Personal Liabilities and Bankruptcy Reform: An International Perspective

Michelle Alexopoulos and Ian Domowitz

International Finance, 1998, vol. 1, issue 1, 127-159

Abstract: We document international changes in bankruptcy law pertaining to personal liabilities. Implications are investigated within a theoretical model, focusing on interest rates, employment, and bankruptcy incidence. Small‐firm employment rises as bankruptcy law becomes more stringent, but interest rates may increase. A tightening of bankruptcy law may not decrease bankruptcy probabilities, except in the stark case of no debt discharge. Strict rules pertaining to debt repayment are desirable, as opposed to court or pre‐court discretion. Pending international agreements with respect to cross‐border insolvency may lower interest rates, but do not necessarily imply a decrease in bankruptcy incidence.

Date: 1998
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