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Household borrowing after personal bankruptcy

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Author Info
Song Han
Geng Li

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Abstract

A large literature has examined factors leading to filing for personal bankruptcy, but little is known about household borrowing after bankruptcy. Using data from the Survey of Consumer Finances, we find that relative to comparable nonfilers, bankruptcy filers generally have more limited access to unsecured credit but borrow more secured debt post bankruptcy, and they pay higher interest rates on all types of debt. We also find that credit access and borrowing costs improve as more time passed since filing. However, filers experience renewed debt payment difficulties and accumulate less wealth, even many years after filing, suggesting that for many bankrupt households, debt discharges fail to generate an effective fresh start as intended by the law. Our estimate also provides empirical guidance for calibrating the equilibrium models of household credit.

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Publisher Info
Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2009-17.

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Date of creation: 2009
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Handle: RePEc:fip:fedgfe:2009-17

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Related research
Keywords: Bankruptcy ; Loans; Personal;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michelle J. White, 2007. "Bankruptcy Reform and Credit Cards," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 175-200, Fall.
  2. Sarah W. Carroll & Wenli Li, 2008. "The homeownership experience of households in bankruptcy," Working Papers 08-14, Federal Reserve Bank of Philadelphia. [Downloadable!]
  3. Filer, Larry & Fisher, Jonathan D., 2007. "Do liquidity constraints generate excess sensitivity in consumption? New evidence from a sample of post-bankruptcy households," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 790-805, December. [Downloadable!] (restricted)
  4. Athreya, Kartik B. & Simpson, Nicole B., 2006. "Unsecured debt with public insurance: From bad to worse," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 797-825, May. [Downloadable!] (restricted)
    Other versions:
  5. David K. Musto, 2004. "What Happens When Information Leaves a Market? Evidence from Postbankruptcy Consumers," Journal of Business, University of Chicago Press, vol. 77(4), pages 725-748, October. [Downloadable!]
  6. Scott Fay & Erik Hurst & Michelle J. White, 2002. "The Household Bankruptcy Decision," American Economic Review, American Economic Association, vol. 92(3), pages 706-718, June. [Downloadable!]
  7. Gropp, Reint & Scholz, John Karl & White, Michelle J, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 217-51, February.
    Other versions:
  8. Lin, Emily Y. & White, Michelle J., 2001. "Bankruptcy and the Market for Mortgage and Home Improvement Loans," Journal of Urban Economics, Elsevier, vol. 50(1), pages 138-162, July. [Downloadable!] (restricted)
  9. David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," Documentos de Trabajo 80, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
    Other versions:
    • David Laibson & Andrea Repetto & Jeremy Tobacman, 2000. "A Debt Puzzle," NBER Working Papers 7879, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Kartik Athreya, 2004. "Shame as it ever was : stigma and personal bankruptcy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 1-19. [Downloadable!]
  11. Ian Domowitz & Robert L. Sartain, 1999. "Determinants of the Consumer Bankruptcy Decision," Journal of Finance, American Finance Association, vol. 54(1), pages 403-420, 02. [Downloadable!] (restricted)
  12. White, M.J., 1998. "Why Don't More Households File for Bankruptcy?," Papers 98-03, Michigan - Center for Research on Economic & Social Theory.
  13. Fan, Wei & White, Michelle J, 2003. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Journal of Law & Economics, University of Chicago Press, vol. 46(2), pages 543-67, October.
  14. White, Michelle J, 1998. "Why Don't More Households File for Bankruptcy?," Journal of Law, Economics and Organization, Oxford University Press, vol. 14(2), pages 205-31, October.
  15. Michelle J. White, 2007. "Bankruptcy Reform and Credit Cards," NBER Working Papers 13265, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. David B. Gross, 2002. "An Empirical Analysis of Personal Bankruptcy and Delinquency," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 15(1), pages 319-347, March.
    Other versions:
  17. Larry H. Filer II & Jonathan D. Fisher, 2005. "The Consumption Effects Associated with Filing for Personal Bankruptcy," Southern Economic Journal, Southern Economic Association, vol. 71(4), pages 837-854, April.
  18. Kartik Athreya, 2005. "Equilibrium models of personal bankruptcy : a survey," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 73-98. [Downloadable!]
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This page was last updated on 2009-11-18.

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