What are the positive and normative implications of eliminating bankruptcy protection for indebted individuals? Without bankruptcy protection, creditors can collect on defaulted debt to the extent permitted by wage garnishment laws. The elimination lowers the default premium on unsecured debt...

By compiling a novel data set from bankruptcy court dockets recorded in Delaware between 2001 and 2002, the authors build and estimate a structural model of Chapter 13 bankruptcy. This allows them to quantify how key debtor characteristics, including whether they are experiencing bankruptcy for...

Bankruptcy reform in 2005 eliminated debtors' ability to discharge private student loan debt in bankruptcy. This law aimed to reduce costly defaults by diminishing the perceived incentive of some private student loan borrowers to declare bankruptcy even if they had sufficient income to service...

Revised Oct 2016. We test the hypothesis that income inequality causes financial distress. To identify the effect of income inequality, we examine lottery prizes of random dollar magnitudes in the context of very small neighborhoods (13 households on average). We find that a C$1,000 increase in...

Commitment device theory suggests that temptations to consume addictive goods could be reduced by the regulatory removal of geographically close environmental cues. We provide new evidence on this hypothesis using a quasi-natural experiment, in which gambling regulators removed slot machines...

The activities of third-party debt collectors affect millions of borrowers. However, relatively little is known about their impact on consumer credit. To study this issue, I investigate whether state debt collection laws affect the ability of third-party debt collectors to recover delinquent...

We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic...

This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the current recession. When debtors file for bankruptcy, credit card debt and other types of debt are discharged — thus loosening debtors' budget constraints. Homeowners in financial...

In many countries, lenders are restricted in their access to information about borrowers' past defaults. The authors study this provision in a model of repeated borrowing and lending with moral hazard and adverse selection. They analyze its effects on borrowers' incentives and access to credit,...

This paper uses a unique data set to shed new light on the credit availability and credit performance of consumer bankruptcy filers. In particular, our data allow us to distinguish between Chapter 7 and Chapter 13 bankruptcy filings, to observe changes in credit demand and supply explicitly, to...