THE INSTITUTION OF PERSONAL INSOLVENCY: PROBLEMS OF FORMATION AND ITS IMPACT ON THE CONSUMER CREDIT MARKET

The rapid expansion of consumer lending in transition economies has been accompanied by rising household over-indebtedness, creating a need for an orderly legal mechanism for resolving the insolvency of natural persons. Many countries, including Uzbekistan, have recently introduced a personal (individual) insolvency institution, but its formation faces substantial problems and its effect on the consumer credit market is ambiguous. This article examines the problems of forming the personal insolvency institution and assesses its impact on the consumer credit market. Using a mixed-methods design that combines comparative institutional analysis, descriptive statistics on consumer credit and household debt, and a multifactor model of consumer credit market outcomes, the study identifies the principal formation problems — weak procedural infrastructure, low public and creditor awareness, the risk of opportunistic (strategic) default, the absence of debt-counselling and out-of-court mechanisms, and uncertainty over exemption levels. The results indicate that the design of the personal insolvency regime exerts a measurable dual effect on the consumer credit market: an excessively debtor-friendly design raises moral hazard and lending risk and thereby tightens credit access and raises its price, while an excessively creditor-friendly design fails to deliver the efficiency and social benefits of a fresh start.