Econometric Optimization of Fresh Start Policy

"What is the optimal consumer bankruptcy law?" Now that's an abstract first line that grabs my attention! I've thought about this question for most of my academic career, and I've struggled to find solid bases for an answer. Now, Indiana Univeristy economist Gray Gordon offers an intriguing if difficult to understand possibility. In his paper, Optimal Bankruptcy Code: A Fresh Start for Some, Gordon actually quantifies the sweet spot: (1) an optimal system offers a discharge of debt (a constant refrain in policy papers, e.g., here and here), (2) it does so for households whose debt is 2.6 times their endowment, and (3) this optimal system results in a welfare gain of 12.2%. The conclusion is nowhere near as confusing for a non-economist (like me) as the proof, expressed in inscrutable Greek-symbol-filled equations which occupy the bulk of the paper. But this paper offers a rock solid answer to a question that has plagued Europe, in particular, for many years--how does one define "overindebtedness" and therefore the proper entry criterion for personal debt relief. Gordon's answer is very powerful, though I wonder how compelling the econometrics are behind these hard numbers. I'm not at all qualified to critique Gordon's proofs, but I'm a bit skeptical in light of Gordon's observation that "[r]elative to the U.S., the optimal policy results in a four-fold increase in the bankruptcy filing rate and a thirty-fold increase in debt." Whoah! Anyone care to comment on what could be a really groundbreaking new approach?