Encyclopedia of SociologyVol._1

effects of consistency and distinctiveness information and their analogue, target-based expectancies, present some incompatibilities. This contradiction has been evaluated both conceptually and empirically (Howard and Allen 1990).

Attribution in achievement situations. Bernard Weiner (1974) and his colleagues have applied attributional principles in the context of achievement situations. According to this model, we make inferences about an individual’s success on the basis of the individual’s ability to do the task in question, how much effort is expended, how difficult the task is, and to what extent luck may have influenced the outcome. Other possible causal factors have since been added to this list. More important perhaps is Weiner’s development of,

first, a structure of causal dimensions in terms of which these causal factors can be described and, second, the implications of the dimensional standing of a given causal factor (Weiner, Russell, and Lerman 1978). The major causal dimensions are locus (internal or external to the actor), stability or instability, and intentionality or unintentionality of the factor. Thus, for example, ability is internal, stable, and unintentional. The stability of a causal factor primarily affects judgments about expectancies for future behavior, whereas locus and intentionality primarily affect emotional responses to behavior. This model has been used extensively in educational research and has guided therapeutic educational efforts such as attribution retraining. Cross-cultural research has explored the cultural generalizability of these models. Paul Tuss, Jules Zimmer, and Hsiu-Zu Ho (1995) and Donald Mizokawa and David Rickman (1990) report, for instance, that Asian and Asian American students are more likely to attribute academic failure and success to effort than are European American students, who are more likely to attribute performance to ability. European American students are also more likely to attribute failure to task difficulty. Interestingly, as Asian Americans spend more time in the United States, they place less emphasis on the role of effort in performance.

Attribution biases. The theoretical models described above are based on the assumption that social perceivers follow the dictates of logical or rational models in assessing causality. Empirical research has demonstrated, not surprisingly, that there are systematic patterns in what has been variously conceived of as bias or error in the

attribution process (Ross 1977). Prominent among these is what has been called the ‘‘fundamental attribution error,’’ the tendency of perceivers to overestimate the role of dispositional factors in shaping behavior and to underestimate the impact of situational factors. One variant of this bias has particular relevance for sociologists. This is the general tendency to make inadequate allowance for the role-based nature of much social behavior. That is, perceivers fail to recognize that behavior often derives from role memberships rather than from individual idiosyncrasy. Again, cross-cultural research has called into question the generalizability of this bias. Joan Miller (1984) shows that the tendency to attribute behavior to persons is markedly more prominent in the United States, among both adults and children, whereas a tendency to attribute behavior to situational factors is more prominent among Indian Hindus, both adults and children, calling into question the ‘‘fundamentalness’’ of this attributional pattern.

A second systematic pattern is the actor-ob- server difference, in which actors tend to attribute their own behavior to situational factors, whereas observers of the same behavior tend to attribute it to the actor’s dispositions. A third pattern concerns what have been called self-serving or egocentric biases, that is, attributions that in some way favor the self. According to the false consensus bias, for example, we tend to see our own behavioral choices and judgments as relatively common and appropriate whereas those that differ from ours are perceived as uncommon and deviant. There has been heated debate about whether these biases derive from truly egotistical motives or reflect simple cognitive and perceptual errors.

METHODOLOGICAL AND

MEASUREMENT ISSUES

The prevalent methodologies and measurement strategies within attributional research have been vulnerable to many of the criticisms directed more generally at social cognition and to some directed specifically at attribution. The majority of attributional research has used structured response formats to assess attributions. Heider’s original distinction between person and environmental cause has had a major influence on the development of these structured measures. Respondents typically are asked to rate the importance of situational and

dispositional causes of events. These ratings have been obtained on ipsative scales as well as on independent rating scales. Ipsative measures pose these causes as two poles on one dimension; thus, an attribution of cause to the actor’s disposition is also a statement that situational factors are not causal. This assumed inverse relationship between situational and dispositional causality has been rejected on conceptual and empirical grounds. In more recent studies, therefore, respondents assign each type of causality separately. (Ipsative measures are appropriate for answering some questions, however, such as whether the attribution of cause to one actor comes at the expense of attribution to another actor or to society.) In theory, then, both dispositional and situational variables could be identified as causal factors.

The breadth of these two categories has also been recognized as a problem. Dispositional causes may include a wide variety of factors such as stable traits and attitudes, unstable moods and emotions, and intentional choices. Situational cause is perhaps an even broader category. It is quite possible that these categories are so broad as to render a single measure of each virtually meaningless. Thus, researchers often include both general and more specific, narrower responses as possible choices

(e.g., choices of attributing blame to an assailant or to the situation might be refined to the assailant’s use of a weapon, physical size, and psychological state, on the one hand, and the location, time of day, and number of people nearby, on the other).

Structured measures of attributions are vulnerable to the criticism that the categories of causes presented to respondents are not those they use in their everyday attributions. Recognizing this limitation, a few researchers have used open-ended measures. Comparative studies of the relative utility of several different types of measures of causal attributions conclude that scale methods perform somewhat better in terms of their inter-test validity and reliability, although open-ended measures are preferable when researchers are exploring causal attributions in new situations. Some researchers have attempted to overcome some of the limitations of existing scales; Curtis McMillen and Susan Zuravin (1997), for example, have developed and refined ‘‘Attributions of Responsibility’’ and ‘‘Blame Scales’’ for use in clinical research that may be useful for other kinds of attributional situations.

The great majority of attribution studies use stimuli of highly limited social meaning. Generally, the behavior is represented with a brief written vignette, often just a single sentence. Some researchers have shifted to the presentation of visual stimuli, typically with videotaped rather than actual behavioral sequences, in order to ensure comparability across experimental conditions. Recognizing the limitations of brief, noncontextualized stimuli, a few researchers have begun to use a greater variety of more extended stimuli including newspaper reports and published short stories. Most of these stimuli, including the videotaped behavioral sequences, rely heavily on language to convey the meaning of behavior. Conceptual attention has turned recently to how attribution relies on language and to the necessity of considering explicitly what that reliance means. Some researchers (Anderson and Beattie 1998; Antaki and Leudar 1992) have attempted to use more naturalistic approaches, incorporating into the study the analysis of spontaneous conversations among study participants.

WHEN DO WE MAKE ATTRIBUTIONS?

Long after attribution had attained its popularity in social psychology, a question that perhaps should have been raised much earlier began to receive attention: When do we make attributions? To what extent are the attributions in this large body of research elicited by the experimental procedures themselves? This is a question that can be directed to any form of social cognition. It is particularly relevant, however, to attribution. Most people, confronted with a form on which they are to answer the question ‘‘Why?,’’ do so. There is no way of knowing, within the typical experimental paradigm, whether respondents would make attributions on their own. In a sense there are two questions: Do people make attributions spontaneously, and if they do, under what circumstances do they do so?

In response to the first question, Weiner (1985) has marshaled impressive evidence that people do indeed make attributions spontaneously. Inventive procedures have been developed for assessing the presence of attributional processing that is not directly elicited. This line of evidence has dealt almost entirely with causal attributions. Research

suggests that trait attributions may be made spontaneously much more often than causal attributions.

In response to the second question, a variety of studies suggest that people are most likely to make attributions when they encounter unexpected events or events that have negative implications for them.

SOCIOLOGICAL SIGNIFICANCE OF

ATTRIBUTION

Attribution is a cognitive process of individuals; much of the extant research on attribution is, accordingly, highly individualistic. In the 1980s, however, researchers began to pay increasing attention to the sociological relevance of attribution. The process of attribution itself is fundamentally social. Attribution occurs not only within individuals but also at the interpersonal, intergroup, and societal levels. Moreover, the process of attribution may underlie basic sociological phenomena such as labeling and stratification.

Interpersonal attribution. At the interpersonal level, attribution is basic to social interaction. Interpersonal encounters are shaped in many ways by attributional patterns. Behavioral confirmation, or self-fulfilling prophecies, illustrate the behavioral consequences of attribution in social interaction; attribution of specific characteristics to social actors creates the expectancies that are then confirmed in behavior. Considering attribution at this interpersonal level demonstrates the importance of different social roles and perspectives (actors vs. observers) as well as how attribution is related to evaluation. The self is also important to the attribution process; the evidence for attributional egotism (self-esteem enhancing attributional biases), self-presentation biases, and egocentrism is persuasive. Attributions also affect social interaction through a widespread confirmatory attribution bias that leads perceivers to conclude that their expectancies have been confirmed in social interaction.

Research has challenged the universality of egocentric biases by examining differences in attributional styles according to race, class, and gender. Several studies (Reese and Brown 1995;

Wiley and Crittenden 1992; Broman 1992; Andrews and Brewin 1990) have shown that women

are less likely than men to make self-serving dispositions. In a study of academics’ accounts of their success in the profession, Mary Glenn Wiley and

Kathleen Crittenden (1992) argue that women explain their success in a more modest manner in order to preserve a feminine identity, at the expense of their professional identities. This attributional style may make it more likely for women to blame themselves for various types of negative situations. Consistent with this reasoning, Bernice Andrews and Chris Brewin (1990) found that female victims of marital violence tended to blame themselves for their experience of violence. Childhood experiences of physical or sexual abuse increased women’s chances of characterological self-blame when, as adults, they found themselves in abusive relationships. (Other research, however, notes that the relationship between attributions and adjustment is complex and not always so straightforward; see McMillen and Zuravin 1997.)

Race and class characteristics also create distinct attributional patterns; research on these factors has been more likely than research on gender to consider possible interactive effects on attributions. In a study conducted by Fathali Moghaddam and colleagues (1995) on attributional styles of whites, blacks, and Cubans in Miami, for example, middleclass black respondents were more likely to blame negative outcomes on discrimination than were lower-class blacks. Lower-class whites were the only group to attribute failure to themselves personally.

The great preponderance of research on social interaction has been based on relationships between strangers in experimental contexts, which may seem to undermine the claim that attribution is significant for interpersonal interaction. The best evidence of this significance, then, is the increasingly large body of research on the role of attribution in the formation, maintenance, and dissolution of close relationships. There is substantial evidence that attributions are linked to relationship satisfaction and behaviors such as conflict resolution strategies. There is also evidence that distressed and nondistressed couples make differing attributions for significant events in their relationships; these patterns may actually serve to maintain marital distress among troubled

couples, thus ultimately influencing marital satisfaction. Attributions also play an important role in relationship dissolution. Attributions are a critical part of the detailed accounts people provide for the dissolution of their relationships, and these accounts go beyond explanation to rationalize and justify the loss of relationships.

Research on interpersonal attribution extends the intrapersonal approach in several ways. When people who interact have substantial knowledge of and feelings about each other, the attribution process involves evaluation as well as cognition. Issues of communication, and hence potential changes in preexisting attributions for recurrent relationship events, also become salient at the interpersonal level. There is very little research on how attributions change through interaction and relationships, but this is clearly a significant topic. Attributions at the interpersonal level also entail greater concern with accountability for action; causality at this level also raises issues of justification.

Intergroup attribution. Intergroup attribution refers to the ways in which members of different social groups explain the behavior of members of their own and other social groups. At this level, social categorization has a direct impact on attribution. Studies using a variety of subjects from different social groups and often different countries show consistent support for an ingroup-serv- ing attributional pattern, for example, a tendency toward more dispositional attributions for positive as opposed to negative behavior for ingroup actors. The evidence for the converse pattern, more dispositional attributions for negative as opposed to positive behavior for outgroup actors, is not as strong. (Moreover, these patterns are stronger in dominant than in dominated groups.) Social desirability biases can counteract this pattern; Steven Little, Robert Sterling, and Daniel Tingstrom (1996), for example, found that white respondents held black actors less responsible for participating in a bar fight than did black respondents. The authors suggest that this finding may be due to the desire of the white sample—under- graduates from a suburban area—to appear racially progressive.

Parallel studies of a group’s success and failure show a consistent pattern of ingroup protection. Outgroup failure is attributed more to lack of ability than is ingroup failure. Effects of group

membership on attributions about success are not as strong. Interestingly, there is also some evidence of outgroup-favoring and/or ingroup-dero- gating attributions among widely recognized low- er-status, dominated groups such as migrant labor populations (Hewstone 1989). A third form of evidence of intergroup attribution is provided by studies of attributions about social positions occupied by existing groups. In general, these studies, like those cited above, show higher ratings of ingroup-serving as opposed to outgroup-serving attributions.

Societal attribution. At the societal level, those beliefs shared by the members of a given society form the vocabulary for social attributions. The concept of social representations, which has its origins in Durkheim’s concept of ‘‘representation collectives,’’ was developed by Serge Moscovici

(1976) to represent how knowledge is shared by societal members in the form of common-sense theories about that society. Social representations are intimately connected to the process of attribution. Not only are explanation and accountability part of a system of collective representations, but such representations determine when we seek explanations. Social representations serve as categories that influence the perception and processing of social information; moreover, they underscore the emphasis on shared social beliefs and knowledge. Social representations are useful in interpreting research on laypersons’ explanations of societal events such as poverty and wealth, unemployment, and racial inequality. Poverty tends to be attributed to individualistic factors, for example, whereas unemployment tends to be attributed to societal factors. Not surprisingly, these patterns may be qualified by attributors’ own class backgrounds; although middle-class people attribute poverty more often to internal factors, those who are themselves poor attribute poverty more often to external factors such as governmental policies

(Singh 1989). Gender and racial stereotyping can also shape attributions. Cynthia Willis, Marianne Hallinan, and Jeffrey Melby (1996), for example, found that respondents with a traditional sex-role orientation showed a favorable bias toward the male perpetrator in domestic violence situations.

When the female victim was African American and married, both egalitarians and traditionalists were less likely to attribute blame to the man.

Moving away from an emphasis on normative stereotyping, research has considered possible effects of counter-stereotyping on attributional patterns, and of attributions on changes in stereotypes. Portrayals of structurally subordinate groups that counter stereotypical expectations can increase the perceived credibility of members of those groups (Power, Murphy, and Coover 1996). Moreover, an attribution of counterstereotypic behavior to dispositional factors of clearly typical outgroup members can modify outgroup stereotypes (Wilder, Simon, and Faith 1996).

Cross-cultural research illustrates another aspect of societal attributions. This work compares the extent and type of attributional activity across cultures. Although there has been some support for the applicability of Western models of attribution among non-Western cultures, most of this research has demonstrated in a variety of ways the cultural specificity of particular patterns of attribution (Bond 1988). As noted above, for example,

Joan Miller (1984) provides cross-cultural empirical evidence that the fundamental attribution error, the tendency to attribute cause more to persons than to situations, is characteristic of Western but not non-Western societies. Attributions about the self also vary across cultures; members of some non-Western cultures attribute performance more to effort than to ability; the opposite pattern has been found in the United States. Cultural patterns also shape responsibility attributions; V. Lee Hamilton and Shigeru Hagiwara (1992) found that U.S.

(and male) respondents were more likely to deny responsibility for their own inappropriate behaviors than were Japanese (and female) respondents, who were more likely to apologize for the behaviors. Hamilton and Hagiwara argue that the Japanese (and women) were more concerned with maintaining the quality of the interaction between the accuser and the accused.

SOCIOLOGICAL APPLICATIONS

It may be useful to identify several sociological phenomena to which theories of attribution are relevant. A number of scholars have suggested integrating attribution theory and labeling theory (Crittenden 1983). Attribution occurs within an individual; labels are applied by a group. Judith Howard and Randy Levinson (1985) offer empirical evidence that the process of applying a label is

directly analogous to attribution. They report that the relationships between attribution information and jury verdicts are consistent with predictions based on a labeling perspective.

Richard Della Fave (1980) demonstrates the importance of attribution for understanding a key but neglected aspect of stratification, namely, how it is that stratification systems become legitimated and accepted by those disadvantaged as well as by those advantaged by those systems. He draws heavily on attribution theory in developing a theory of legitimation and in identifying possible sources of delegitimation.

Attribution is a significant social process that ranges widely from cognitive processes to collective beliefs. The field is still imbalanced; more work has been done at the intrapersonal and interpersonal levels. There is evidence for both intergroup and societal attributions, however, and research at these two levels is steadily increasing

(Hewstone 1989). Recent research has demonstrated connections across areas as diverse as social cognition, social interaction, intergroup relations, and social representations; these connections provide increasing evidence of the importance of attribution for sociological phenomena. Indeed, in the next decade it may be that the fruits of attribution theories will be evident more in research on these other topics, than in research on attribution alone.

REFERENCES

Anderson, Irina, and Geoffrey Beattie 1996 ‘‘How Important is Kelley’s Model of the Attribution Process When Men and Women Discuss Rape in Conversation?’’ (Semiotica 1/2:1–21.

Andrews, Bernice, and Chris R. Brewin 1990 ‘‘Attributions of Blame for Marital Violence: A Study of Antecedents and Consequences.’’ Journal of Marriage and the Family 52:757–767.

Antaki, Charles, and Ivan Leudar 1992 ‘‘Explaining in Conversation: Towards an Argument Model.’’ European Journal of Social Psychology 22:181–194.

Bond, Michael H. (ed.) 1988 The Cross-Cultural Challenge to Social Psychology. Newbury Park, Calif.: Sage.

Broman, Clifford L. 1992 ‘‘The Black Experience: Attributing the Causes of Labor Market Success.’’ National Journal of Sociology 6:77–90.

Crittenden, Kathleen S. 1983 ‘‘Sociological Aspects of Attribution.’’ Annual Review of Sociology 9:425–446.

Della Fave, L. Richard 1980 ‘‘The Meek Shall Not Inherit the Earth: Self-Evaluation and the Legitimacy of Stratification.’’ American Sociological Review 45:955–971.

Hamilton, V. Lee, and Shigeru Hagiwara 1992 ‘‘Roles, Responsibility, and Accounts Across Cultures.’’ International Journal of Psychology 27:157–179.

Heider, Fritz 1958 The Psychology of Interpersonal Relations. New York: Wiley.

Hewstone, Miles 1989 Causal Attribution: From Cognitive Processes to Collective Beliefs. Oxford: Basil Blackwell.

———, and Jos M. F. Jaspars 1987 ‘‘Covariation and Causal Attribution: A Logical Model of the Intuitive Analysis of Variance.’’ Journal of Personality and Social Psychology 53:663–672.

Howard, Judith A., and Carolyn Allen 1990 ‘‘Making Meaning: Revealing Attributions Through Analyses of Readers’ Responses.’’ Social Psychology Quarterly

52:280–298.

Howard, Judith A., and Randy Levinson 1985 ‘‘The Overdue Courtship of Attribution and Labeling.’’

Social Psychology Quarterly 48:191–202.

Jones, Edward E., and Keith E. Davis 1965 ‘‘From Acts to Dispositions: The Attribution Process in Person Perception.’’ Advances in Experimental Social Psychology

2:219–266.

Jones, Edward E., and Daniel McGillis 1976 ‘‘Correspondent Inferences and the Attribution Cube: A Comparative Reappraisal.’’ In J. H. Harvey, W. Ickes, and R. F. Kidd, eds., New Directions in Attribution Research, Vol. 1. Hillsdale, N.J.: Erlbaum.

Kelley, Harold H. 1967 ‘‘Attribution Theory in Social Psychology.’’ Nebraska Symposium of Motivation

15:192–238.

———1973 ‘‘The Processes of Causal Attribution.’’ American Psychologist 28:107–128.

Little, Steven G., Robert C. Sterling, and Daniel H. Tingstrom 1996 ‘‘The Influence of Geographic and Racial Cues on Evaluation of Blame.’’ The Journal of Social Psychology 136:373–379.

McArthur, Leslie Z. 1972 ‘‘The How and What of Why: Some Determinants and Consequences of Causal Attribution.’’ Journal of Personality and Social Psychology 22:171–197.

McMillen, Curtis, and Susan Zuravin 1997 ‘‘Attributions of Blame and Responsibility for Child Sexual Abuse and Adult Adjustment.’’ Journal of Interpersonal Violence 12:30–48.

Miller, Joan G. 1984 ‘‘Culture and the Development of Everyday Social Explanation.’’ Journal of Personality and Social Psychology 46:961–978.

Mizokawa, Donald T., and David B. Ryckman 1990 ‘‘Attributions of Academic Success and Failure: A Comparison of Six Asian-American Ethnic Groups.’’

Journal of Cross-Cultural Psychology 21:434–451.

Moghaddam, Fathali M., Donald M. Taylor, Wallace E. Lambert, and Amy E. Schmidt 1995 ‘‘Attributions and Discrimination: A Study of Attributions to the Self, the Group, and External Factors among Whites, Blacks, and Cubans in Miami.’’ Journal of Cross-Cultur- al Psychology 26:209–220.

Moscovici, Serge 1976 La Psychanalyse: Son image et son public, 2nd ed. Paris: Presses Universitaires de France.

Moskowitz, G. B. 1996 ‘‘The Mediational Effects of Attributions and Information Processing in Minority Social Influence.’’ British Journal of Social Psychology

35:47–66.

Power, J. Gerard, Sheila T. Murphy, and Gail Coover 1996 ‘‘Priming Prejudice: How Stereotypes and Coun- ter-Stereotypes Influence Attribution of Responsibility and Credibility among Ingroups and Outgroups.’’

Human Communication Research 23:36–58.

Reese, Laura T., and Ronald E. Brown 1995 ‘‘The Effects of Religious Messages on Racial Identity and System Blame among African Americans.’’ The Journal of Politics 57:24–43.

Ross, Lee 1977 ‘‘The Intuitive Psychologist and His Shortcomings: Distortions in the Attribution Process.’’ Advances in Experimental Social Psychology

19:174–220.

Singh, Anup K. 1989 ‘‘Attribution Research on Poverty: A Review.’’ Psychologia 32:143–148.

Tuss, Paul, Jules Zimmer, and Hsiu-Zu Ho 1995 ‘‘Causal Attributions of Underachieving Fourth-Grade Students in China, Japan, and the United States.’’ Journal of Cross-Cultural Psychology 26:408–425.

Weiner, Bernard 1974 Achievement Motivation and Attribution Theory. Morristown, N.J.: General Learning Press.

———1985 ‘‘’Spontaneous’ Causal Thinking.’’ Psychological Bulletin 97:74–84.

———, Dan Russell, and David Lerman 1978 ‘‘Affective Consequences of Causal Ascription.’’ In J. H. Harvey, W. Ickes., and R. F. Kidd, eds., New Directions in Attribution Research, Vol. 3. Hillsdale, N.J.: Erlbaum.

Wilder, David A., Andrew F. Simon, and Myles Faith 1996 ‘‘Enhancing the Impact of Counterstereotypic Information: Dispositional Attributions for Deviance.’’

Journal of Personality and Social Psychology 71:276–287.

Wiley, Mary Glenn, and Kathleen S. Crittenden 1992 ‘‘By Your Attributions You Shall Be Known: Consequences of Attributional Accounts for Professional and Gender Identities.’’ Sex Roles 27:259–276.

BALANCE THEORY

See Attitudes; Cognitive Consistency Theories.

BANKRUPTCY AND CREDIT

Every society must resolve the tension between debtors and creditors, especially if the debtors cannot pay or cannot pay quickly enough. Many of the world’s religions have condemned lending money for interest, at least among co-religionists. In traditional societies, money lenders, although necessary for ordinary commerce, were often viewed as morally suspect. The development of a robust capitalism was based upon raising capital by paying interest or dividends, and so it has been important for capitalist societies to develop institutions and mechanisms for handling debt and credit.

The inherent tension between creditors and debtors turns upon the creditor’s claim to justice as the property owner and the debtor’s interest in fairness in the terms of repayment. To be sure, lenders sometimes used their position to create social control mechanisms such that debtors often could never work their way out of debt. Such arrangements as sharecropping and the use of the company store often tied laborers to employers through the bonds of debt. With some exceptions, states and legal regimes upheld property rights against the claims of the debtors.

Through the years, societies have sanctioned creditors’ use of slavery, debt-prison, transportation to debtors’ colonies, debt-peonage, seizure of assets or garnishment of wages to control debtors.

Most such methods, however, work to the advantage only of the first creditor or the most aggressive creditor to demand payment. Bankruptcy, as used in the United States and a number of other countries, provides a means for resolving not only the debtor-creditor conflict but also the potential conflict among creditors.

Bankruptcy is a very old concept. The word itself comes from an Italian phrase meaning ‘‘broken bench,’’ because a bankrupt merchant’s work bench would be broken by his creditors if he could not repay the debt. In the United States, each state has laws governing debtor-creditor relations, but the enactment of bankruptcy statutes is reserved to the Congress by the U.S. Constitution. United States bankruptcy occurs in the federal courts and is regulated by statutes enacted by Congress. Special bankruptcy courts are located in each federal judicial district, and specially appointed bankruptcy judges oversee the caseload. Bankruptcy decisions may be appealed to the federal district court and subsequently to the federal appeals court and the U.S. Supreme Court.

Bankruptcy is technically different from insolvency. Insolvency refers to a financial situation in which a person or business has liabilities that exceed assets. To be bankrupt, the debtor must file for bankruptcy protection in the federal court. Although the overwhelming majority of individuals filing for bankruptcy are also insolvent, occasionally a solvent business will file for bankruptcy because of anticipated liabilities that will exceed its assets. An example of such a bankruptcy is that of pharmaceutical manufacturer A. H. Robbins, whose

Dalkon Shield intrauterine device (a contraceptive) was judged the cause of many injuries and some deaths among women who used it. As the

financial judgments against the company mounted, its management sought the protection of the bankruptcy courts. Bankruptcy allowed the company to hold its creditors at bay for a period of time to allow the company to propose a financial settlement.

THE ROLE OF THE STATES

Although bankruptcy is a federal matter, states also have laws to govern debtor-creditor relations. Each state’s debtor-creditor laws are affected by its history and by the debt conventions that are part of its history. Before becoming a state, for example, Georgia was a debtor’s colony. Before the

Civil War, debtors in such southern states often

fled harsh debt-collection laws by going to Texas, indicated by ‘‘G.T.T.’’ in sheriffs’ records. Texas has traditionally retained pro-debtor statutory provisions, especially its generous exemption.

An exemption is the property that a debtor may keep despite bankruptcy or a judgment for nonpayment. The federal bankruptcy statutes recognize the right of state law to prescribe exemptions. There is also a federal exemption, but state legislatures may require their citizens to claim only the state exemption, which in some states is smaller than the federal exemption. State exemption laws vary widely, with some states allowing a substantial exemption and other states exempting very little property. Even a generous exemption law, however, is not a guarantee that a debtor will keep a lot of property. A home is not exempt if there is a mortgage on the home, and other goods are similarly not protected from a secured creditor if they have been used as collateral for a debt.

The states with a Spanish heritage often followed the Spanish tradition that a bankrupt’s family should have the means to continue to make a living. Thus, the state laws of Florida, Texas, and California, for example, have traditionally been liberal in permitting debtors to keep their homesteads and some other assets, such as the tools of their trade and current wages. Other states exempt items that are believed necessary for the family’s well being, such as children’s school books, certain farm equipment, sewing machines, and

funeral plots. There is a recent trend toward substituting dollar limitations for exemptions instead of listing specific items of property.

The state exemption is the principal determinant of the resources a bankrupt debtor will have following the bankruptcy. The rest of the debtor’s postbankruptcy status depends upon the type of bankruptcy the debtor declares.

TYPES OF BANKRUPTCY

Bankruptcy may be entered either on a voluntary or on an involuntary basis. U.S. bankruptcy law arranges several ways by which debtors may voluntarily declare bankruptcy. Either individuals or corporate actors, including incorporated and unincorporated businesses, not-for-profit agencies, and municipalities may declare bankruptcy. The law makes special provision for the bankruptcies of railroads and stockbrokers. Creditors may in some circumstances initiate an involuntary bankruptcy. Only a small proportion of all bankruptcies is involuntary, and nearly all of those cases are targeted toward a business.

The Clerk of the Bankruptcy Court classifies each case filed as a business bankruptcy or a nonbusiness bankruptcy. These distinctions are not always clear-cut. As many as one in every five

‘‘nonbusiness’’ debtors reports currently owning a business or having recently owned a business.

Moreover, many of the ‘‘business’’ bankruptcies are small family-owned enterprises. Whether classified as business or nonbusiness, the bankruptcy of a small business owner typically affects the family’s welfare as well as that of the business.

Individual, noncorporate debtors typically have two choices in bankruptcy: Chapter 7 liquidation or a Chapter 13 repayment plan. In a Chapter 7 case, the debtor’s assets over and above the exempt property will be sold and the creditors will be paid pro rata. Creditors with secured debts (those debts with collateral) will be allowed to have the collateral. All remaining debt will be discharged, or wiped away by the court. The debtor will not be able to file a Chapter 7 bankruptcy again for six years.

The Chapter 13 repayment plan is available only to individual debtors with a regular source of income. There are also other legal limitations,

such as maximum limits on the amount of debt owed. The debtor files with the court a plan for repaying debts over a three-to-five year schedule. The debtor must report all income to the court, and must also include a budget that provides the necessities of rent, food, clothing, medical treatment, and so on. The difference between the budgeted amount and the monthly income is the disposable income, which becomes the amount of the monthly payment.

The Chapter 13 petitioner must pay to a trustee, who is appointed by the court, all disposable income for the period of the plan. The debtor gets to keep all property. The trustee disburses the funds to the creditors. For a judge to confirm a

Chapter 13 plan, the unsecured creditors must receive more money through the plan payments than they would have received in a Chapter 7 liquidation. At the conclusion of the plan, any remaining debt is discharged. Following this discharge, the Chapter 13 petitioner is also barred from further Chapter 7 bankruptcies for six years.

About two of every three Chapter 13 filers do not complete the proposed plan. Although the

Chapter 13 may provide some benefits to the debtor—for example, he might have time to reorganize his finances—once plan payments are missed the court may dismiss the Chapter 13 and the debtor loses the protection of bankruptcy. Repayment plans such as Chapter 13 were begun by bankruptcy judges in northern Alabama before

Congress wrote them into law. Even today, Chapter 13 is disproportionately popular in some judicial districts in the South. About one-third of all nonbusiness bankruptcies are filed in Chapter 13.

Some debts survive bankruptcy, regardless of the chapter in which the bankruptcy is filed. Child support, alimony, federally-backed educational loans, and some kinds of taxes are among those effectively nondischargeable in Chapter 7. Creditors may also object to the discharge of a specific debt if the debt arose from certain misbehavior, including fraud and drunkenness. Creditors may also object to the discharge generally on the grounds of debtor misbehavior, including hiding assets, disposing of assets before the bankruptcy, and lying to the court. A judge may object to a debtor filing in Chapter 7 if the judge believes that the

filing represents a ‘‘substantial abuse.’’ A Chapter

13 plan must be filed in ‘‘good faith.’’

For persons with substantial assets and for businesses there is an additional choice, Chapter 11, also called a reorganization. In Chapter 11, a debtor business seeks the protection of the court to reorganize itself in such a way that its creditors can be repaid (although perhaps not one hundred cents on the dollar). Creditors are given an opportunity to review the plan and to vote on its acceptability. If a sufficient number of creditors agree, the others may be forced to go along. In large cases, a committee of creditors is often appointed for the duration of the Chapter 11. Reorganizations may provide a means to save jobs while a business reorganizes.

In recent years, critics have charged that undoing business obligations has become an important motive for companies to reorganize under Chapter 11. Various companies have been accused of trying to avoid labor contracts, to avoid product liability, or to insulate management from challenges. These strategic uses of bankruptcy are potentially available to solvent companies. Although strategic uses of bankruptcies by individuals probably occur, most studies have found that the individuals in bankruptcy are in poor financial condition, often with debts in excess of three years’ income.

There is also Chapter 12 bankruptcy, another type of reorganization specifically for farmers. It was introduced in 1986 and in most years between one and two thousand cases are filed in Chapter 12.

Federal law permits the fact of a bankruptcy to remain on a credit record for ten years, but the law also prohibits discrimination against bankrupt debtors by governments or private employers.

BANKRUPTCY TRENDS

The number of business bankruptcies remains relatively small, usually fewer than 75,000 in a year, with exceptions in a few years. The number of nonbusiness bankruptcies, however, has generally risen for about two decades, from about 313,000 in 1981 to 811,000 in 1991. Nonbusiness bankruptcies passed the millionmark in 1996, and by 1998 there were more than 1.4 million nonbusiness bankruptcies in the United States.

Embedded within the general increase in bankruptcy are substantial regional variations in filing