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Personal Bankruptcy and Credit Supply and Demand

  • Gropp, Reint
  • Scholz, John Karl
  • White, Michelle J

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 benefiting less-well-off borrowers, the authors' results using data from the 1983 Survey of Consumer Finances suggest that 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. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets. Interest rates on automobile loans for low-asset households also appear to be higher in high exemption states. Copyright 1997, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 112 (1997)
Issue (Month): 1 (February)
Pages: 217-51

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Handle: RePEc:tpr:qjecon:v:112:y:1997:i:1:p:217-51
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  1. F. Thomas Juster & Kathleen A. Kuester, 1990. "Differences in the measurement of wealth, wealth inequality, and wealth composition obtained from alternative U.S. wealth surveys," Finance and Economics Discussion Series 116, Board of Governors of the Federal Reserve System (U.S.).
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  4. Charles A. Luckett, 1988. "Personal bankruptcies," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 591-603.
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  7. Dye, Ronald A, 1986. "An Economic Analysis of Bankruptcy Statutes," Economic Inquiry, Western Economic Association International, vol. 24(3), pages 417-28, July.
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  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.
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  11. 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.
  12. 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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  15. Richard T. Curtin & Thomas Juster & James N. Morgan, 1989. "Survey Estimates of Wealth: An Assessment of Quality," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 473-552 National Bureau of Economic Research, Inc.
  16. 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.
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