Going Broke the Hard Way: The Economics of Rural Failure

Despite their role at the forefront of empirical research on the legal system, bankruptcy scholars are typical of the legal academy in their ignorance of the perspectives and experiences of rural Americans. No empirical study has systemically considered or acknowledged the role of community size in understanding when and why Americans turn to the bankruptcy system. Until now, the plight of rural families has been ignored. Overlooking the rural experience has impoverished our understanding of the financial pressures facing Americans. Without knowledge about rural Americans, who make up one-fifth of the U.S. population, our collective knowledge about the bankruptcy system generally and the economic pressure on all families is deeply flawed. The original data developed in this Article reveal that rural America is home to extraordinary, unexplored economic distress. Contrary to conceptions about a rural cultural resistance to debt and the pastoral nature of rural life, rural families appear to be facing more severe financial hardship than their urban counterparts. The bankruptcy data reveal the depth and nature of the financial squeeze on rural families. Rural Americans live in areas where low wages and reduced job opportunities leave them with smaller incomes, but at the same time, they pay the same or higher prices for many of the same goods and services that urban Americans do. This is the worst of both worlds. Rural households have fewer dollars to spend and more demands on those dollars - both from past debts and current expenses. The nature of rural bankruptcies reflects the declining rural economy and the losing struggle of rural families who are trying to make ends meet despite severe income, job and medical problems. Far from being immune from the financial pressures on American households, rural families inhabit the deepest hollows in a map of economic well-being. Exploring this terrain offers critical insights on legal scholarship and bankruptcy policy. The data presented in this Article expose important differences in the economics of bankrupt families that correlate with place of residence. Because these differences between urban and rural families have gone unexplored until now, our understanding of the bankruptcy system has been distorted. This distortion is more pernicious because scholars have frequently failed to acknowledge their urban bias. In showing how rural residence creates differences among bankruptcy filers, this Article exposes the need to consider rural perspectives in studies of all legal fields. Exploring how the role of place shapes use of the legal system opens up a new way to flush out variations in how laws actually operate. My conclusions suggest that future legal scholarship in all disciplines should be cognizant of the ways in which rurality, like race, gender, non-citizen status, or age, may influence perspectives on law. The suffering of rural families revealed in the bankruptcy data has powerful implications for our understanding of the American economy as a whole. Learning how the economics of rural failure differ from that identified in urban areas allows a critical evaluation of how prior studies may have underreported the financial distress of bankrupt families by overlooking place of residence as a relevant factor. The rural bankruptcy data also offer a compelling example of the need for specialized rural policy in America. These findings highlight the need to build a healthy rural economy and offers insights into the problems that push rural families to bankruptcy, a financial breaking point.