Debt relief as climate policy: the role of personal insolvency law

Abstract

Climate impacts extend beyond physical destruction to include widespread financial distress. This article explores the role that debt relief policies – particularly personal insolvency or bankruptcy law – might play within a range of measures to raise the capacity of individuals to withstand climate-related shocks. Through the cancellation of unpayable debt, personal insolvency acts as a form of insurance against the unavoidable risks inherent in a volatile and unpredictable economy. Reviewing the links between climate impacts, debt and default, and the inevitable gaps in supports to victims of these impacts, the paper makes a case for personal insolvency as a rules-based system for stabilising chaotic financial distress associated with disasters and crises. As an extraordinary exception to the law’s usual orientation toward upholding past obligations and facilitating market allocations, bankruptcy might represent an internal means of accommodating the disruptions and contradictions with which climate change confronts the legal system.