How does bankruptcy affect the dynamics of aggregate consumption? We quantify the trade-off between the insurance and … creditworthiness effects of bankruptcy in response to tighter credit. We show that bankruptcy dampens the effect of tighter credit on … market reduces consumption smoothing over time and slows the recovery. Default costs play a crucial role in bankruptcy …

This paper studies the optimal determination of bankruptcy exemptions for risk averse borrowers who use unsecured … sufficient to determine whether a bankruptcy exemption level is optimal, or should be increased or decreased. These variables are …' leverage, the borrowers' bankruptcy probability, and the change in bankrupt borrowers' consumption. An application of the …

access to unsecured credit (because of bankruptcy costs) and aggregate shocks, we show that the cyclical behavior of … credit match the sizes of credit and bankruptcy volatilities. We also find that when the right to file for bankruptcy does …