Who gets credit after bankruptcy and why? An information channel

Ethan Cohen-Cole, Burcu Duygan-Bump and Judit Montoriol-Garriga
Authors registered in the RePEc Author Service: Judit Montoriol Garriga ()

Journal of Banking & Finance, 2013, vol. 37, issue 12, 5101-5117

Abstract: Conventional wisdom holds that individuals find it difficult to obtain new credit post-bankruptcy. Using credit bureau data, we test this hypothesis and show that more than 90% of bankrupt individuals receive credit shortly after filing. Individuals with good credit history prior to filing have reduced credit availability after bankruptcy while those with ex-ante low credit quality receive more credit. We show that credit supplied to low quality individuals is severely curtailed during the financial crisis. We also find that the default probability on new debt increases after bankruptcy, especially among individuals with high ex-ante credit score. These findings are consistent with an information channel, in which bankruptcy reveals new information about a borrower’s credit quality.

Keywords: Personal bankruptcy; Credit access; Information and lending; Consumer finance (search for similar items in EconPapers)
JEL-codes: D14 I30 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426613003117
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:12:p:5101-5117

DOI: 10.1016/j.jbankfin.2013.07.036

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().