Abstract

http://ssrn.com/abstract=903355
 
 

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Less Stigma or More Financial Distress: An Empirical Analysis of the Extraordinary Increase in Bankruptcy Filings


Elizabeth Warren


Harvard Law School

Jay Lawrence Westbrook


University of Texas at Austin School of Law

Teresa A. Sullivan


University of Virginia - Office of the President

May 2006


Abstract:     
A central concern in domestic economic policy has been the great increase in consumer bankruptcy filings since 1980. That concern was a major cause of the adoption of the 2005 amendments to the Bankruptcy Code. We analyze the data from three studies of consumer bankruptcy over twenty years to learn more about the causes of that increase. One consistent claim has been that a decline in reputational loss (stigma) has made filing for bankruptcy easier, thus explaining the rise in filings. The principal competing claim has been that increased filings arise from increased financial distress. We find that the declining-stigma hypothesis is implausible because the data show that consumer bankrupts are even more indebted now than their counterparts were in 1981 and 1991 and that there is no identifiable group of less-indebted bankrupts that were tempted into bankruptcy by reduced reputational costs. Those data and other factors support an inference that the stigma of bankruptcy may have increased over the past twenty years.

Number of Pages in PDF File: 41

Keywords: bankruptcy, consumer

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Date posted: May 19, 2006  

Suggested Citation

Warren, Elizabeth and Westbrook, Jay Lawrence and Sullivan, Teresa A., Less Stigma or More Financial Distress: An Empirical Analysis of the Extraordinary Increase in Bankruptcy Filings (May 2006). Available at SSRN: http://ssrn.com/abstract=903355 or http://dx.doi.org/10.2139/ssrn.903355

Contact Information

Elizabeth Warren (Contact Author)
Harvard Law School ( email )
1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-495-3101 (Phone)
617-496-6118 (Fax)
Jay L. Westbrook
University of Texas at Austin School of Law ( email )
727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1303 (Phone)
HOME PAGE: http://www.law.utexas.edu/webra/faculty/jwestbrook
Teresa A. Sullivan
University of Virginia (UVA) - Office of the President ( email )
Charlottesville, VA
United States
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