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Chapter 7 or 13: Are Client or Lawyer Interests Paramount?

Berkeley Electronic Journal of Economic Analysis and Policy Advances, Vol. 10, No. 1, 2010

46 Pages Posted: 11 Jan 2012  

Lars John Lefgren

Brigham Young University - Department of Economics

Frank McIntyre

Rutgers Business School Newark and New Brunswick

Michelle M. Miller

Loyola Marymount University - Department of Economics

Date Written: 2010

Abstract

Households often rely on professionals with specialized knowledge to make important financial decisions. In many cases, the professional’s financial interests are at odds with those of the client. We explore this problem in the context of personal bankruptcy. OLS, fixed effects, and IV estimates all show that attorneys play a central role in determining whether households file under Chapter 7 or Chapter 13 of the bankruptcy code. We present evidence suggesting that some attorneys maximize profits by steering households into Chapter 13 bankruptcy even when the households’ objective financial benefits are low and the probability of case dismissal is high. An attorney-induced Chapter 13 filing increases household legal fees and reduces the probability of long-term debt relief.

Suggested Citation

Lefgren, Lars John and McIntyre, Frank and Miller, Michelle M., Chapter 7 or 13: Are Client or Lawyer Interests Paramount? (2010). Berkeley Electronic Journal of Economic Analysis and Policy Advances, Vol. 10, No. 1, 2010. Available at SSRN: https://ssrn.com/abstract=1983397

Lars John Lefgren

Brigham Young University - Department of Economics ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States

Frank McIntyre

Rutgers Business School Newark and New Brunswick ( email )

111 Washington Avenue
Newark, NJ 07102
United States

Michelle M. Miller (Contact Author)

Loyola Marymount University - Department of Economics ( email )

1 LMU Drive
Los Angeles, CA 90045
United States
(310) 338-1811 (Phone)

HOME PAGE: http://myweb.lmu.edu/mmiller

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