IDEAS home Printed from https://ideas.repec.org/p/red/sed004/253.html
   My bibliography  Save this paper

Evidence on the Effect of US Consumer Bankruptcy Exemptions

Author

Listed:
  • Charles Grant

Abstract

Bankruptcy (defaulting on one's debts) acts as insurance if it allows default in cases of negative income shocks. However, if debts are not fully recoverable, lenders may instead react by limiting the amount that they allow households to borrow. This upper borrowing limit will increase as the punishment for defaulting increases. The US provides a natural test for these effects since rules about which assets may be kept by the debtor (the exemptions) when filing for bankruptcy differ dramatically across the different states. While increasing the level of these exemptions causes less debt to be held by consumers, empirical results also show that consumption becomes much smoother, suggesting that these bankruptcy exemptions help households insure themselves against adverse shocks

Suggested Citation

  • Charles Grant, 2004. "Evidence on the Effect of US Consumer Bankruptcy Exemptions," 2004 Meeting Papers 253, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:253
    as

    Download full text from publisher

    File URL: http://www.iue.it/FinConsEU/Charles/bank12.pdf
    File Function: main text
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hülya Eraslan & Gizem Koşar & Wenli Li & Pierre‐Daniel Sarte, 2017. "An Anatomy Of U.S. Personal Bankruptcy Under Chapter 13," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 671-702, August.

    More about this item

    Keywords

    Consumption; Bankruptcy Law; Debt; Insurance;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K19 - Law and Economics - - Basic Areas of Law - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed004:253. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.