IDEAS home Printed from
   My bibliography  Save this article

Do Debtors Have an Obvious Financial Rationale for Filing a Chapter 13 Bankruptcy Petition?


  • Donald D. Hackney

    () (Gonzaga University)

  • Daniel Friesner

    () (North Dakota State University)

  • Matthew Q. McPherson

    () (Gonzaga University)


The decision to file for bankruptcy, and more specifically to file for Chapter 13 bankruptcy protection, is a major financial decision that impacts the debtor's financial well-being for several years. Under financial economic theory, debtors should make informed choices, which include having clear rationale for making specific chapter filing choices. Based on those choices, expected outcomes accrue to the debtor. Moreover, rationales for the debtor's decisions should be revealed as debtors disclose their assets, liabilities, income and other salient characteristics in the filing process. The common rationales, as characterized by the outcomes accruing from making a choice to file under Chapter 13, are explored in this manuscript. Using a sample of nearly 300 Chapter 13 bankruptcy filings in the Eastern Washington Bankruptcy Court District, approximately 32 percent of all filers accrue no obvious financial benefit from filing under Chapter 13, and would be been better off financially by filing under Chapter 7. These filings are typically attributed to local norms and business practices that occur within a community, also known as “legal culture†. This analysis suggests that legal culture plays a very significant role in Chapter 13 bankruptcy chapter filing choices.

Suggested Citation

  • 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.
  • Handle: RePEc:ebl:ecbull:eb-14-00619

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Reint Gropp & John Karl Scholz & Michelle J. White, 1997. "Personal Bankruptcy and Credit Supply and Demand," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 217-251.
    2. Frank McIntyre & Daniel M. Sullivan & Laura Summers, 2015. "Lawyers Steer Clients Toward Lucrative Filings: Evidence from Consumer Bankruptcies," American Law and Economics Review, Oxford University Press, vol. 17(1), pages 245-289.
    3. Kartik B. Athreya, 2004. "Shame as it ever was : stigma and personal bankruptcy," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 90(Spr), pages 1-19.
    4. Wenli Li, 2001. "To forgive or not to forgive : an analysis of U.S. consumer bankruptcy choices," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 1-22.
    5. Donald Hackney & Matthew McPherson & Daniel Friesner & Candice Correia, 2010. "Domestic Support Obligations and Bankruptcy: An Analysis of Chapter 13 Filings," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 457-458, December.
    6. Jon P. Nelson, 1999. "Consumer Bankruptcy And Chapter Choice: State Panel Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 17(4), pages 552-566, October.
    7. Lefgren Lars & McIntyre Frank L & Miller Michelle, 2010. "Chapter 7 or 13: Are Client or Lawyer Interests Paramount?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-46, September.
    8. Lars Lefgren & Frank McIntyre, 2009. "Explaining the Puzzle of Cross-State Differences in Bankruptcy Rates," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 367-393, May.
    9. Ning Zhu, 2011. "Household Consumption and Personal Bankruptcy," The Journal of Legal Studies, University of Chicago Press, vol. 40(1), pages 1-37.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • K3 - Law and Economics - - Other Substantive Areas of Law


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-14-00619. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.