The inhibitory effect of personal bankruptcy laws on household debt: Evidence from a pilot program

Xincheng Xu and Buguo Xu

Finance Research Letters, 2025, vol. 81, issue C

Abstract: This research aims to gain insights into the impact of personal bankruptcy law on household debt. Based on a large-scale survey in China from 2015 to 2023, this paper finds that personal bankruptcy law effectively inhibits the spiral growth of household debt. This effect is even evident in households with higher education, more children, and households in cities. Taking advantage of a pilot program, the difference-in-differences approach mitigates potential endogeneity and confirms the substantial impact of personal bankruptcy law. Overall, this paper contributes to the research on household finance and the implications of personal bankruptcy law.

Keywords: Personal bankruptcy law; Household debt; Difference-in-differences; Pilot program (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007925

DOI: 10.1016/j.frl.2025.107533

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