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Bankruptcy Lawyers and Credit Recovery

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Abstract

The author studies how bankruptcy law firm advertisements affect credit recovery of households in financial distress. Exploiting the border discontinuity strategy associated with the geographic unit in which local TV advertisements are sold, the author empirically uncovers bankruptcy filings and credit recovery related to exogenous variations in bankruptcy law firm advertisements. The author first documents a significant advertising effect on filing rates and shows that advertising-induced filers are similar to existing filers. The author then finds a positive effect of advertisements on credit outcomes including credit score, new homeownership, and foreclosure. The author interprets these findings as evidence that lawyers address information frictions in households’ assessment of the bankruptcy option.

Suggested Citation

  • Brian Jonghwan Lee, 2024. "Bankruptcy Lawyers and Credit Recovery," Working Papers 24-10, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:98037
    DOI: 10.21799/frbp.wp.2024.10
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    References listed on IDEAS

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    More about this item

    Keywords

    Personal bankruptcy; lawyers; intermediaries; advertising;
    All these keywords.

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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