Bankruptcy Exemptions and the Market for Mortgage Loans
The recent explosion in personal bankruptcy filings has motivated research into whether credit markets are being adversely affected by generous legal provisions. Empirically, this question is examined by comparing credit conditions and bankruptcy exemptions across states. We note that the literature has focused on aggregate household credit, making no distinction between secured and unsecured credit. We argue that such aggregation obscures important differences in forms of credit. Most significant, property exemptions do not prevent the home mortgage creditor from foreclosing on the home if not fully repaid. This makes it unlikely that the home mortgage lender will be adversely affected by the exemptions. We argue further that some property exemptions, in fact, may have some beneficial effects for home mortgage lenders. Using both household-level data and state-level data, we show that in the 1990s high exemption levels have not tended to increase mortgage rates or increase the probability of being denied a mortgage. Copyright 1999 by the University of Chicago.
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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.:
- 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.
- Stephen D. Williamson, 1987.
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Oxford University Press, vol. 102(1), pages 135-145.
- Stephen D. Williamson, 1984. "Costly Monitoring, Loan Contracts and Equilibrium Credit Rationing," Working Papers 572, Queen's University, Department of Economics.
- J. A. Hausman, 1976.
"Specification Tests in Econometrics,"
185, Massachusetts Institute of Technology (MIT), Department of Economics.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- 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 205-231, October.
- White, M.J., 1998. "Why Don't More Households File for Bankruptcy?," Papers 98-03, Michigan - Center for Research on Economic & Social Theory.
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