Act from 1986 was quite idiosyncratic and focused solely on state enterprises, the 2006 new Insolvency Act already has a much broader scope. Moreover, its drafters have tried to build on best international standards as well, including especially Chapter 11 of the US Bankruptcy Act.

  51. See Jacob S. Ziegel, the New Personal Property Security Regimes—Have we Gone too Far?, Alberta Law Review, vol. 28(4): 739–760 (1990), page 739.

  52. The project’s website address is http://lopucki.law.ucla.edu/index.htm and is hosted by the University of California, Los Angeles.

  53. Id.

  54. See Nathalie Martin, Common-Law Bankruptcy Systems: Similarities and Differences, American Bankruptcy Institute Law Review, vol. 11 (Winter 2003), page 368.

  55. See, for example, Mallon and Waisman, the LAW AND PRACTICE OF RESTRUCTURING IN THE UK AND US (Oxford University Press 2011), part starting with section number 7–145, page 205.

  56. Steven C. Krause (ed.), A PRACTITIONER’S GUIDE TO PREPACKAGED BANKRUPTCY (American Bankruptcy Institute 2011), at 23.

  57. Id.

  58. Niall Ferguson, the ASCENT OF MONEY (Penguin Books 2009), page 60.

  59. See David A. Skeel, Jr., DEBT’S DOMINION—A HISTORY OF BANKRUTPCY LAW IN AMERICA (Princeton University Press 2001), page 131.

  60. Id. page 254. The empirical study conducted by the authors did not fully support the hypothesis “that the declining stigma of bankruptcy encourage millions of debtors to file ‘bankruptcies of convenience’ that, in earlier times, they would not have filed. [In fact, the studies found that] there are a number of more plausible explanations available that fit the data much more closely than the decline in stigma”.

  61. See Teresa A. Sullivan, Elizabeth Warren and Jay Lawrence Westbrook, Less Stigma or More Financial Distress: An Empirical Analysis of the Extraordinary Increase in Bankruptcy Filings, 59 Stanford L. Rev. 213 (2006), page 234.

  62. Michelle Maroto, The Scarring Effects of Bankruptcy: Cumulative Disadvantage Across Credit and Labor Markets, Social Forces 91(1) 99–130, September 2012, page 101.

  63. See, e.g., the New York Times article (7 Dec 2011 issue) by Brian Havel, The Bankruptcy Stigma Is Gone for Airlines claiming that in the US business sector “[s]ome think that the stigma is gone, but a number of management teams still seek to avoid bankruptcy unless absolutely necessary […].” Available electronically at: http://www.nytimes.com/roomfordebate/2011/12/07/waging-war-on-wages/the-bankruptcy-stigma-is-gone-for-airlines; last visited on 27 June 2017.

  64. See David A. Skeel, Jr., DEBT’S DOMINION—A HISTORY OF BANKRUTPCY LAW IN AMERICA (Princeton University Press 2001), page 7.

  65. Id. page 7.

  66. Id. page 7.

  67. See Yvana L.B.H. Mols, Bankruptcy Stigma and Vulnerability: Questioning Autonomy and Structuring Resilience 29 Emory Bankr. Dev. J. 289–331 (2012), page 303.

  68. McCormack, Apples and Oranges, page 110.

  69. McCormack, Apples and Oranges, page 110.

  70. McCormack, Apples and Oranges, page 116.

  71. McCormack, Apples and Oranges, page 110.

  72. According to a 2005 research paper of Baird and Rasmussen, creditors routinely remove the directors and management of the debtor company to-be-reorganised whenever that suits their interests. See Douglas G. Baird and Robert K. Rasmussen, Private Debt and the Missing Lever of Corporate Governance, Vanderbilt Law and Economics Research Paper 05-08, pp. 1–48 (2005), downloadable from the SSRN database.

  73. McCormack, Apples and Oranges, page 114.

  74. Bork, RESCUING COMPANIES, section 2.12.

  75. Bork, RESCUING COMPANIES, section 1-07.

  76. Hungarian Insolvency Handbook, volume I, page 145.

  77. See, in general, Tibor Tajti, COMPARATIVE SECURED TRANSACTIONS LAW, Chapter on Hungary (Akadémiai könyvkiadó, Budapest 2002), as well as Tibor Tajti, Security Rights and Insolvency Law in Central and Eastern European Systems, in: McCormack G and Bork R (eds.) (2017) Security Rights and the European Insolvency Regulation, Intersentia, Cambridge-Antwerp-Portland.

  78. Hungarian Insolvency Handbook, volume I, page 30. One cannot but side with the critique of Juhász, who wrote: “It is hard to understand the intent of the lawmakers and the reasons for changing the contents of more centuries of terms to something that is different from what has become domesticated in practice.” Otherwise, the etymology of the Hungarian term for ‘bankruptcy’—“csőd”—is not the derivative of the Italian ‘banca rotta’ (broken bench). The general meaning, outside the context of bankruptcy law, is ‘crowd,’ or ‘gathering,’ because in 1840 when the first modern bankruptcy act was passed, the proceedings’ began with gathering of the creditors. Id. However, in modern parlance, the term—just as the US term ‘bankrupt’—means ‘failure, collapse and complete fiasco’ or ‘the failure of an entrepreneur or of a company;’ as defined by contemporary Hungarian Lexicons. See Id.

  79. ICSID case Dan Cake v. Hungary No. ARB/12/9.

  80. The Convention on the Settlement of Investment Disputes between States and Nationals of Other States was formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank) and entered into force on 14 October 1966.

  81. Although one may legitimately raise questions on the way insolvency proceedings are conducted in Hungary and dilemmas may arise also related to the acts of the court handling the case, similar critiques may be raised related to other legal systems as well. In the opinion of the author of this paper, however, the facts gathered by the tribunal seem to present a significantly incomplete picture. Moreover, the tribunal has not even tried to determine what the normal practice of insolvency courts are not just in Hungary but perhaps in some other countries.

  82. See, in general, Laura Carballo Piñeiro, Towards the Reform of the European Insolvency Regulation: Codification rather than Modification, 2 Nederland Internationaal Privaatrecht (NIPR), 207–215 (June 2014), at. 207.

  83. The two acts are the Council Directive 1346/2000 on insolvency proceedings and the Regulation (EU) 2015/848 of the European parliament and of the council of 20 may 2015 on insolvency proceedings (recast), which replaced the previous Directive. See also Reinhard Bork and Kristin van Zwieten (eds.), COMMENTARY ON THE EUROPEAN INSOLVENCY REGULATION (OUP 2016).

  84. 2007 Commission Communication: Overcoming the stigma of business failure, for a second chance policy—Implementing the Lisbon Partnership for Growth and Jobs: Why and How to Overcome the ‘European Stigma.’ Brussels, 5.10.2007 COM(2007) 584 final. Available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52007DC0584&from=EN; last visited on 5 March 2017.

  85. See, e.g., the questionnaire-based 2002 Study by Philippe and Partners and Deloitte and Touche, BANKRUPTCY AND A FRESH START: STIGMA ON FAILURE AND LEGAL CONSEQUENCES OF BANKRUPTCY; 2011 Report of an expert group commissioned by the EU Commission entitled ‘A SECOND CHANCE FOR ENTREPRENEURS: PREVENTION OF BANKRUPTCY, SIMPLIFICATION OF BANKRUPTCY PROCEDURES AND SUPPORT FOR A FRESH START.

  86. Besides the already mentioned 2007 Commission Communication, the Commission Recommendation of 12 March 2014 on a new approach to business failure and insolvency (2014/135/EU) should be mentioned. [Emphasis added].

  87. The act (Ustawa z dnia 9 kwietnia 2015 r.—Prawo Restrukturyzacyjne) was enacted on the 9th of April 2015. See Tibor Tajti, Chapter on Central and Eastern Europe, in: Gerard McCormack and Reinhard Bork (eds.), SECURITY RIGHTS AND THE EUROPEAN INSOLVENCY REGULATION (Intersentia 2017).

  88. See 2013 World Bank Report, para 124, page 44.

  89. See 2013 World Bank Report, para 118, page 42.

  90. Spreading information about the bankruptcy process (including also the stigma) may be a valuable tool not only in case of consumer-bankrupts but also for business people. Thus, what was concluded related to consumers and consumer law might be applied mutatis mutandis also to bankruptcy. An expert of European consumer law expressed these thoughts as follows: “[One] of the most significant barriers to consumers gaining access to justice is a lack of knowledge about their rights. It is vitally important [therefore] to attempt to break down this barrier by educating consumers about these rights. Government departments, publicly funded community law centres or other relevant public bodies should aim to educate consumers about their rights and how to enforce them by publishing free written material. In addition, the television and the internet could be used to disseminate consumer law information. Education strategies are an important tool to encourage and empower consumers to resolve their legal problems.” Quoted from Peter Spiller and Kate Tokeley, Individual Consumer Redress, in: Geraint Howells, Iain Ramsay, Thomas Wilhelmsson and David Kraft (eds.), HANDBOOK OF RESEARCH ON INTERNATIONAL CONSUMER LAW (Edward Elgar 2010), at 510.

  91. See 2013 World Bank Report, para 123, page 43.

  92. See the Financial Operations and Pre-Insolvency Settlement Act of 2012 [“Zakon o financijskom poslovanju i predstečajnoj nagodbi”]. Official Gazette, NN 108/12, and the amendments in NN 144/12, 81/13, 112/13, 71/15, and 78/15.

  93. See, in general, Vladimir Mamić, Nikola Kokot, Branimir Zarković, and Nera Popović, Croatian Pre-Insolvency Settlement Saves Companies which are ‘Too Big to Fail,’ in: Rodrigo Olivares-Caminal (ed.), EXPEDITED CORPORATE DEBT RESTRUCTURING IN THE EU (Oxford University Press 2015).

  94. See Nicola Howell and Rosalind Mason, Reinforcing Stigma or Delivering A Fresh Start: Bankruptcy and Future Engagement in the Workforce, 38(4) UNSW L.J. 1529–1574 (2015), at 1530. [In the article focused on consumer-bankrupts, various Australian laws (regulations, professional and licensing rules) were analyzed whether they reinforce the stigma associated with bankruptcy thereby preventing or making it harder for bankrupt-individuals to reenter the job market or start a business. The article vouched for law reforms to facilitate the fresh start objective of the bankruptcy system].

  95. Hungarian law knows only one type of reorganisation (restructuring) proceedings regulated by the 1991 Act No XLIX on Reorganisation and Liquidation Proceedings (“1991 . évi XLIX. Törvény a csődeljárásról és a felszámolási eljárásról”), Chapter II, §§7–21/C.

  96. See 2013 World Bank Report, para 123, page 44.

  97. Id.

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Authors and Affiliations

  1. Chair of the International Business Law Program, Legal Studies Department, Central European University (CEU), Nádor Street No. 9, Budapest, Hungary

    Tibor Tajti

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  1. Tibor Tajti
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Correspondence to Tibor Tajti.

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This article is the extended version of the presentation the author delivered at the international conference ‘Legal Reform of Market Economy,’ organized by the China-EU School of Law in Beijing on 5 Nov 2015.

Appendix

Appendix

See Table 1.

Table 1 Socio-psychological classification of some manifestations of the bankruptcy stigma
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Tajti, T. Bankruptcy stigma and the second chance policy: the impact of bankruptcy stigma on business restructurings in China, Europe and the United States. China-EU Law J 6, 1–31 (2018). https://doi.org/10.1007/s12689-017-0077-z

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