Personal Bankruptcy and Credit Supply and Demand

48 Pages Posted: 19 Jul 2000 Last revised: 25 Mar 2008

See all articles by Reint Gropp

Reint Gropp

Halle Institute for Economic Research

John Karl Scholz

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Michelle J. White

University of California, San Diego (UCSD) - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: July 1996

Abstract

This paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit. While generous state-level bankruptcy exemptions are probably viewed by most policymakers as benefitting less-well-off borrowers, our results using data from the 1983 Survey of Consumer Finances suggest they increase the amount of credit held by high-asset households and reduce the availability and amount of credit to low-asset households, conditioning on observable characteristics. We also find evidence that interest rates on automobile loans for low-asset households are higher in high exemption states. Thus, bankruptcy exemptions redistribute credit toward borrowers with high assets.

Suggested Citation

Gropp, Reint and Scholz, John Karl and White, Michelle J., Personal Bankruptcy and Credit Supply and Demand (July 1996). NBER Working Paper No. w5653. Available at SSRN: https://ssrn.com/abstract=225568

Reint Gropp (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
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Germany

John Karl Scholz

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-262-5380 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Michelle J. White

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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