The Routinization of Debt Collection: An Essay on Social Change and Conflict in the Courts

Abstract

In an era of supposed judicial imperialism, the decline of judicial involvement in an important policy area raises questions about the dynamics of legal change. In the past thirty-five years, despite large increases in the volume of loans and delinquent debts, there has been a sharp decline in contested debt cases in state supreme courts and an apparent decline in trial courts as well. In seeking an explanation, this article concludes that for both creditors and debtors, litigation has become more costly in relation to alternative courses of action such as renegotiating payment terms, declaring bankruptcy, or writing off unpaid debts. The attractiveness of nonlitigational alternatives is attributed to (a) the “legal rationalization” of credit transactions by institutional lenders, (b) increased litigation costs stemming from enhanced debtors' rights, and most importantly, (c) “systemic stabilization”—welfare state measures, economic regulation, insurance arrangements, and market diversification that facilitates the attenuation and spreading of financial losses.

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