Macroeconomic Effects of Bankruptcy & Foreclosure Policies

89 Pages Posted: 3 Jun 2011 Last revised: 19 Jun 2015

See all articles by Kurt Mitman

Kurt Mitman

Stockholm University; Centre for Economic Policy Research (CEPR)

Date Written: June 13, 2015


I develop an equilibrium model of housing and default to jointly analyze the effects of bankruptcy and foreclosure policies. Heterogeneous households have access to mortgages and unsecured credit and can default separately on both types of debt. I show that the interaction between foreclosure and bankruptcy decisions is crucial for explaining the observed cross-state correlation between default policies and default rates. I use the model to argue that a major recent reform to bankruptcy reduced bankruptcy rates but increased foreclosure rates, and that the Home Affordable Refinance Program reduced foreclosures during the Great Recession.

Keywords: Bankruptcy, Foreclosure, Housing, Default Risk, Household Debt

JEL Classification: E21, G11, K35, R21

Suggested Citation

Mitman, Kurt, Macroeconomic Effects of Bankruptcy & Foreclosure Policies (June 13, 2015). PIER Working Paper No. 11-015, Available at SSRN: or

Kurt Mitman (Contact Author)

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91

Centre for Economic Policy Research (CEPR)

United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics