Bankruptcy Reform and Homeownership Risk

Abstract:     
The personal bankruptcy system is part of a larger system of household risk management. Much of the discussion of personal bankruptcy has focused on bankruptcy's insurance role with respect to unsecured obligations like credit cards and medical bills. In this symposium contribution, I redirect the analysis by evaluating the bankruptcy system, and particularly chapter 13, as a mortgagor protection law. In particular, I explore how bankruptcy might be encouraging and prolonging unsustainable homeownership. I then consider the impact of two recent revisions to the Bankruptcy Code relating to credit counseling and repeat filers. I conclude that these revisions may improve the system modestly by enabling sorting based on homeownership sustainability.

Number of Pages in PDF File: 24

Keywords: bankruptcy, homeownership, foreclosure, social insurance

JEL Classification: K19

Accepted Paper Series