CONSUMER BANKRUPTCY LAW FOR ETHIOPIA: LESSONS FROM UNITED STATES AND GERMANY

Abstract

After deregulation of consumer credit and resultant availability, over-indebtedness
became a problem for many countries. As a response to this, many jurisdictions
have departed from their “merchant-oriented” bankruptcy law to include
consumers giving them discharge and fresh start. Germany, United States, United
Kingdom and France are some of the countries that have adopted consumer
bankruptcy laws after experiencing over-indebtedness problem. In Ethiopia, credit
market is still highly regulated. Nevertheless, consumers have access to credit and
are potentially exposed to risk of indebtedness and there is a move towards that.
Adopting consumer bankruptcy law can also be an ex ante solution. More
importantly, introducing such law to Ethiopia is more convincing based on the
entrepreneurship, social insurance, development policy and rehabilitative function
of discharge and fresh start. The author argues that Ethiopia should follow the
global trend by adopting consumer bankruptcy law with adequate discharge and
fresh start. This law should be based on German model, repayment plan and then
discharge: repayment of certain portion of the debt and covering cost of
proceeding by the debtor.