Personal Bankruptcy Reform, Credit Availability, and Financial Distress

61 Pages Posted: 15 Jan 2014 Last revised: 3 Sep 2015

See all articles by Hamid Boustanifar

Hamid Boustanifar

EDHEC Business School; BI Norwegian Business School

Date Written: January 14, 2015


Using the 2005 (pro-creditor) bankruptcy reform in the US, I investigate the impact of consumer credit availability on households' borrowing decisions and the subsequent effect on their financial well-being. Access to credit for households increased significantly more in states that were affected more. Households with low education and those with self-control problems responded aggressively by taking on debt and spending it mainly on apparel and recreational activities. Consequently, financial and economic distress increased substantially more among the same borrowers. The results highlight the real cost of credit availability for a subgroup of vulnerable households.

Keywords: Bankruptcy, Credit, Distress

JEL Classification: D33, G21, J21

Suggested Citation

Boustanifar, Hamid, Personal Bankruptcy Reform, Credit Availability, and Financial Distress (January 14, 2015). Available at SSRN: or

Hamid Boustanifar (Contact Author)

EDHEC Business School ( email )

393 Promenade des Anglais – BP 3116
Nice, 06202

BI Norwegian Business School ( email )


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

Paper statistics

Abstract Views
PlumX Metrics