Berkeley Electronic Journal of Economic Analysis and Policy Advances, Vol. 10, No. 1, 2010
46 Pages Posted: 11 Jan 2012
Date Written: 2010
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: 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