Modern personal bankruptcy is becoming an emotional and algorithmic phenomenon rather than a financial one.
April 1, 2026
Original Paper
Economic Psychology and Algorithms in the Genesis of Modern Insolvency
SSRN · 6506906
The Takeaway
The paper argues that 'the heuristic debtor' is a new category of person whose insolvency is caused by algorithmic architectures (like BNPL and gamified credit apps) specifically designed to exploit cognitive vulnerabilities. This challenges the legal assumption that debt is a result of rational agents making bad choices, suggesting instead that it is a systemic product of digital design.
From the abstract
Ćontemporary insolvency can no longer be understood from the classic patrimonial categories. In the digital economy, indebtedness arises from the interplay between cognitive vulnerabilities and algorithmic architectures designed to amplify them. Phenomena such as doom spending, consumer gamification, and frictionless credit models (BNPL, digital microcredits) show that financial decision-making is shifting into an emotional and impulsive terrain, mediated by systems that shape expectations and e