Consumer Bankruptcy Law: A Safety Valve for the Second Gilded Age

Welcome to an exploration of consumer bankruptcy law and practice. I'm Jonathan Arias, and I run a law practice designed to help people navigate one of the most misunderstood areas of American law.

This isn't just about statutes and case law—it's about understanding how bankruptcy actually works in people's lives, and why it exists at all.

The Ancient Balancing Act

From the earliest English insolvency laws to the modern Bankruptcy Code, this body of law has always balanced two competing values: the creditor's right to repayment and the debtor's right to a fresh start. Today, that balance is struck through a system that touches everything from a family's home to the global flow of capital.

More Than a Personal Matter

At first glance, bankruptcy law seems like a personal matter—one individual or a business unable to pay their debts. But in truth, bankruptcy law performs a vital societal function.

In theory, a predictable and orderly system for resolving unpayable debts provides stability to our economy. It gives investors, banks, and entire markets the confidence to extend credit and prevents chaos, such as the rush of creditors competing for payments, and then replaces it with an organized process that preserves economic stability.

The American system is far from perfect, but it's become a model for other nations, for better or worse. It helps maintain the country's reputation for financial reliability and fairness. And this reliability attracts global investments and sustains the dollar's strength as the world's reserve currency.

In that sense, bankruptcy law isn't just about personal relief—it's a cornerstone of capitalism itself.

Living Under the Weight of Debt

At the same time, Americans have never carried more debt—from credit cards and student loans to car payments and medical bills. Millions of families live under chronic indebtedness, often one emergency away from financial collapse. The cost of housing, healthcare, and education has outpaced wages for decades, forcing ordinary people to rely on credit simply to survive.

The New Gilded Age

We're also living in an era with extreme disparities in wealth. New York City, where I live and practice, is home to over 349,000 millionaires, more than 770 millionaires, and 123 billionaires. Despite all this wealth, an astonishing one in four people in New York City are living in poverty, and over 146,000 public school kids experience some form of homelessness.

In 2024, I firmly believe that we're living in the second American Gilded Age.

Society's Safety Valve

So bankruptcy exists as society's safety valve—a legal recognition that debt is not merely a moral failure, but a structural feature of modern economic life. It provides a path to recovery, giving individuals the chance to reset, re-enter the economy, and rebuild their lives.

Understanding this process means understanding one of the most important tools available to ordinary Americans struggling to survive in an increasingly unequal economy.