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Personal Bankruptcy and Credit Supply and Demand

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Author Info
Reint Gropp
John Karl Scholz
Michelle White

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Abstract

This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefitting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. We also find evidence that interest rates on automobile loans for low-asset households are higher in high exemption states. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5653.

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Date of creation: Jul 1996
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Publication status: published as Quarterly Journal of Economics (February 1997): 217-251.
Handle: RePEc:nbr:nberwo:5653

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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. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February. [Downloadable!] (restricted)
  2. Dye, Ronald A, 1986. "An Economic Analysis of Bankruptcy Statutes," Economic Inquiry, Oxford University Press, vol. 24(3), pages 417-28, July.
  3. Donald Cox & Tullio Japelli, 1993. "The Effect Of Borrowing Constraints On Consumer Liabilities," Boston College Working Papers in Economics 228, Boston College Department of Economics.
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  4. Peterson, Richard L. & Aoki, Kiyomi, 1984. "Bankruptcy filings before and after implementation of the bankruptcy reform law," Journal of Economics and Business, Elsevier, vol. 36(1), pages 95-105, February. [Downloadable!] (restricted)
  5. Charles A. Luckett, 1988. "Personal bankruptcies," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 591-603.
  6. Boot, Arnoud W A & Thakor, Anjan V & Udell, Gregory F, 1991. "Secured Lending and Default Risk: Equilibrium Analysis, Policy Implications and Empirical Results," Economic Journal, Royal Economic Society, vol. 101(406), pages 458-72, May. [Downloadable!] (restricted)
  7. Mankiw, N Gregory, 1986. "The Allocation of Credit and Financial Collapse," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 455-70, August. [Downloadable!] (restricted)
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  8. Rea, Samuel A, Jr, 1984. "Arm-breaking, Consumer Credit and Personal Bankruptcy," Economic Inquiry, Oxford University Press, vol. 22(2), pages 188-208, April.
  9. Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January. [Downloadable!] (restricted)
  10. Perraudin, William R M & Sorensen, Bent E, 1992. "The Credit-Constrained Consumer: An Empirical Study of Demand and Supply in the Loan Market," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 179-92, April.
  11. Bester, Helmut, 1994. "The Role of Collateral in a Model of Debt Renegotiation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 72-86, February. [Downloadable!] (restricted)
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  12. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September. [Downloadable!] (restricted)
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