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Financial benefits, travel costs, and bankruptcy

  • Mikhed, Vyacheslav

    (Federal Reserve Bank of Philadelphia)

  • Scholnick, Barry

    (University of Alberta)

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    We are the first to show that the cost of personal bankruptcy filers traveling to their bankruptcy trustees affects bankruptcy choices. We use detailed balance sheet, income statement, and location data from 400,000 Canadian bankruptcies. To control for endogenous trustee selection, we use the location of local government offices as an instrument for the location of bankruptcy trustees (while filers interact with trustees, and trustees interact with local government, filers do not interact with the local government). We find that increased travel costs reduce the number of filings. Furthermore, for those individuals who do file, we find that their increased travel costs need to be compensated by increased financial benefits of bankruptcy. Filers without cars (higher travel costs), as well as those with jobs (higher opportunity costs), receive larger per-kilometer financial benefits from bankruptcy.

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    Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 14-18.

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    Length: 48 pages
    Date of creation: 01 Jun 2014
    Date of revision:
    Handle: RePEc:fip:fedpwp:14-18
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