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Financial benefits, travel costs, and bankruptcy

Author

Listed:
  • Vyacheslav Mikhed
  • Barry Scholnick

Abstract

We are the first to show that the cost of personal bankruptcy filers traveling to their bankruptcy trustees affects bankruptcy choices. We use detailed balance sheet, income statement, and location data from 400,000 Canadian bankruptcies. To control for endogenous trustee selection, we use the location of local government offices as an instrument for the location of bankruptcy trustees (while filers interact with trustees, and trustees interact with local government, filers do not interact with the local government). We find that increased travel costs reduce the number of filings. Furthermore, for those individuals who do file, we find that their increased travel costs need to be compensated by increased financial benefits of bankruptcy. Filers without cars (higher travel costs), as well as those with jobs (higher opportunity costs), receive larger per-kilometer financial benefits from bankruptcy.

Suggested Citation

  • Vyacheslav Mikhed & Barry Scholnick, 2014. "Financial benefits, travel costs, and bankruptcy," Working Papers 14-18, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:14-18
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    Cited by:

    1. Jason Allen & Kiana Basiri, 2016. "The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit," Staff Working Papers 16-26, Bank of Canada.

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    More about this item

    Keywords

    Bankruptcy; Travel Costs;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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