A Study of Consumers' Post-Discharge Finances: Struggle, Stasis, or Fresh-Start?

American Bankruptcy Institute Law Review

37 Pages Posted: 7 Aug 2008  

Jay Zagorsky

Ohio State University (OSU) - Center for Human Resource Research

Lois R. Lupica

University of Maine School of Law

Date Written: Spring 2008

Abstract

The postwar U.S. has experienced an extremely sharp rise in consumer bankruptcies. What happens to these consumers financially after filing for bankruptcy? Do filers catch up with their non-filing peers, stay at a constant distance or fall further behind over time? This question is investigated empirically using a new set of financial and bankruptcy data obtained from a large national random survey of bankruptcy filers and non-filers. Along some simple financial dimensions, such as car ownership, bankruptcy filers are not disadvantaged compared to non-filers. Along more complex indicators, such as total income and net worth, filers catch up over time but it takes between a dozen and two dozen years. The theoretical justification for allowing consumers to file bankruptcy is to afford debtors a fresh start, in essence, a restoration of financial well-being. Results suggest the U.S. bankruptcy system does not immediately provide consumers with a fresh start; the average filer takes many years to restore their financial well-being.

Suggested Citation

Zagorsky, Jay and Lupica, Lois R., A Study of Consumers' Post-Discharge Finances: Struggle, Stasis, or Fresh-Start? (Spring 2008). American Bankruptcy Institute Law Review. Available at SSRN: https://ssrn.com/abstract=1208151

Jay Zagorsky

Ohio State University (OSU) - Center for Human Resource Research ( email )

921 Chatham Lane
Suite 200
Columbus, OH 43221
United States

Lois R. Lupica (Contact Author)

University of Maine School of Law ( email )

246 Deering Avenue
Portland, ME 04102
United States

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