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Personal Bankruptcy and the Accumulation of Shadow Debt

Author

Listed:
  • Bronson Argyle
  • Benjamin Iverson
  • Taylor D. Nadauld
  • Christopher Palmer

Abstract

Compiling new liability-level data from the balance sheets of personal bankruptcy filers, we document that a sizable share of reported liabilities are “shadow debt,” debt not reported to credit bureaus that often arises from the non-payment of goods and services. We use this new data to evaluate how debtor cash flows affect when consumers file for bankruptcy and how much debt they have at bankruptcy. We find that filers respond to a quasi-exogenous $100 increase in monthly cash flows by delaying filing by an average of one month and by increasing unsecured indebtedness by $4,000 in the months preceding filing. A large share of the additional debt incurred by delaying filers is shadow debt, and our effects are concentrated among filers without employment, health, or marriage shocks.

Suggested Citation

  • Bronson Argyle & Benjamin Iverson & Taylor D. Nadauld & Christopher Palmer, 2021. "Personal Bankruptcy and the Accumulation of Shadow Debt," NBER Working Papers 28901, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28901
    Note: CF LE PE
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    Cited by:

    1. Mudrazija, Stipica & Butrica, Barbara A., 2023. "How does debt shape health outcomes for older Americans?," Social Science & Medicine, Elsevier, vol. 329(C).

    More about this item

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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