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The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit

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  • Jason Allen
  • Kiana Basiri

Abstract

We examine the impact of the 2009 amendments to the Canadian Bankruptcy and Insolvency Act on insolvency decisions. Rule changes steered debtors out of division I proposals and into the more cost-effective division II proposals. This also led to a significant substitution out of bankruptcies and into proposals. Using credit bureau data on credit card limits we test, but do not find, any evidence that this substitution into more creditor-friendly insolvencies had any impact on average lending behavior, either immediately following the amendments or up to six years removed.

Suggested Citation

  • Jason Allen & Kiana Basiri, 2016. "The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit," Staff Working Papers 16-26, Bank of Canada.
  • Handle: RePEc:bca:bocawp:16-26
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Credit and credit aggregates; Financial Institutions; Financial system regulation and policies;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G2 - Financial Economics - - Financial Institutions and Services
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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