Author: Reint Gropp Publisher: ISBN: Category : Languages : en Pages : 48
Book Description
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.
Author: Reint Gropp Publisher: ISBN: Category : Bankruptcy Languages : en Pages : 64
Book Description
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.
Author: Song Han Publisher: DIANE Publishing ISBN: 1437987427 Category : Business & Economics Languages : en Pages : 44
Book Description
Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, the authors directly explore the supply of unsecured credit to consumers with the most conspicuous default risk those with a bankruptcy history. On average, over one-fifth of personalbankruptcy filers receive at least one offer in a given month, with the likelihood being even higher for those who filed for bankruptcy within the previous two years. However, offers to bankruptcy filers carry substantially less favorable terms than those to comparable consumers without a bankruptcy history, with higher interest rates, lower creditlimits, a greater likelihood of having an annual fee, and a smaller likelihood of having rewards or promotions. In addition, this analysis of credit terms typically disclosed only in the fine print suggests that offers to filers tend to include more "hidden" costs. Tables. This is a print on demand report.
Author: Jeremy Berkowitz Publisher: ISBN: Category : Bankruptcy Languages : en Pages : 26
Book Description
In this paper, we investigate how personal bankruptcy law affects small firms' access to credit. When a firm is unincorporated, its debts are personal liabilities of the firm's owner, so that lending to the firm is legally equivalent to lending to its owner. If the firm fails, the owner has an incentive to file for personal bankruptcy, since the firm's debts will be discharged and the owner is only obliged to use assets above an exemption level to repay creditors. The higher the exemption level, the greater is the incentive to file for bankruptcy. We show that supply of credit falls and demand for credit rises when non-corporate firms are located in states with higher bankruptcy exemptions. We test the model and find that, if small firms are located in states with unlimited rather than low homestead exemptions, they are more likely to be denied credit, they receive smaller loans and interest rates are higher. Results for non-corporate versus corporate firms suggest that lenders often disregard small firms' organizational status in making loan decisions
Author: David B. Gross Publisher: ISBN: Category : Bankruptcy Languages : en Pages : 66
Book Description
This paper uses a new panel data set of credit card accounts to analyze credit card delinquency, personal bankruptcy, and the stability of credit risk models. We estimate duration models for default and assess the relative importance of different variables in predicting default. We investigate how the propensity to default has changed over time, disentangling the two leading explanations for the recent increase in default rates - a deterioration in the risk - composition of borrowers versus an increase in borrowers' willingness to default due to declines in default costs, including social, information, and legal costs. Even after controlling for risk-composition and other economic fundamentals, the propensity to default significantly increased between 1995 and 1997. By contrast, increases in credit limits and other changes in risk-composition explain only a small part of the change in default rates. Standard default models appear to have missed an important time-varying default factor, consistent with a decline in default costs.
Author: John Hackney Publisher: ISBN: Category : Credit Languages : en Pages : 118
Book Description
In the first chapter of my dissertation I ask whether and how debtor protection affects aggregate small business credit quantity. Using comprehensive data on the number and amount of small business loans granted by commercial banks, and employing a robust difference-in-difference empirical design utilizing staggered shocks to personal bankruptcy exemptions, I find that increases in debtor protection increase the equilibrium quantity of small business credit in local regions. This finding is statistically significant and robust, despite competing demand and supply effects. I find that an average change in the homestead exemption results in a 1.1% increase in the number of small business loans in a local area (census tract), and a 2.5% increase in the total volume. The increase in quantity is concentrated in areas with presumably higher risk aversion and higher wealth, as predicted by the wealth insurance and collateral channels, respectively, and where local banks are better able to determine borrower type. These findings add depth to previous literature on debtor protection and small business financing that finds a tightening of credit terms, and suggest a greater role of the wealth insurance properties of personal bankruptcy law in determining aggregate small business credit quantity. In the second chapter, I ask how soft information affects the average organizational structure in local banking markets. I utilize the same staggered changes in state-level personal bankruptcy exemptions as exogenous shocks to the primary information frictions facing small business lenders: adverse selection and moral hazard. I find that an average increase in exemptions reduces the average distance between borrowers and lender headquarters, where presumably high-level capital allocation decisions are made, by 2.8-3.7%. I find that this result is weaker where social and cultural factors are likely to lessen the scope for moral hazard. Additionally, I find that areas whose bank branch headquarters are more distantly located experience adverse small business outcomes following exemption increases. These results are consistent with theories of soft information and organizational structure where flatter organizations maintain an information advantage over their hierarchical peers, and suggests that information frictions play a prominent role in shaping the competitive landscape of local markets by reducing competition from outsiders.
Author: Teresa A. Sullivan Publisher: Yale University Press ISBN: 0300251890 Category : Bankruptcy Languages : en Pages : 405
Book Description
Why have so many middle-class Americans encountered so much financial trouble? In this classic analysis of hard-pressed families, the authors discover that financial stability for many middle-class Americans is all too fragile. The authors consider the changing cultural and economic factors that threaten financial security and what they imply for the future vitality of the middle class. A new preface examines the persistent and new threats that have emerged since the original publication. "[A] fascinating, alarming study. . . . [This] chilling diagnosis of middle-class affliction demonstrates that we all may be only a job loss, medical problem or credit card indulgence away from the downward spiral leading to bankruptcy."--Publishers Weekly "A well-designed and carefully executed study."--Andrew Greeley, University of Chicago "The Fragile Middle Class, a well-written work of social science that is about as gripping as the genre gets, forces us to reevaluate notions about consumerism."--American Prospect
Author: Reint Gropp
Author: Reint Gropp
Author: Song Han
Author: Song Han
Author: Jeremy Berkowitz
Author: David B. Gross
Author: John Hackney
Author: 
Author: Amanda Ellen Dawsey
Author: Teresa A. Sullivan