Who Files for Bankruptcy? The Heterogeneous Impact of State Laws on a Household's Bankruptcy Decision

Forthcoming in American Law and Economics Review

26 Pages Posted: 12 Jan 2012 Last revised: 13 Jul 2019

See all articles by Michelle M. Miller

Michelle M. Miller

Loyola Marymount University - Department of Economics

Date Written: January 1, 2019

Abstract

This paper examines the heterogeneous impact of state exemption laws and state garnishment laws on bankruptcy. Using a new household level dataset, my empirical specification simultaneously examines the impact these laws have on a household’s bankruptcy decision as well as a household’s assets and unsecured debts. I find that high exemption laws have a positive impact on bankruptcy and that this effect is increasing in assets. Additionally, I find that high garnishment rates have a positive impact on bankruptcy, which is increasing in income. Moreover, I examine the policy implications of standardizing state exemption laws and state garnishments laws. Understanding the heterogeneous effects of these laws is crucial as they suggest that a household with a given set of financial characteristics will seek bankruptcy relief if it resides in one state but will have to use alternative consumption smoothing measures if it lives in a different state.

Keywords: personal bankruptcy, exemption laws, garnishment laws

Suggested Citation

Miller, Michelle M., Who Files for Bankruptcy? The Heterogeneous Impact of State Laws on a Household's Bankruptcy Decision (January 1, 2019). Forthcoming in American Law and Economics Review, Available at SSRN: https://ssrn.com/abstract=1983503 or http://dx.doi.org/10.2139/ssrn.1983503

Michelle M. Miller (Contact Author)

Loyola Marymount University - Department of Economics ( email )

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

HOME PAGE: http://michellemmiller.lmu.build/

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