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Lawyers Steer Clients Toward Lucrative Filings: Evidence from Consumer Bankruptcies

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  • Frank McIntyre
  • Daniel M. Sullivan
  • Laura Summers

Abstract

Consumers often rely on lawyers to make complicated legal decisions, though in many cases the lawyer's financial interests are at odds with those of the client. We consider this general problem in the context of consumers filing for bankruptcy. Lawyers advise debtors on whether to file the cheaper Chapter 7 filing or the more expensive Chapter 13 filing. Bankruptcy courts that allow lawyers to charge more for Chapter 13 bankruptcy see a significantly larger fraction of Chapter 13 filings (elasticity of 0.3). This is true controlling for a host of demographic controls at the zip code level, as well as with state fixed effects and district policy controls. Our estimates suggest that 5.4% of cross-district variation in relative Chapter 13 rates could be eliminated by harmonizing relative fees.

Suggested Citation

  • Frank McIntyre & Daniel M. Sullivan & Laura Summers, 2015. "Lawyers Steer Clients Toward Lucrative Filings: Evidence from Consumer Bankruptcies," American Law and Economics Review, American Law and Economics Association, vol. 17(1), pages 245-289.
    • Handle: RePEc:oup:amlawe:v:17:y:2015:i:1:p:245-289.
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    File URL: http://hdl.handle.net/10.1093/aler/ahv004
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    Cited by:

    1. Pattison, Nathaniel & Millimet, Daniel L., 2023. "A Tale of Two Bankruptcies: Geographic Differences in Bankruptcy Chapter Choice," IZA Discussion Papers 16105, Institute of Labor Economics (IZA).
    2. John H. Beck & Donald D. Hackney & John Hackney & Matthew Q. McPherson, 2014. "Regional Differences in Chapter 13 Filings: Southern Legal Culture or Religion?," Review of Social Economy, Taylor & Francis Journals, vol. 72(2), pages 186-208, June.
    3. Rajashri Chakrabarti & Nathaniel Pattison, 2019. "Auto Credit and the 2005 Bankruptcy Reform: The Impact of Eliminating Cramdowns," The Review of Financial Studies, Society for Financial Studies, vol. 32(12), pages 4734-4766.
    4. Donald D. Hackney & Daniel Friesner & Matthew Q. McPherson, 2015. "Do Debtors Have an Obvious Financial Rationale for Filing a Chapter 13 Bankruptcy Petition?," Economics Bulletin, AccessEcon, vol. 35(3), pages 1572-1588.

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