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Impact of State Exemption Laws on Small Business Bankruptcy Decision

Author

Listed:
  • Sumit Agarwal
  • Souphala Chomsisengphet
  • Chunlin Liu
  • Lawrence Mielnicki

Abstract

To provide further insights into the current debate on consumer bankruptcy, this article empirically assesses the impact of state bankruptcy exemption levels on the likelihood of small business owners filing for bankruptcy. We estimate a proportional hazard model of small business bankruptcy using a unique panel data set of over 43,000 small business credit card holders over a two‐year period from May 2000 to May 2002. Overall, our results indicate that for every $10,000 increase in a state's homestead exemptions, the risk of small business bankruptcy increases by 8%. Moreover, we also find that the likelihood of small business owners filing for bankruptcy will rise by 4% with a $1000 increase in personal property exemption levels.

Suggested Citation

  • Sumit Agarwal & Souphala Chomsisengphet & Chunlin Liu & Lawrence Mielnicki, 2005. "Impact of State Exemption Laws on Small Business Bankruptcy Decision," Southern Economic Journal, John Wiley & Sons, vol. 71(3), pages 620-635, January.
    • Handle: RePEc:wly:soecon:v:71:y:2005:i:3:p:620-635
    DOI: 10.1002/j.2325-8012.2005.tb00663.x
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    References listed on IDEAS

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