Our Way Out | Rethinking Debt By Its Limits
The RESOLVENCY project reimagines debt governance by focusing on its limits—specifically, the moment of debt default. When a debtor appears over-indebted or illiquid, creditors typically rush to collect what they are owed. This scramble for repayment can collapse the debtor’s remaining potential and undermine trust in the broader economy. Insolvency law offers a legal response to this collective action problem: it freezes credit relations and provides collective mechanisms for debt restructuring or the distribution of assets.
Yet insolvency law does far more than to manage default. It establishes the hierarchy of creditor claims—often determined by factors such as collateral—and can ultimately discharge the debtor from remaining obligations. These "insolvency factors" shape the market value of assets, define what counts as secure and tradable capital, and influence the broader architecture of (debt) markets.
Traditionally, lawyers and economists have viewed insolvency law as a technical instrument to resolve creditor competition. In contrast, the RESOLVENCY project seeks to uncover its full normative and institutional potential. We argue that insolvency law is not merely a mechanism of crisis management, but a constitutive force in the formation and regulation of our contemporary debt economies.
This shift from a reactive insolvency to a constitutive resolvency paradigm opens up new possibilities. Resolvency signals the reintegration of overburdened debtors into economic life, the resilience of social and credit relations, and the reintroduction of political, cultural, and ecological perspectives into the collective governance of debt. It invites us to think of debt not only as a financial instrument, but as a social medium that must remain adaptable, reflexive, and just.