Personal Bankruptcy and Credit Supply and Demand

Reint Gropp, John Scholz and Michelle White

No 5653, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefitting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. We also find evidence that interest rates on automobile loans for low-asset households are higher in high exemption states. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets.

Date: 1996-07
Note: PE
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Citations: View citations in EconPapers (124)

Published as Quarterly Journal of Economics (February 1997): 217-251.

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