RESOLVENCY
RESOLVENCY explores how debt can be reimagined as a more sustainable socio-economic medium– one that enables democratic deliberation of corporate, consumer and sovereign debt relations. RESOLVENCY understands debt as most basic socio-economic medium and proposes to rethink it from its limits. Moving from an insolvency paradigm to one of re-solvency opens up the regulatory and reflexive potential of insolvency law. This shift positions insolvency not as an end-point, but as an anchor for a renewed, deliberative understanding of debt—RE:DEBT.
If money makes the world go 'round, then debt speeds it up. But what is debt? Debt and credit are contract-based bonds that enable extended social reciprocity over time, forming a logical pair of formalized exchanges. A creditor provides something to a debtor, who, in turn, owes the creditor and promises to return something—usually of equivalent value—at a later time. At its core, debt gives the debtor time—typically quantified in money—to fulfill that obligation. In this sense, debt buys time in exchange for interest. Even money itself could be understood as social debt or credit relation where the currency represents future (time-delayed) exchange value.
Within a paradigm of perpetual growth, debt inherently threatens sustainable development. Economic expansion (on a state, corporate or personal level) today is mostly financed through debt, which is expected to be repaid by future growth—an assumption that becomes unstable when ecological and social limits are ignored. Debt bubbles fuel financial and economic crises, as seen in the global financial collapse of 2008. The natural limits to planetary growth—such as climate change—are absent from conventional economic calculations. So, too, are the rising inequalities both globally and within most national societies. Democratic governance and actors' autonomy suffer under the structural power of overwhelming economic debt. In short, an unlimited and reductionist financial conception of debt contributes to economic, ecological, cultural, and political unsustainability. Decoupled financial markets (e.g., derivatives trading), imperialistic debt politics, and the explosion of public and private debt (e.g., in response to the pandemic-induced recession) only further entrench the global debt cycle.
At a glance
Research Project
RESOLVENCY – A Global Theory of Reflexive Debt (Deliberation)
Project Lead
Prof. Dr. Bertram Lomfeld, Freie Universität Berlin
bertram.lomfeld@fu-berlin.de
Funding
European Research Council (ERC)
Grant Agreement No. 950427
Perspectives
RESOLVENCY examines and compares how debt can be understood as a socio-economic medium across diverse debtor groups. Debtor-specific conditions influence not only the form and dynamics of the negotiation process, but also which rationalities—traditionally marginalized in conventional debt discourse—have to be given weight within debtor-creditor relationships.
Project Structure
RESOLVENCY adopts a multidimensional, interdisciplinary approach to rethinking debt governance. As background analysis, it reflects the role of debt relations within the societal development of the Anthropocene (PS 0). It systematically compares corporate (PS 1) and personal (PS 2) insolvency laws across jurisdictions using both qualitative and quantitative methods, aiming to identify potential leverage points for more sustainable debt regulation. Complementing this legal-comparative core, economic experiments and political economy evaluations (PS 7) examine the complex interplay between debt and law.
To develop a theory of reflexive debt (RE:DEBT)—that is, a more sustainable, flexible, and deliberative approach to debt governance—the project incorporates socio-philosophical inquiry. This includes examining the normative credit ontology of money (PS 5) and the political grammar of legal deliberation in credit markets (PS 6).
Further, RESOLVENCY explores empirical and conceptual traces of reflexive debt across diverse domains: anthropological foundations of debt governance (PS 9), state-contingent debt instruments (PS 4), and debt-for-nature swaps in sovereign debt contexts (PS 3). It also investigates alternative socio-economic debt structures, such as social credit systems (PS 8).
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.
Where Are We Heading? | Reflexive Debt Deliberation
When credit fails to produce the expected growth, social conflict is often the result. Resolving such debt conflicts requires more than the enforcement of private claims—it demands creditor consent on how remaining assets are distributed and a collective procedure that accounts for the interests of all affected parties. These include not only debtors and creditors, but also employees, residents, local communities, and the environment.
RESOLVENCY aims to analyze and evaluate legal structures for democratic debt deliberation, capable of navigating these complex multi-stakeholder settings. Different distributive models are tested in economic game-theoretical experiments to assess their viability, efficiency, and fairness.
Substantively, the project seeks to index sustainable debt, integrating ecological and social parameters into the logic of debt governance. It also explores how insolvency factors—such as creditor hierarchies, collateral rules, or discharge conditions—can be reshaped to incentivize more sustainable lending and borrowing practices. Some causal assumptions underlying these interrelations, including potential ex-ante effects on credit markets, are empirically tested through experimental modeling.
Ultimately, the project elaborates on a theory of reflexive debt (RE:DEBT)—a normative framework that links the reintegration of social concerns into debt restructuring procedures with more sustainable forms of capital valuation and credit design.