Personal Financial Decisions: A Study of Changes in Homestead Exemption Levels and Consumer Bankruptcy Choices

Benjamin B Boozer, S. Keith Lowe and Robert J. Landry

The International Journal of Business and Finance Research, 2014, vol. 8, issue 4, 17-26

Abstract: This study examines the impact of changes in homestead exemption levels upon the consumer bankruptcy filing rate. This relationship is examined through the creation of an interrupted time-series multiple regression model. Regression analyses were implemented using several predictor variables to detect any relationship between changes in homestead exemption levels and their effect on the applicable dependent variable. Four dependent bankruptcy variables were employed: per capita total consumer-bankruptcy filings, per capita Chapter 7 consumer-bankruptcy filing rate, per capita Chapter 13 bankruptcy filing rate, and Chapter 7 consumer-bankruptcy filings as a percentage of aggregate consumer-bankruptcy filing rates. Analyses indicate that consumers clearly prefer utilizing a Chapter 7 discharge method over Chapter 13. Additionally, these consumers do not find changes in homestead exemption levels as a source of wealth insurance to the extent that filings are significantly increased. Finally, consumer filing rates do not appear to be positively affected by the wealth effect that a risk-averse consumer might choose in bankruptcy choice.

Keywords: Bankruptcy; Chapter 7; Chapter 13; Homestead Exemption (search for similar items in EconPapers)
JEL-codes: G K (search for similar items in EconPapers)
Date: 2014
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