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Desperate vs. Deadbeat: Can We Quantify the Effect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?


  • Christian E. Weller
  • Amanda Logan
  • Bernard Morzuch


For decades, personal bankruptcies increased in the U.S., either reflecting growing economic distress of families or a declining stigma associated with filing for bankruptcy. In a nod to the latter argument, the U.S. Congress passed the Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005 (BAPCPA), after bankruptcies had grown to record high rates. The assumption was that with the new law many if not most bankruptcies would eventually disappear since they supposedly were the result of a “bankruptcy of convenience”. The U.S. bankruptcy rate fell indeed sharply after the law went into effect, but increased quickly again afterwards. By the end of 2007, the U.S. bankruptcy rate exceeded all levels recorded during the 1980s, and approached the levels prevalent during the early 1990s. But it remains unclear how much of these changes resulted from BAPCPA and what was attributable to other factors. In this Working Paper, the authors establish a benchmark level of the U.S. bankruptcy rates after 2005 that likely would have been observed if the law had not changed. They then compare the actual U.S. bankruptcy rate to the benchmark for 2007 to provide a sense of the effectiveness of BAPCPA.

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  • Christian E. Weller & Amanda Logan & Bernard Morzuch, 2008. "Desperate vs. Deadbeat: Can We Quantify the Effect of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?," Working Papers wp185, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp185

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    1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    2. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    3. Ashley, Richard, 1985. "On the Optimal Use of Suboptimal Forecasts of Explanatory Variables," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(2), pages 129-131, April.
    4. Fisher, Franklin M, 1970. "Tests of Equality Between Sets of Coefficients in Two Linear Regressions: An Expository Note," Econometrica, Econometric Society, vol. 38(2), pages 361-366, March.
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